Monday, July 6, 2015

UBS Former Head Communications Tells Argentina Officials About Tax Evasion Assistance for Argentine Taxpayers

According to SwissInfo: 

Stephanie Gibaud, who was head of communications at UBS France until 2012, spoke to members of Argentina’s parliament, on a visit to the French capital to investigate undeclared accounts opened at HSBC, following earlier revelations made by Hervé Falciani, a former HSBC employee in Geneva.

UBS had a manual with instructions on how to attract clients worth between $15 to 20 million [CHF13.7 to 18.4 million] and assist them to evade taxes” shared Gibaud.

read the full article on SwissInfo News 

UBS denies the allegations.

July 6, 2015 in Current Affairs | Permalink | Comments (0)

Chad’s Former Chad's Ambassador to the U.S. and Canada Forfeiture of $34 Million in Bribe Payments

The Department of Justice is seeking the civil forfeiture of approximately $34 million, FBISeal (1)which represents the cash value of shares in a Canadian energy company that the company used to bribe Chad’s former Ambassador to the United States and Canada for the purpose of influencing the award of oil development rights.

From 2004 to 2012, Mahamoud Adam Bechir, 50, served as Chad’s Ambassador to the United States and Canada.  From approximately 2007 to 2015, Youssouf Hamid Takane, 52, was the Deputy Chief of Mission.  As alleged in the complaint, in 2009, Bechir and Takane agreed to use their official positions to influence the award of oil development rights in Chad to Griffiths Energy International Inc., a Canadian oil company, in exchange for shares in the company.  Thereafter, in or about October 2009, Griffiths Energy issued four million shares to the wives of Bechir and Takane and to another associate.

The complaint further alleges that Griffiths Energy agreed with Bechir and his wife that the company would pay a $2 million “consulting fee” to Bechir’s wife to influence the award of oil development rights in Chad.  After securing the desired oil development rights in February 2011, Griffiths Energy allegedly transferred $2 million to an account held by a shell company created by Bechir’s wife.  This bribe payment was commingled and laundered through U.S. bank accounts and real property, and eventually was transferred to Bechir’s bank account in South Africa, where he is now serving as Chad’s Ambassador.  In 2013, Griffiths Energy pleaded guilty in Canadian court to bribing Bechir.

The $34 million that the United States seeks in forfeiture represents the cash value of the four million shares in Griffiths Energy that were provided to the wives of Bechir and Takane and to their associate.  In a separate action filed in 2014, the United States also is seeking the civil forfeiture of over $100,000 in allegedly laundered funds traceable to the $2 million bribe payment.  Takane resides in the United States.

Griffiths Energy Complaint

July 6, 2015 in Current Affairs | Permalink | Comments (0)

Sunday, July 5, 2015

Greece Votes. Greece is to blame for its troubles, states IMF. Germany Says Greece may exit Euro temporarily.

Germany has stated publicly that if Greece votes no, it may need to temporarily exit the Euro, whereas in the runup to Greece's vote today, the IMF stated:

At the last review in May 2014, Greece’s public debt was assessed to be getting back on a path IMF_Text_Logotoward sustainability, though it remained highly vulnerable to shocks. By late summer 2014, with interest rates having declined further, it appeared that no further debt relief would have been needed under the November 2012 framework, if the program were to have been implemented as agreed.

But significant changes in policies since then—not least, lower primary surpluses and a weak reform effort that will weigh on growth and privatization—are leading to substantial new financing needs. Coming on top of the very high existing debt, these new financing needs render the debt dynamics unsustainable.

This conclusion holds whether one examines the stock of debt under the November 2012 framework or switches the focus to debt servicing or gross financing needs.

To ensure that debt is sustainable with high probability, Greek policies will need to come back on track but also, at a minimum, the maturities of existing European loans will need to be extended significantly while new European financing to meet financing needs over the coming years will need to be provided on similar concessional terms.

But if the package of reforms under consideration is weakened further—in particular, through a further lowering of primary surplus targets and even weaker structural reforms—haircuts on debt will become necessary.

IMF Nine Key Questions About Greece Non-Payment

Q2. What happens to Greece because of the failure to make a repayment when due?

The immediate effect is that Greece can no longer receive financing from the IMF under the existing extended arrangement and the IMF will not approve new financing to Greece until it clears its arrears. This is standard procedure when a member fails to repay the IMF. The IMF’s Selected Decisions, 37th issue, page 912, spell out the procedures for a failure to repay and apply to all of its 188 members.

Q6. Are there penalties for a failure to repay?

The most immediate “penalty” is that the member can no longer receive IMF financing.

Within 12 months, the Executive Board may consider a declaration of ineligibility against Greece if Greece continues to incur arrears to the IMF. If the non-payment persists for more than 12 months, the IMF Executive Board may declare that the country is “noncooperative” in efforts to clear arrears, which could trigger a suspension of technical assistance, possibly followed by a suspension of voting rights and, ultimately—if the non-cooperation is extreme and protracted—compulsory withdrawal from the IMF. The timetable for these steps is flexible, as spelled out in the IMF’s Selected Decisions, page 912.

July 5, 2015 in Current Affairs | Permalink | Comments (0)

Saturday, July 4, 2015

Bitcoin and Other Digital Currencies - DOJ's Remarks

It is a pleasure to address today’s ABA National Institute on Bitcoin and Other Digital Currencies.  Bitcoin_euroAs head of the Justice Department’s Criminal Division, I am privileged to lead over 600 attorneys who investigate and prosecute federal crime, help develop criminal law and formulate law enforcement policy.  Our talented prosecutors perform crucial work in many of the areas relevant to today’s discussion, including the fight to combat money laundering, financial fraud, child exploitation and cybercrime.

This afternoon, I’d like to discuss the department’s approach to the emerging virtual currency landscape, our ongoing efforts to prosecute those who commit crimes by using virtual currency, and our view that compliance and cooperation from exchanges, companies and other market actors can ensure that emerging technologies are not misused to fund and facilitate illicit activities.

The department is aware of the many legitimate actual and potential uses of virtual currency.  It has the potential to promote a more efficient online marketplace.  It also potentially can lower costs for brick and mortar businesses, by removing the need to pay credit card-related costs.  And in theory, it can help speed and reduce the cost of cross-border transactions.  But we also have seen that criminals have been among the first to enthusiastically embrace the use of virtual currency, primarily in crime involving the internet.

Many of the inherent features of virtual currencies are exactly what makes them attractive to criminals.  Many criminals like virtual currency systems because these systems conduct transfers quickly, securely and with a perceived level of anonymity.  For others, the irreversibility of payments made in virtual currency and lack of oversight by a central financial authority is appealing.  Finally, the ability to conduct international peer-to-peer transactions that lack immediately available personally identifying information has made decentralized virtual currency attractive to those who wish to cover their money trail. 

As a result, virtual currency facilitates a wide range of traditional criminal activities as well as sophisticated cybercrime schemes.

Much of the illicit conduct involving virtual currency occurs through online black markets such as the now-shuttered Silk Road, which operated on an anonymized “dark web” network that masked users’ physical locations, making them difficult to track.  Similar online black markets continue to operate, offering on a global scale, a wide selection of illicit goods and services.  While these have included more traditional crimes such as narcotics trafficking, stolen credit card information, and hit-men for hire, we have also seen a significant evolution in criminal activity. 

For example, Bitcoin has been utilized to fund the production of child exploitation material through online crowd-sourcing – a development rarely seen before the prevalence of virtual currency.  It has also been used to buy and sell lethal toxins over the internet and as a payment method for virtual kidnapping and extortion, allowing near-instantaneous transactions across the globe between perpetrators of phishing and hacking schemes and their victims.

Despite the significant challenges in investigating, much less prosecuting, this activity, the department already has a strong record of bringing cases in which virtual currencies were used to facilitate criminal conduct.  While the burgeoning assortment of online exchanges, virtual currencies and virtual marketplaces has created a complex and evolving environment or “ecosystem” as this audience knows it, we too are keeping pace and will pursue those who exploit vulnerabilities in that ecosystem for illegal gain.

In this arena, we rely principally on money services business, money transmission and anti-money laundering statutes.  While individual users who are not acting as exchangers or transmitters are not required to register with FinCEN, many virtual currency systems, exchangers and related services are.  Additionally, most states also require money transmitters to obtain a state license in order to conduct business in that state, and some like New York have established virtual-currency specific licensing requirements.  Any failure to register or obtain a license may subject a money transmitter to criminal prosecution, and a money transmitter that knowingly moves funds connected to a criminal offense also faces prosecution for money laundering, regardless of licensing status.  Whether the currency involved is virtual or traditional, the department enforces these critical laws to prosecute money services businesses that engage in money laundering or facilitate crime by flouting registration and licensing requirements.

The department’s enforcement actions have evolved along with the virtual currency ecosystem.  Our first major action against a virtual currency service used for illicit purposes was in 2007, when the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS), together with our Computer Crime and Intellectual Property Section (CCIPS), spearheaded the prosecution against e-Gold and its owners on charges related to money laundering and operating an unlicensed money transmitting business.  E-Gold was a popular online currency exchange, and was a favored hub for cybercriminals in part because of the lack of account holder identity verification.  An e-mail address was the only information needed to set up an account, allowing global anonymous transactions.  After a multi-agency investigation, e-Gold and three associated individuals pleaded guilty in 2008 to charges of money laundering and operating an unlicensed money transmitting business.

In the wake of e-Gold’s demise, the virtual currency system Liberty Reserve was created.  As alleged in our pending indictment, Liberty Reserve was structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes.

Liberty Reserve quickly became one of the principal money transfer agents used by cybercriminals around the world to distribute, store and launder the proceeds of their illegal activity.  Like e-Gold, any would-be account holder needed little more than a working email address to move funds around the globe.  Again, this virtual currency platform became a favorite of cybercriminals and other tech-savvy wrongdoers, enabling them to engage in anonymous financial transactions, all conducted in violation of BSA requirements.

Before the government shut down Liberty Reserve in 2013, it had accumulated more than one million users worldwide, including more than 200,000 in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds.  These funds included suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, child pornography, narcotics trafficking and other crimes. 

In a case jointly spearheaded by AFMLS and prosecutors from the Southern District of New York, several of Liberty Reserve’s top executives, including a co-founder of the company, the IT Manager and its Chief Technology Officer, have pleaded guilty to money laundering and operating an unlicensed money transmitting business and have been sentenced up to five years in prison.  The creator of Liberty Reserve was extradited to the United States from Spain in October 2014 and is currently awaiting trial, where he is, of course, presumed innocent. 

The department has also taken action against a number of individuals and groups who sought to exploit decentralized systems such as Bitcoin and anonymized dark web servers to finance illicit trade and activity in online black markets.

The first major prosecution of a dark market website was by the Southern District of New York in a case against Ross Ulbricht, aka “Dread Pirate Roberts,” who was arrested in October 2013 and convicted by a jury for his role in creating and operating Silk Road, an online black market whose payment operations exclusively used Bitcoin. 

Silk Road – designed to act as a black-market bazaar completely free from government regulation and oversight – attempted to enable its users to exchange illegal drugs and other unlawful goods and services anonymously and beyond the reach of law enforcement.  It emerged as one of the most extensive criminal marketplaces on the internet.  Before it was dismantled by law enforcement, Silk Road was used by thousands of drug dealers and other vendors to distribute hundreds of kilograms of illegal drugs and other unlawful goods and services to well over a 100,000 buyers, and has been linked to at least six overdose deaths around the world.  Further, Silk Road was also used to launder hundreds of millions of dollars derived from these unlawful transactions.  And just a few weeks ago, in a federal courtroom in New York City, Ulbricht was sentenced to a term of life in prison – a cautionary tale for all those who would use dark spaces on the internet to flout the law.

The Silk Road story, however, did not end with Ross Ulbricht.  Two federal agents, sworn to uphold the law, were also apparently lured by the perceived anonymity of virtual currency.    

Carl Force, a Special Agent with the Drug Enforcement Administration, and Shaun Bridges, a Special Agent with the U.S. Secret Service, were both assigned to the Baltimore Silk Road Task Force, which investigated illegal activity in the Silk Road marketplace.

Force served as an undercover agent.  According to court documents, Force went rogue and developed additional online personas to engage in complex bitcoin transactions to steal hundreds of thousands of dollars from the government and from the targets of the investigation.  Independently, Bridges also allegedly engaged in an even larger direct theft, illegally diverting over $800,000 in virtual currency to his personal account.

Both individuals have been charged by the Criminal Division’s Public Integrity Section and prosecutors from the Northern District of California with wire fraud, theft of government property and money laundering.  These investigations and prosecutions should send a strong message to those who would exploit technology to commit crimes: no matter how anonymous people might feel using virtual currency, their actions are not untraceable.  People should not assume that law enforcement will not notice when they act on the dark web, or that we are not keeping up with emerging technology.  Our successful prosecutions have shown that neither the supposed anonymity of the dark web nor the use of virtual currency is an effective shield from arrest and prosecution.

In addition to the operators of Silk Road and the drug traffickers who conducted their deals online in bitcoin, prosecutors from the Southern District of New York have also taken action against those who enabled this activity through the operation of Bitcoin currency exchanges.  We understand that there are legitimate exchanges, and many of those are working closely with FinCEN and other regulators to ensure compliance with the law.  But there are also many exchanges that don’t concern themselves with following the law.

From approximately December 2011 to October 2013, Robert Faiella ran an underground Bitcoin exchange on the Silk Road website under the alias “BTCKing,” and sold bitcoin to users to fund their purchases on the site.

Faiella would run bitcoin orders through Charlie Shrem, who operated a New York-based company that acted as a bitcoin to fiat currency exchange.  Although Shrem was the company’s Anti-Money Laundering Officer and had registered the company with FinCEN as a money services business, Shrem failed to report any of BTCKing’s activity, despite knowing it was being used for illegal purchases.  Shrem’s assistance enabled BTCKing to finance Silk Road transactions without collecting any personal identifying information from customers.  Faiella pleaded guilty to operating an unlicensed money transmitting business involving funds he knew were intended to support unlawful activity, and Shrem pleaded guilty to aiding and abetting Faiella’s operations.  Just this past winter, they were sentenced to four and two years in prison, respectively.

While these cases demonstrate that the criminal use of virtual currency has grown rapidly in recent years, its comparative scale versus traditional money laundering still pales in magnitude.  Few virtual systems currently can accommodate the hundreds of millions of dollars we have seen in certain large-scale money laundering schemes involving government-issued currency.  That said, as virtual currencies become more mature and better understood by criminals, we expect to see an increase in both individualized criminal activity and large-scale money laundering enterprises.

In some ways, companies and individuals operating in the virtual currency ecosystem are at a crossroads, and they have an opportunity to help virtual currency emerge from its association with criminal activities.  While there obviously are good and legitimate reasons to use these currencies, industry participants are now on notice that criminals too, make regular use of them.  So, to ensure the integrity of this ecosystem and prevent its penetration by crime, the industry must raise the level of its game on the compliance front. 

That includes strict compliance with money services business regulations and anti-money laundering statutes.  I understand that you have heard from our partners at FinCEN this morning about our collaborative efforts to investigate and enforce anti-money laundering laws, and you’ll also hear more from Katie Haun this afternoon about the investigation of the virtual currency business Ripple Labs, which operated an unlicensed money transmitting business. 

Ripple sold a virtual currency called “XRP,” but failed for a time to register with FinCEN as a money service business and failed to establish and maintain appropriate anti-money laundering protections.  Importantly, the department resolved this investigation after Ripple agreed to a number of substantial remedial measures.  This includes cooperation in other ongoing investigations, a change in business model and oversight by independent auditors, an extensive look-back through their previous activities and development of an extensive compliance framework. 

The resolution with Ripple Labs underscores the importance of having a strong compliance program to ensure adherence to the law.  Virtual currency exchangers and other marketplace actors comprise the front line of defense against money laundering and other financial crime.  Robust compliance programs, such as those imposed on Ripple Labs, are essential to keeping crime out of our financial system.  If a money services business finds itself subject to a criminal investigation, we will look, as we do in all cases involving potential prosecution of a business entity, at the factors set forth in the Principles of Prosecution of Business Organizations, or Filip Factors.  Two of the Filip Factors in particular, the existence of an effective and well-designed compliance program and a company’s remedial actions, including steps to improve upon an existing compliance regime, are explicitly set forth as factors prosecutors should consider. 

As you know, there is no “one-size-fits-all” compliance program.  Rather, effective anti-money laundering and other compliance programs must be tailored to meet the circumstances, size, structure and risks encountered by each entity.  And virtual currencies, with their perceived anonymity, pose compliance risks that money transmitters such as Western Union do not face. Industry participants must address those risks, even when it may be costly to do so.

Just as in any other corporate investigation, when reviewing the conduct of, for example, an exchange, the department will examine whether a company has meaningfully addressed compliance.  We have resolved cases against many financial institutions and other entities, and are deeply familiar with hallmarks of a genuine compliance program.

We expect virtual currency businesses to take compliance risk as seriously as they take any other business risk.  Now, we recognize that new entrants in emerging fields may find that compliance requires a significant expenditure of resources, and we will be context-specific in analyzing appropriate compliance frameworks including consideration of the size and scope of the business.  But a real commitment to compliance is a must, particularly given the significant risks in the virtual currency market.  In the long run, investment in effective compliance programs will be well worth it, especially in the event that a company has to interact with law enforcement.

In many ways, I think that is a message that everybody gathered here today can appreciate.  As the virtual currency markets attempt to move past their association with the Silk Roads and Liberty Reserves of the online world, are used to finance legitimate activity, and are becoming increasingly subject to regulation, robust compliance with existing anti-money laundering laws and regulations is necessary – indeed, critical – to bolster the reliability and value of virtual currency.

The challenges posed by the cases I’ve described are not unique to the virtual currency world.  Indeed, these dark web criminals are merely using new tools to conduct the same old crimes, committing what is essentially street crime like drug trafficking and extortion, but over computer networks.

For those investors, exchanges and compliance officers who deal in virtual currency, compliance is of paramount importance.  Adherence to regulations and state license requirements can reduce the liability of corporations who invest or deal in virtual currency.  As seen with Ripple Labs, compliance and remediation can lead to a more favorable resolution of criminal investigations and adhering to anti-money laundering guidelines allows the legitimate use of virtual currency to grow and be responsive to infiltration and abuse by criminal elements.  While the department will aggressively investigate and prosecute criminal activity that is funded through virtual currency, money services businesses that fall under the department’s scrutiny can also receive credit for meaningful and sincere compliance efforts.

 Your compliance and cooperation will make it more difficult for those who seek to operate illicit and underground marketplaces and will be a key element for law enforcement to shed light on these illegal virtual currency transactions.  It also will help to ensure the continued viability of virtual currency systems in the future.

Thank you for the opportunity to address this year’s National Institute on Bitcoin and Other Virtual Currencies.

Assistant Attorney General Leslie R. Caldwell Remarks

July 4, 2015 in Current Affairs | Permalink | Comments (0)

Friday, July 3, 2015

Swiss Privatbank Von Graffenried Admits Assisting US Clients Evade Tax, But Pays Smallest Penalty Yet

The Department of Justice announced that Privatbank Von Graffenried AG has entered into a non prosecution agreement for assisting US persons evade US taxes.  Since Aug. 1, 2008, Von Graffenried held a total of 58 U.S.-related accounts with approximately $459 million in assets. But Von Graffenried will only pay a penalty of $287,000, much less than other banks who have entered into the Swiss non-prosecution arrangement.

According to the terms of the non-prosecution agreement signed today, Von Graffenried agrees to Justice logocooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute Von Graffenried for tax-related criminal offenses.  Von Graffenried also has provided certain account information related to U.S. taxpayers that will enable the government to make requests under the 1996 Convention between the United States of America and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income for, among other things, the identities of U.S. accountholders.

Von Graffenried is a private bank founded in 1992 and based in Bern, Switzerland.  Starting in at least July 1998, Von Graffenried, through certain practices, assisted U.S. taxpayer-clients in evading their U.S. tax obligations, filing false federal tax returns with the Internal Revenue Service (IRS) and otherwise hiding assets maintained overseas from the IRS.

Von Graffenried opened and maintained undeclared accounts for U.S. taxpayers when it knew or should have known that, by doing so, it was helping these U.S. taxpayers violate their legal duties.  Von Graffenried offered a variety of traditional Swiss banking services that it knew could assist, and that did assist, U.S. clients in the concealment of assets and income from the IRS.  For example, Von Graffenried would hold all mail correspondence, including periodic statements and written communications for client review, thereby keeping documents reflecting the existence of the accounts outside the United States.  Von Graffenried also offered numbered account services, replacing the accountholder’s identity with a number on bank statements and other documentation that was sent to the client. 

In late 2008 and early 2009, Von Graffenried accepted accounts from two European nationals residing in the United States who had been forced to leave UBS and Credit Suisse, respectively.  At the time it accepted the accounts, Von Graffenried knew that UBS was the target of an investigation by the Department of Justice.  It also knew that both individuals had been forced to leave their respective banks because the banks were closing their accounts, and that both individuals had U.S. tax obligations and did not want the accounts disclosed to U.S. authorities.  Senior management at Von Graffenried approved the opening of these accounts. 

When Von Graffenried compliance personnel sought to obtain an IRS Form 8802, Application for U.S. Residency Certification, from one of the accountholders, that accountholder replied that completing the form would be problematic for him and that he believed the relationship manager knew why.  The beneficial owner of the second account was referred by an external fiduciary, who handled the account at Credit Suisse.  The fiduciary told a Von Graffenried relationship manager that Credit Suisse was attempting to exit its U.S. offshore clients to other banks if the clients would not sign an IRS Form W-9.  The relationship manager agreed to take on the account, which was held by a Liechtenstein “stiftung,” or foundation, with the beneficial owner as the primary beneficiary and U.S. citizens as other beneficiaries.

Between July 1998 and July 2000, Von Graffenried accepted approximately two dozen accounts from a specific external asset manager.  Von Graffenried was aware that the external asset manager seemed to be targeting U.S. clientele.  Sixteen of the accounts were beneficially owned by individuals with U.S. tax and reporting obligations, and most of those accounts were held by U.S. citizens residing in the United States.  At the time, Von Graffenried did not have a policy in place that required U.S. clients to show tax compliance.  Consequently, Von Graffenried accepted these accounts without obtaining IRS Forms W-9 or assurances that the accounts were in fact tax compliant.  By early 2009, Von Graffenried determined that some of the external asset manager’s accountholders likely were attempting to evade U.S. tax requirements.  In 2010, Von Graffenried began to close the existing U.S.-related accounts that originated with the external asset manager.  Von Graffenried did not complete the exit process for these accounts until late 2012.

In accordance with the terms of the Swiss Bank Program, Von Graffenried mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at Von Graffenried who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased to 50% of the foreign assets.

Download Von Graffenried NPA and SOF

July 3, 2015 | Permalink | Comments (0)

Thursday, July 2, 2015

US Confiscates and Repatriates Art Works Associated With Brazil's Banco Santo 2004 Fraud and Money Laundering

Preet Bharara, the United States Attorney for the Southern District of New York, and Deputy Special Brazil painting Agent in Charge Michael Shea of U.S. Immigration and Customs Enforcement’s ("ICE") Homeland Security Investigations New England, announced that a painting by Jean-Michel Basquiat called "Hannibal" (the "Basquiat"), as well as a Roman Togatus statue, were returned to Brazil at a repatriation ceremony at the United States Attorney’s Office in Manhattan, New York.

The painting and the statue were smuggled into the United States in violation of customs law and were forfeited to the government as a result of civil forfeiture action brought by the United States.

Manhattan U.S. Attorney Preet Bharara stated: "Art and antiquities have special value and meaning that cannot readily be quantified. As a result, they have long been the subject of theft and deception, as well as a means to launder illicit proceeds. Art should serve to inspire the mind and nourish the soul, and not be allowed to become a conduit for crime."

HSI Deputy Special Agent in Charge Michael Shea stated: "It is always a pleasure to return cultural artifacts to the people of another nation. I would like to thank our special agents and partners at INTERPOL for their diligence in this investigation. ICE will do everything in its power to help preserve and safeguard a nation's history by identifying, locating, and recovering stolen antiquities."

In related repatriation ceremonies held on September 21, 2010, and May 9, 2014, the U.S. Attorney’s Office for the Southern District of New York returned to Brazil three paintings – "Modern Painting with Yellow Interweave" by Roy Lichtenstein (the "Lichtenstein"), "Figures dans une structure" by Joaquin Torres-Garcia (the "Torres-Garcia"), and "Composition abstraite" by Serge Poliakoff (the "Poliakoff") – that were smuggled into the United States.

The Basquiat and the Togatus once belonged to Brazilian banker Edemar Cid Ferreira. Ferreira, the founder and former president of Banco Santos, S.A. ("Banco Santos"), was convicted in Brazil of crimes against the national financial system and money laundering. In December 2006, Ferreira was sentenced in Brazil to 21 years in prison.

As part of the case, a Sao Paulo Court judge also ordered the search, seizure, and confiscation of assets that Ferreira, his associates, and members of his family had acquired with unlawfully obtained funds from Banco Santos. Those assets included the Basquiat, the Togatus, the Lichtenstein, the Torres-Garcia, the Poliakoff, and other artwork valued at $20 million to $30 million. The artwork was kept in several locations, including Ferreira’s home in the Morumbi neighborhood of Sao Paulo, the main offices of Banco Santos, and at a holding facility. When Brazilian authorities searched these locations, they found that several of the most valuable works of art were missing, including the Basquiat and the Togatus.

The Sao Paulo Court sought INTERPOL’s assistance after searching museums and institutions in Brazil for the missing artwork. In October and November 2007, INTERPOL and the Government of Brazil sought the assistance of the United States to locate and seize the missing works on behalf of the Brazilian government. The ensuing Southern District of New York and HSI investigation revealed that the Basquiat and the Togatus were shipped from the Netherlands to a secure storage facility in New York on August 21, 2007, and September 11, 2007, respectively. The invoices, however, failed to comply with U.S. customs laws in a number of respects. For example, the shipping invoices did not identify the pieces and falsely claimed that their value was $100 each. In fact, the Basquiat alone was recently appraised at $8 million.

HSI special agents based in New Haven, Connecticut, located and seized the Basquiat in November 2007, and the U.S. Attorney’s Office for the Southern District of New York filed a civil forfeiture Complaint alleging that the Basquiat had been brought into the United States illegally. Since the filing of the original Complaint in February 2008, the United States seized additional works of art and filed two amended Complaints seeking the forfeiture of the Lichtenstein, the Torres-Garcia, the Poliakoff, and the Togatus.

After extensive litigation, United States District Court Judge Richard J. Sullivan granted the government’s motion for summary judgment and entered an order forfeiting the Basquiat and the Togatus on May 10, 2013. The Second Circuit Court of Appeals affirmed Judge Sullivan’s order on September 9, 2014.

July 2, 2015 in Current Affairs | Permalink | Comments (0)

Wednesday, July 1, 2015

High-Impact Law Enforcement Cases Furthered through Financial Institution Reporting

The Financial Crimes Enforcement Network (FinCEN) presented its first-ever Law FINCENEnforcement Awards in a ceremony at the U.S. Department of the Treasury. These awards are presented to law enforcement agencies that use Bank Secrecy Act (BSA) reporting in their criminal investigations. There are two primary goals of the program. First, to recognize law enforcement agencies who made effective use of BSA data to obtain a successful prosecution. And, second, to provide concrete evidence of the value of BSA data to the financial industry.

News Release:

Director Calvery’s Remarks:

July 1, 2015 in Current Affairs | Permalink | Comments (0)

BSA filing trends & FinCEN’s enforcement approach

FinCEN’s Associate Director for Enforcement, Stephanie Brooker, delivered remarks last week at the FINCEN 2015 Bank Secrecy Act (BSA) Conference, held in Las Vegas. She discussed BSA filing trends, the value of the BSA data, FinCEN’s enforcement approach, recent enforcement developments, and the critical importance of a culture of compliance throughout the business and compliance sides of casinos and card clubs. ...

BSA Filing Trends

In her remarks last year, Director Calvery stressed the importance of SAR filings. One of the areas where we see tremendous industry improvement in the past year is on the filing of suspicious activity reports (SARs). In 2013, there were 27,520 SARs filed by casinos and card clubs. In the past year, we’ve seen this figure dramatically increase by almost 20,000 more filings in 2014 – an increase of 69 percent from 2013 to 2014. This trend has continued into 2015, and we have already seen an increase in filings compared to the same months in 2014. Notably, these increases have occurred industry-wide. We have observed increases in state- licensed casinos, tribal casinos, and card clubs. 

From the data that you have provided us, we can tell that the highest reported categories of suspicious activity by your industry are minimal gaming and altering transactions to avoid currency transaction report filing. But that’s not all. Because of your reporting, we’ve seen patrons using casinos and card clubs to conceal narcotics transactions; to move money in support of international fraud schemes; to launder real estate fraud money; or to transfer money for other illicit purposes. Using this data can help financial institutions make decisions about adjustments to their casino’s or card club’s policies and procedures, or may help inform future training of your staff. We make these trends available to the public through the SAR Stats reports on our webpage, which allow you to see these filing trends for yourselves.

The Value of the BSA Data 

We know you devote a significant amount of time and resources to the SAR process. And we want to assure you that SARs don’t just go into a “black hole.” BSA reports filed by our financial institutions, including casinos and card clubs, provide some of the most important information available to law enforcement and other agencies safeguarding the United States. The data is used to confront serious threats, including terrorist organizations, rogue nations, WMD proliferators, foreign grand corruption, and increasingly serious cyber threats, as well as transnational criminal organizations, including those involved in drug trafficking, and massive fraud schemes targeting the U.S. government, our businesses, and our people.

Taken together, BSA data includes nearly 190 million records. The reporting contributes critical information that is routinely analyzed, resulting in the identification of suspected criminal activity and the initiation of investigations.

The reporting aids in expanding the scope of ongoing investigations by pointing to the identities of previously unknown subjects, exposing accounts and hidden financial relationships, or revealing other information such as common addresses or phone numbers that connect seemingly unrelated participants in a criminal or terrorist organization. In some cases, it can even confirm the location of suspects. 

Domestically, FinCEN grants more than 10,000 agents, analysts, and investigative personnel from over 350 unique federal, state, and local agencies across the United States with direct access to the reporting. There are approximately 30,000 searches of the BSA data taking place each day.

Through international information exchanges to support law enforcement efforts, we can get similar reporting from other countries. FinCEN facilitates the sharing of information internationally on both a bilateral and multilateral basis through the Egmont Group of Financial Intelligence Units. The Egmont Group, currently comprised of 151 member jurisdictions, provides an unparalleled, preexisting platform for the secure exchange of financial intelligence. Egmont members exchange information pursuant to guidelines meant to encourage the widest range of international cooperation and dissemination of financial intelligence while at the same time protecting each jurisdiction’s equities in security, confidentiality, and sovereignty.

Every day, we see the BSA data being used by our partners in the counterterrorism and countering the financing of terrorism context to make our country safer. For example, the FBI reports that in 2014, approximately 16 percent of its total pending cases had related BSA filings. In particular, BSA filings were associated with about 42 percent of its pending drug cases, 33 percent of its pending transnational organized crime cases, 32 percent of its complex financial crime cases, and nearly 18 percent of its international terrorism cases.

In May of this year, we were very pleased to have the American Gaming Association, as well as other trade associations, join us for the launch of an annual FinCEN awards ceremony to highlight the value of BSA reporting. The goal of the program is to recognize criminal cases, and the law enforcement professionals who worked on those cases, in which BSA reporting played a significant role in the successful investigation and prosecution of a case. In this way, we are not only recognizing exemplary law enforcement achievements, but also providing meaningful feedback to the financial industry on how information they provided helped the case. You can see more on this awards program and the specific cases chosen for these awards on our website,

Information Sharing

Let me move now to another positive development in the casino compliance space. Section 314(b) of the USA PATRIOT Act provides financial institutions with the ability to share information with one another, under a safe harbor that offers protections from liability, in order to better identify and report potential money laundering or terrorist activities.

Over the last year, FinCEN has also seen an increase in information sharing between casinos and card clubs through the 314(b) program. The 314(b) program now includes 98 casinos and card clubs. Information sharing across financial institutions can play a critical role in helping these institutions achieve their BSA/AML goals. Casinos and card clubs that participate in 314(b) are able to communicate with other 314(b) participants, even if those other institutions are not other casinos. The 314(b) program is a powerful tool for providing financial institutions with a more comprehensive view of potential money laundering or terrorist financing activity that involves multiple institutions. We strongly encourage all financial institutions to consider participation in the 314(b) program.

Enforcement Approach and Recent Developments

The Bank Secrecy Act provides FinCEN with broad supervisory and enforcement authority, allowing FinCEN to impose civil penalties not only against domestic financial institutions, but also against partners, directors, officers, and employees of such entities who themselves participate in misconduct. We also have the authority to obtain injunctions against institutions, as well as individuals, that we believe are involved in violations of the BSA.

FinCEN’s enforcement authority extends across the broad range of industries covered by the BSA, including depository institutions, casinos, and card clubs, broker-dealers, money services businesses, and dealers in precious metals, stones, and jewels, among others.

In our BSA oversight role, we, of course, focus on compliance in all of our regulated industry sectors. But, nowhere is this more important than in those sectors of the financial industry where FinCEN is the only federal regulator with AML enforcement authorities, such as casinos and card clubs.

We work closely with the Internal Revenue Service Small Business/Self-Employed Division, which is FinCEN’s delegated examiner for casinos and card clubs, as well as certain other industries. IRS makes referrals to FinCEN of significant violations found in its exams for our enforcement consideration. We also receive referrals from and coordinate our enforcement investigations with criminal law enforcement agencies, including IRS-Criminal Investigations (IRS-CI), the FBI, the Department of Justice’s Asset Forfeiture and Money Laundering Section, U.S. Attorney’s Offices, state authorities, as well as other regulatory partners, including the Nevada Gaming Control Board.

Our enforcement program follows a number of core principles. I would like to share a few of these with you today, as these principles shape FinCEN’s enforcement approach.

  •   Transparency in our Rationale: Enforcement should never be a “gotcha” or hide-the- ball exercise. If you look at our past enforcement actions, and review the facts, you will clearly see why FinCEN took action in these cases. We devote a tremendous amount of time to ensuring that our public enforcement assessments clearly explain the facts and the violations underlying our enforcement action.

  •   Accountability: Over the last two years, we have changed our historical practice at FinCEN to one in which our presumption is that a settlement of an enforcement action will include an admission to the facts, as well as the violation of law. This is a departure from FinCEN’s past practice in which institutions were permitted to “neither admit nor deny” FinCEN’s enforcement allegations. It is important that financial institutions and institutions take responsibility when their actions violate the BSA. We have implemented this practice in our enforcement actions against all sizes and types of financial institutions and individuals, including casinos.

  •   Credit Where Credit is Due: All enforcement cases, by nature, focus in large part on historical conduct. We seriously consider documented improvements in AML compliance over time as part of our assessment of whether to take an enforcement action, as well as in our penalty decisions. To be clear, just because an institution had a series of violations and then made substantial remedial efforts does not mean that it will not be penalized for their past violations. But, at the same time, it will generally be in a better position than one that had violations, was cited for them, and then never fixed the problems.

  •   Recidivism: On the other hand, cases in which IRS SB/SE examiners have found repeat violations over multiple exams receive heightened scrutiny from FinCEN. Your IRS BSA examiner is an important source of information on whether your casino’s AML program is on the right track. We are also aware of disturbing instances in which our IRS examiners were denied access to critical information and key personnel during the exam process. Obviously, obstructing the examination process and failing to address repeated violations are heavily weighted factors that we consider in enforcement actions and penalty determinations.

  •   Individual Accountability: We will continue to consider whether to take action against individuals responsible for a financial institution’s BSA/AML failures, including, in appropriate cases, barring individuals from working in the industry. And, of course, this includes considering the institution as a whole and holding those on the business side accountable for willful participation in such failures. That being said, we know that the vast majority of financial institutions, and in particular their compliance officers, are working hard to comply with their responsibilities, and are successful at it. We appreciate all you are doing to keep your financial institutions safe from illicit use.

  •   Remedial Framework: Our recent enforcement actions have begun to focus more specifically on how financial institutions can work to correct the errors identified in our investigations. Some of our enforcement actions have included “undertakings” that aim to ensure that the financial institution rectifies identified problems. For example, we may insist on corporate monitor arrangements as part of our enforcement settlements. Our enforcement undertakings may require a casino to have more stringent independent testing for a given period of time, demonstrated training improvements, or updates to their written policies and procedures. Additionally, if specific concerns arise over transactions, FinCEN may require a SAR look-back as part of the consent order as well. These undertakings serve as a way to remedy any potential violations and ensure that future issues do not arise.

Over the past two years, we have taken enforcement actions against a wide range of financial institutions and individuals covered by the Bank Secrecy Act, including casinos and a casino employee. For example, in March, we imposed a remedial framework to address identified BSA/AML deficiencies as part of an enforcement action taken against a casino. The casino agreed to an undertaking that requires periodic external audits that must be reported directly to FinCEN and the IRS. The penalty assessed by FinCEN was based upon recidivist behavior dating back to 2003 and included the casino’s admission that it had willfully violated the BSA’s program, reporting, and recordkeeping requirements.

Just this month, FinCEN assessed a civil money penalty against another casino after it identified willful and egregious violations of the BSA. The conduct included substantial program deficiencies and extensive reporting failures. However, not only did FinCEN act to hold this financial institution accountable for its behavior, but we also took action last August against an individual, a VIP Services Manager at the same casino, who was complicit in assisting customers that tried to avoid BSA reporting requirements.

Hopefully, our enforcement actions serve to assist financial institutions and the public as an education tool as well. We take great care to ensure that the facts underlying our actions are clearly articulated in our Assessments. Through them, the financial industry can spot trends in compliance as well as weaknesses that should help you self-identify corrective actions and industry-wide issues that may require future attention.

Culture of Compliance

Since the Director’s address last year, we have issued an “Advisory to U.S. Financial Institutions on Promoting a Culture of Compliance.” We have received feedback from across the financial services industry, including from casinos, that this Advisory has fostered important discussions between the compliance and business sides of the house.

I want to emphasize today that for the culture of compliance to be strong within an institution, the business side of the organization needs to take AML controls seriously. And it needs to begin with the institution’s leadership.

A financial institution’s leadership – the board of directors, executive management, and owners and operators – is responsible for performance in all areas of the institution, including compliance with the BSA. The commitment of an organization’s leaders should be clearly visible. The degree of that commitment will have a direct influence on the attitudes of others within the organization.

I know that both business and compliance personnel are joining us today. The fact that you are here at this conference is evidence of your commitment in this area.

Business interests should never compromise an institution’s AML program. What does this mean in practice? This means that AML compliance personnel should be listened to when they express concerns. This means that AML compliance should not be shut out of monitoring profitable areas of the casino. This means that, as compliance professionals, you should be empowered with sufficient authority, independence, and the tools you need to effectively implement the AML program within your institution. This means that every casino employee, from the top down, views AML compliance as part of his or her responsibilities.

From an enforcement perspective, most roads lead back to one single point of failure – a failed compliance culture. How this failure reveals itself in an investigation may differ from institution to institution but the core breakdown is the same. This suggests to me that each institution should engage in some honest self-examination and ask itself whether its culture of compliance is merely lip service or is it real. We are seeing some meaningful improvements, but more work still needs to be done. I believe that it can be done but it will take real, sustained commitment. ...

July 1, 2015 in Current Affairs | Permalink | Comments (0)

Tuesday, June 30, 2015

Request for National FATCA/CRS Reporting Dates?

Note that since the release of the initial 1 June 2014 U.S. Treasury list of registered foreign financial FATCA_roll institutions that have been allocated a GIIN list, Haydon Perryman and I (authors of the industry leading Lexis Guide to FATCA Compliance) have been analyzing on a monthly basis the GIIN list that the IRS provides of “approved FFIs” (foreign financial institutions) and then we publicly share our research with industry. 

We have a public request for assistance with our continued research that will help us provide better information in our future posts and the 2016 Guide to FATCA Compliance.  I ask that you email me (

(1)   the annual reporting date for [Country]’s Financial Institutions to provide its [Competent Authority] information on accounts beneficially owned by US persons for FATCA, and non-residents for CRS

(2)   web link to local regulatory guidance for such reporting

(3)   name and web-link for the local reporting form(s)

(4)   annual date, if it differs from that in the IGA, that [Country] will upload its amalgamated information to the US’ IDES. 

June 30, 2015 in Current Affairs | Permalink | Comments (0)

JPMorgan sues $2B team who left for Morgan Stanley

Investment News reports

"JPMorgan Chase Bank & Co. sued six of its former brokers who defected together to Morgan Stanley this spring for allegedly telling clients if they stayed with JPMorgan their accounts might be serviced by a call center, among other claims.  ... The brokers worked with about 400 families while at JPMorgan and generated about $15 million in annual revenue, the complaint said."

read the article here.

June 30, 2015 | Permalink | Comments (0)

Monday, June 29, 2015

Greek Banks Closed for Week. Deposits Unavailable. Euro Exit?

Greece must repay to the IMF by tomorrow evening Euro 1.6 billion.  It's government has decided to 'take the money and run', or at least, cause a bank run.  

All Greek banks have been shut until at least July 6, as well as the stock market.  ATM withdrawal are limited to 60 Euro a day.  Depositors do not know if the 'theoretically' protected amount of their funds remain protected or will all be lost?  A bankrupt government that cannot pay back the lenders of last resort like the IMF cannot also meet its depositor insurance demands.  The Greek economy teeters on collapse.

Greece is asking to take on another $8.1 billion in debt from primarily the EU institutions, to keep itself a float another couple months.  However, it rejects the structural reforms required by the international bailout fund.  C'est la vie.  

Washington Post

New York Times 

CNN Money

June 29, 2015 in Current Affairs | Permalink | Comments (0)

Ersparniskasse Schaffhausen (EKS) 26th Swiss Bank to Pay Fine to DOJ, Turn Over US Tax Evaders

The Department of Justice announced that Ersparniskasse Schaffhausen AG (EKS) has reached a resolution under the department’s Swiss Bank Program - the 26th Swiss Bank to do so (see list here)

According to the terms of the non-prosecution agreement (Download EKS executed NPA and SOF), Justice logoEKS agrees to cooperate in any related criminal or civil proceedings, demonstrate its implementation of controls to stop misconduct involving undeclared U.S. accounts and pay penalties in return for the department’s agreement not to prosecute EKS for tax-related criminal offenses.

EKS was founded in 1817 and is wholly owned by a Swiss charitable foundation.  It is headquartered in the city and canton of Schaffhausen, Switzerland.  EKS opened, maintained and serviced accounts for U.S. persons that it knew or had reason to know were likely not declared to the Internal Revenue Service (IRS) or the U.S. Department of the Treasury as required by U.S. law.

From 2004 through 2011, EKS accepted referrals of U.S. persons as new clients from an external asset manager who, until 2009, resided in the United States and conducted some of his business through a corporation organized under the laws of the United States.  The majority of the accounts that came to EKS as a result of these referrals were held in the names of non-U.S. entities that were beneficially owned by U.S. persons. 

In May 2008, with the knowledge and approval of EKS management, the external asset manager and an EKS relationship manager visited five U.S. cities to meet with U.S. clients and attorneys who had the potential to refer new clients.  Topics discussed during their meetings included the “crisis” involving Swiss bank UBS AG, client satisfaction with EKS, the performance of client accounts at EKS and the “asset protection” benefits of EKS.

Until 2009, EKS opened numbered accounts for U.S. persons, including code-name or pseudonym accounts, upon request.  Upon opening this type of account, an EKS employee would  enter the accountholder’s name in a physical register rather than in the bank’s electronic records system.  This action limited the number of EKS personnel who knew the client’s identity.  Holders of these accounts could also provide documents to EKS using only their code names or numbers as their authorized signatures. 

EKS provided all of its clients, including U.S. persons, with the option to request that EKS retain all mail related to a client’s financial accounts in exchange for a standard service fee.  EKS understood that providing such hold-mail agreements upon request could allow U.S. persons to keep evidence of their EKS accounts outside of the United States and thus assist them in concealing assets and income from the IRS.  

EKS also accepted IRS Forms W-8BEN for U.S.-related accounts held in the names of non-U.S. entities, such as foreign corporations, trusts or foundations.  Because Swiss law required EKS to identify the true beneficial owners of the entities on a document called a Form A, EKS knew that these accounts were beneficially owned by U.S. persons.  Nonetheless, EKS accepted Forms W-8BEN that it knew falsely stated that the entities were the beneficial owners of the accounts. 

EKS was aware of the 2009 IRS Offshore Voluntary Disclosure Program for U.S. persons.  Despite knowing of that program and knowing or having reason to know that some of its U.S. clients had likely not declared their EKS accounts to the IRS, EKS made no effort to encourage its U.S. clients to disclose their accounts through that program.

During 2009, consultants reported to EKS, among other things, that EKS had increased risks because of its relationship with the external asset manager; that it was only a matter of time until small banks came into contact with U.S. authorities; and that there was a latent risk that previous revenues from EKS’s “U.S. strategy” could be seized or corresponding fines imposed.  According to minutes of a 2009 meeting of the EKS board of directors, an EKS executive stated, among other things, that “there is practically no risk if U.S. customers travel to Switzerland and a customer account is handled locally,” and that he had been informed that Swiss bank Wegelin & Co. was going to keep its previous U.S. customers.

In October 2009, the EKS board of directors voted to continue the account relationships with clients of the external asset manager, including his U.S. clients, under certain conditions, including that his business be relocated to Switzerland.  The board also voted to “have the option of entering into new cross-border business relationships.”

Since Aug. 1, 2008, EKS provided private banking services for 90 U.S.-related accounts with approximately $65 million in assets.  Thirty-seven of these accounts were opened after Aug. 1, 2008.  EKS will pay a penalty of $2.066 million.

In accordance with the terms of the Swiss Bank Program, EKS mitigated its penalty by encouraging U.S. accountholders to come into compliance with their U.S. tax and disclosure obligations.  While U.S. accountholders at EKS who have not yet declared their accounts to the IRS may still be eligible to participate in the IRS Offshore Voluntary Disclosure Program, the price of such disclosure has increased.


June 29, 2015 | Permalink | Comments (0)

FATF Releases Best Practice and Risk-Based Guidance for Non-Profits and Virtual Currencies

FATF Plenary meeting of Plenary year FATF-XXVI was held on 24-26 June 2015.

The main issues dealt with by this Plenary were:

o    Jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) deficiencies for which a call for action applies 

o    Jurisdictions with strategic AML/CFT deficiencies for which they have developed an action plan with the FATF 

o    Revised best practices on combating the abuse of non-profit organisations (Recommendation 8)

o    Guidance for a risk-based approach to virtual currencies

o    Typologies report on the money laundering / terrorist financing risks and vulnerabilities associated with gold

  • Indicating its support for a proposal from the Republic of Korea to establish an AML/CFT training and research institute in Korea.

Continuing its work on terrorist financing

Terrorist financing continues to be a priority issue on the FATF agenda given concerns about the terrorist threats posed notably by ISIL and foreign terrorist fighters. The FATF agreed to:

  • report to the G20 in October on the level of implementation in FATF countries of the FATF standards on criminalising terrorist financing and applying targeted financial sanctions
  • undertake work aimed at enhancing countries’ implementation of the FATF standards on terrorist financing, and
  • conduct further typologies work in this area.

Update on AML/CFT improvements in Indonesia

The FATF congratulated Indonesia for the significant progress made in addressing the strategic AML/CFT deficiencies earlier identified by the FATF and included in its action plan. Indonesia will no longer be subject to the FATF’s monitoring process under its on-going global AML/CFT compliance process. It will work with the Asia/Pacific Group on Money Laundering (APG) as it continues to further strengthen its AML/CFT regime.

Mutual evaluation report on compliance with the FATF Recommendations of Malaysia

The Plenary discussed the mutual evaluation report of Malaysia, which is currently an observer to the FATF. The report sets out the level of effectiveness of Malaysia’s AML/CFT system and its level of compliance with the FATF Recommendations. The report was prepared by the Asia-Pacific Group on Money Laundering (APG) on the basis of the FATF Methodology for assessments, adopted in 2013, which requires countries to take into account the effectiveness with which AML/CFT measures are implemented, as well as technical compliance for each of the FATF Recommendations.

The mutual evaluation of Malaysia was undertaken by the APG, and the assessment team comprised legal, financial and law enforcement experts principally drawn from FATF members. The Plenary discussed the team’s key findings, priority actions, and recommendations regarding Malaysia’s AML/CFT regime.

The FATF will finalise the mutual evaluation report for publication in due course.

Best practices on combating the abuse of non-profit organisations


The Plenary approved the revised best practices paper on combating the abuse of non-profit organisations (NPOs) for publication. The NPO community provides vitally important services around the world assisting those in need, often in remote regions. However, terrorists and terrorist organisations may also abuse some NPOs by creating fake charities to funnel money to terrorists, or abusing legitimate NPOs without the knowledge of their donors, management, or staff.

This guidance paper highlights the need for countries to protect NPOs from such abuse by implementing appropriate mitigation measures that are commensurate with the terrorist financing risks identified and in line with the risk-based approach. With input from governments and the private sector, including NPOs, the FATF has revised its best practices, aimed at preventing misuse of NPOs for the financing of terrorism while, at the same time, respecting legitimate activities of NPOs.The FATF is committed to continuing a constructive engagement with NPOs on these important issues, and will continue doing so on an ad hoc basis, as needed, to facilitate its technical work. The FATF also agreed to enhance its engagement by holding an annual discussion with NPOs on specific issues of common interest.

Read more

Best Practices Paper on Combating the Abuse of Non-Profit Organisations (Recommendation 8)  (pdf, 629 Kb)


Guidance for a risk-based approach to virtual currencies


The Plenary adopted Guidance for a risk-based approach to virtual currencies for publication. This is an important step in the staged approach taken by the FATF and the focus of the Guidance is on the points of intersection that provide gateways to the regulated financial system, in particular convertible virtual currency exchangers.

This Guidance aims to help national authorities understand the ML/TF risks associated with virtual currencies payments products and services (VCPPS), and potentially develop regulatory responses to address them. It also aims to help the private sector better understand and comply with relevant AML/CFT obligations. This Guidance builds on the typologies report published in June 2014, and on the risk matrix and the best practices of the Guidance for the risk-based approach to prepaid cards, mobile payments and internet based payment services published in June 2013. Going forward, the FATF will continue to monitor developments in this area.

Read more

Guidance for a Risk-based approach to virtual currencies

Money laundering / terrorist financing risks and vulnerabilities associated with gold

The plenary approved the report on money laundering / terrorist financing risks and vulnerabilities associated with gold for publication. This report identifies the features of gold and the gold trade that have made it an alternative means for criminals to transfer value and generate proceeds. Gold is anonymous, has a stable value and is easily transformable and transportable, which have made it an attractive alternative for criminals to store or move and generate value as regulators implement stronger AML/CFT measures to protect the formal financial sector from abuse. This report provides a series of case studies and red flag indicators to raise awareness, particularly with AML/CFT practitioners and companies involved in the gold industry, of the key vulnerabilities of gold and the gold market. [report to be published in due course]

June 29, 2015 in Current Affairs | Permalink | Comments (0)

Sunday, June 28, 2015

For-Profit Education Company to Pay $13 Million to Resolve False Claims for Federal Student Aid

Settlement Resolves Allegations and Administrative Claims Involving Schools in Five States

Education Affiliates (EA), a for-profit education company based in White Marsh, Maryland, DOJ-U-S-ATTORNEYS-OFFICEhas agreed to pay $13 million to the United States that it violated the False Claims Act by submitting false claims to the Department of Education for federal student aid for students enrolled in its programs.  EA operates 50 campuses in the United States under various trade names, including All State Career, Fortis Institute, Fortis College, Tri-State Business Institute Inc., Technical Career Institute Inc., Capps College Inc., Driveco CDL Learning Center, Denver School of Nursing and Saint Paul’s School of Nursing, which provide post-secondary education training programs in several professions in the states of Alabama, Florida, Maryland, Ohio and Texas. 

“Today’s settlement is an excellent example of cooperation among multiple offices of the federal government to achieve a result that protects federal student aid funding and the interests of individual students,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “Schools have an obligation to live up to their commitment to the government and their students when they accept federal student aid funds.”

The government alleged that employees at EA’s All State Career campus in Baltimore altered admissions test results so as to admit unqualified students, created false or fraudulent high school diplomas and falsified students’ federal aid applications, and that multiple EA schools referred prospective students to “diploma mills” to obtain invalid online high school diplomas.  These allegations also led to criminal convictions of two All State Careers admission representatives, Barry Sugarman and Jesse Moore, and a test proctor, Jacqueline Caldwell. 

“Students who apply for federal financial aid to attend trade and professional schools are required to show that they have the necessary skills to complete the educational program and work in the field,” said U.S. Attorney Rod J. Rosenstein of the District of Maryland.  “This settlement resolves the government's allegations that Education Affiliates defrauded the government by changing students' test scores and enrolling students with invalid diploma mill high school ‘diplomas’ ordered online.”

“The various cases that were settled here include numerous allegations of predatory conduct that victimized students and bilked taxpayers,” said Under Secretary Ted Mitchell of the U.S. Department of Education.  “In particular, the settlement provides for repayment of $1.9 million in liabilities ordered by Secretary of Education Arne Duncan that resulted from EA awarding federal financial aid to students at its Fortis-Miami campus based on invalid high school credentials issued by a diploma mill.  Secretary Duncan made clear that such abusive behavior would not be tolerated, and we will continue to work with the Justice Department and other federal agencies to ensure that postsecondary institutions face consequences when they violate the law.”

The settlement agreement also resolves allegations related to EA schools in Birmingham, Alabama, Houston and Cincinnati, including violations of the ban on incentive compensation for enrollment personnel, misrepresentations of graduation and job placement rates, alteration of attendance records and enrollment of unqualified students. 

“Using fake high school diplomas is a particularly insidious abuse of the federal student aid system,” said Inspector General Kathleen Tighe of the U.S. Department of Education’s Office of Inspector General (OIG).  “Students received only a worthless piece of paper.”  Tighe commended the efforts of OIG staff and Department of Justice attorneys, whose outstanding investigative work led to this significant settlement.

The settlement resolves five lawsuits filed under the whistleblower provisions of the False Claims Act, which permit private citizens to sue on behalf of the United States and share in the recovery.  As part of this resolution, the five whistleblowers will receive payments totaling approximately $1.8 million.

June 28, 2015 in Current Affairs | Permalink | Comments (0)

Friday, June 26, 2015

Germany Expresses Concern EU Commission Becoming Tax Authority

Bloomberg Business reports that Germany's Finance Minister (as well as the UK, Ireland, and others) are concerned about the EU Commission's proposal to require the sharing of competitive corporate information among EU countries.  

Presumably, Germany, whose corporations are known for highly developed financial and business practices that provide them a competitive edge, has the same concerns regarding the OECD BEPS requirement to have its corporations share that financial and business competitive edge with other countries' governments. 

German Finance Minister Wolfgang Schaeuble said the proposal needs changes to ensure it EU Commissiondoesn’t violate national rules on privacy, trade secrets and tax confidentiality. He also expressed concern about how much access the European Commission would have to the shared information, an issue cited by Ireland, the U.K. and others who took part in public debate on the plan.

“I doubt whether we should really try to move in the way that the commission will become a tax authority -- it is not,” 
Read the Bloomberg complete story on what was said at the EU meeting.
(hat tip: Dennis Kleinfeld, Esq)

June 26, 2015 in Current Affairs | Permalink | Comments (0)

Four Days Left! BE-10 Survey Filing Required by June 30th or at least $2,500 Fine

The BE-10 survey is conducted by the U.S. Department of Commerce’s Bureau of Economic Bureau Econ Analysis
Analysis (BEA). The BE-10 survey is currently required to be filed with the BEA by any U.S. person that had direct or indirect ownership or control of at least 10 percent of the voting stock of an incorporated foreign business enterprise, or an equivalent interest in an unincorporated foreign business enterprise, at any time during the U.S. person’s 2014 fiscal year.  The BE-10 is only filed every fifth year and thus, is not an annual form.

The general deadline for the fiscal year 2014 survey passed on 29 May 2015.  But U.S. persons who will be first time BE-10 form filers have an automatic BE-10 filing extension until 30 June 2015.

Non-filers are potentially subject to civil and criminal penalties.  The civil penalty for non-filing is at least $2,500 but not greater than $25,000.  Willful non-compliance may attract a prison sentence up to one year. Any officer, director, employee, or agent of any corporation who knowingly participates in such non-compliance may also be punished by a like fine and/or imprisonment.

June 26, 2015 in Current Affairs | Permalink | Comments (0)

William Byrnes & Haydon Perryman Monthly FATCA GIIN Update

The FFI GIIN List Update (Lists from June 1, 2014 through June 1, 2015)

On 1 June 2015 the IRS published its thirteenth FATCA GIIN list of “approved FFIs” (a list of the FATCA_rollfinancial firms that have registered on the IRS FATCA portal).  

Total approved FFIs reached 165,461, and increase of only 2,851 during the month of May.  This FATCA registration trend since January has been described as lethargic, with April’s increase just 2,600 additional firms joining, 3,734 additional during March, and 2,479 in February.  But when compared to what was forecast by the IRS, by industry, and by the UK, it’s a troubling low figure.

In its FATCA FAQs, the IRS suggested a 500,000 potential FFI registration figure.  Many industry stakeholders suggested that 800,000 – 900,000 firms fall under the expansive definition of financial institution.

Given the broad definition of a financial institution that must register for a GIIN, the UK HMRC estimated that, even with its IGA and its accompanying local regulations, 75,000 UK entities probably are impacted.  Yet, only the UK GIIN population is only 23,256.

If the UK HMRC is correct that 75,000 entities are impacted in the UK, then extrapolated among other large and sophisticated financial service economies like Japan, China, India, and Germany, the IRS estimate of 500,000 may be low.

90 countries and dependencies have entered into a FATCA IGA with the U.S. based on Model 1A (reciprocal), or are awaiting local ratification, accounting for 100,190 of the registrations.  A further eight countries signed a Model 1B (non-reciprocal), accounting for a further 39,564 GIINs.  A final 14 countries signed a Model 2 version IGA, adding 18,458 FFI registrations covered by an IGA.  Thus in total, 158,212, representing 96% of FFI registrations, are from the 112 IGA states and their dependencies.

The 131 countries and dependencies without an IGA have only registered 6,295 FFIs to date, a surprising low number given that the initial implementation of the 30% withholding for non-compliance with FATCA began 1 July 2014.

The UK and its ten dependencies and overseas territories comprised 74,694 of the GIINs, representing 45% of the total, or without the UK included, 49,898 for 30.6%.  The 34 OECD members have produced 79,057 GIIN registrations.

Cayman remains the FFI registration global leader, with 30,868, throughout the entire FATCA registration process.  Ironic that the EU Commission just black listed it last week.

The major financial industries of the four BRIC countries have only led to 8,254 FFI registrations, which is seen as a worrying point for FATCA acceptance among non-OECD states.  BRIC registrations are now just dripping in, up from 8,186 in May, 8,060 in April and 7,962 in March.

OECD Common Reporting Standard signatories for the a multilateral competent authority agreement to automatically exchange information has reached 61.  But a notable holdout of a signatory that has not yet actually ratified the agreement is the U.S.  88 countries and dependencies are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, the latest being Mauritius which signed June 23.

FATCA IGA Scenarios GIINs Jurisdictions
Model 1A IGA  100,190  90
Model 1B IGA  39,564  8
Model 2 IGA  18,458  14
No IGA  6,295  131
US  886  1
US Territories  68  6
Total  165,461  250

GIIN List (2014/2015) Registrations  

June                             77,354

July                              82,994

August                        95,239

September                   99,861

October                       104,344

November                   116,104

December                    122,881

January                        147,043

February                      153,797

March                          156,276

April                            160,010

May                             162,610

June                             165,461

5,809 of the total FFI registrations are members of an expanded affiliated group (EAG).

New Contact Details 

I am beginning my new faculty position with Texas A&M University School of Law in a week.  With the resources of Texas A&M Law, my research colleague Haydon Perryman (who is now with UBS Investment Bank where he is responsible for global regulatory reporting of FATCA and the CRS) and I will be able to expand our FATCA and CRS research capacity.  Any readers that want to assist in such research, please contact us at Haydon Perryman or William Byrnes.  Please download my FATCA SSRN article here.

June 26, 2015 | Permalink | Comments (0)

Thursday, June 25, 2015

OECD v. EU blacklists. Has the EU Blacklist made the OECD's irrelevant?

Pascal Saint-Amans, Director of the OECD Centre for Tax Policy and Administration and Monica Bhatia, Head, Global Forum Secretariat issued the following letter in response to the EU black-listing many OECD-compliant jurisdictions.  

Has the EU has in effect, at least undermined, and potentially made irrelevant, the OECD's agreements with international financial centers. According to the OECD letter below: "Our EU colleagues have confirmed that this is not their intent." 

The OECD then continues: "As the OECD and the Global Forum we would like to confirm that the only agreeable assessment of countries as regards their cooperation is made by the Global Forum and that a number of countries identified in the EU exercise are either fully or largely compliant and have committed to AEOI, sometimes even as early adopters."

But the EU, in its communique, states that its new blacklist "can be used to screen non-cooperative tax jurisdictions and develop a common EU strategy to deal with them."

Just last week in response to the EU Commission proposal to require disclosure of corporate financial, tax, and business operation information among all EU countries, Germany, the UK, Ireland, among other EU states expressed their mutual concern, best stated by the Germany's Finance Minister:  “I doubt whether we should really try to move in the way that the commission will become a tax authority...”   

Is the Commission acting beyond the expressions of the member states?  Or are the member states establishing a form of double standard, one that applies to the internal market and another that applies to non-members? Questions, questions....  

Dear Colleagues,

As many of you may be aware, on 17 June, the EU Commission released its Comprehensive “Action OECD Plan for Fair and Efficient Corporate Taxation in the EU”. The plan includes five key areas for action, including item 4, “Further Progress on Tax Transparency”.

As an immediate first step as part of this item, the Commission has released what is essentially a compilation of a pan-EU-wide list of third country non-cooperative tax jurisdictions, which is based on Member States' independent national lists. In their background document, the EU has indicated that they have not decided which countries should be listed, rather it is relaying decisions taken at national level by their members. It is very unfortunate that this exercise has looked like the establishment of a list. Our EU colleagues have confirmed that this is not their intent.

The list is made up of jurisdictions that appear on at least 10 EU member states’ national blacklists. Some information is provided as to what factors go into making the national blacklists - they include “compliance with transparency and exchange of information standards; absence of harmful tax measures, other criterion”.

It should be noted that the EU Commission has incorporated the Global Forum’s terms of reference into its principles of good governance in tax matters and so supports a clear link between compliance with the Global Forum standard and inclusion on a national blacklist.  However, it is not clear how this aspect is factored into either the national blacklists or the EC’s list.  In addition, the inclusion of harmful tax practices or “other criterion” in determining inclusion in a national blacklist makes it impossible to determine how this independently reflects on a jurisdiction compliance with the Global Forum standards.

As the OECD and the Global Forum we would like to confirm that the only agreeable assessment of countries as regards their cooperation is made by the Global Forum and that a number of countries identified in the EU exercise are either fully or largely compliant and have committed to AEOI, sometimes even as early adopters. Without prejudice to countries' sovereign positions, we are happy to confirm that these jurisdictions are cooperative and we would like to commend the tremendous progress made over the past years as well as the cooperation and integrity of the Global Forum process.

We have already expressed our concerns and stand ready to further clarify to the media the position of the affected jurisdictions with regard to their compliance with the Global Forum standards.

We look forward to further engagement with you all and remain fully available should you need any assistance.

June 25, 2015 in Current Affairs | Permalink | Comments (0)

Five Days Left! File FBAR Report (Foreign Bank and Financial Accounts) to FinCEN by June 30 or Pay Large Fines

The Internal Revenue Service reminds all US persons who has one or more bank or financial FINCENaccounts located outside the United States, or signature authority over such accounts, that they may need to file an FBAR by next Tuesday, June 30.

FBAR refers to Form 114, Report of Foreign Bank and Financial Accounts, which must be filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department. It is not a tax form and cannot be filed with the IRS. The form must be filed electronically and is only available online through the BSA E-Filing System website.

In general, the filing requirement applies to anyone who had an interest in, or signature or other authority over foreign financial accounts whose aggregate value exceeded $10,000 at any time during 2014. Because of this threshold, the IRS encourages taxpayers with foreign assets, even relatively small ones, to check if this filing requirement applies to them.

FBAR filings have surged in recent years, topping the one-million mark for the first time during calendar-year 2014. The FBAR requirement is separate from the requirement to report specified foreign financial assets on a U.S. income tax return using Form 8938

FBAR Civil Penalties

A civil penalty up to $10,000 may be imposed by the IRS upon a U.S. person per incidence of non-compliance with the FBAR filing requirements although the IRS may waive the penalty when there is reasonable cause for the non-compliance and the FBAR properly reports the balance held in a foreign account.  However, where the IRS determines willfulness for the FBAR non-compliance, it may increase the civil monetary penalty to the greater of $100,000 or 50 percent of the balance in the account at the time of the violation.

According to the Government Accountability Office (GAO) Report of 2013 regarding the application of FBAR civil penalties, small financial accounts with balances of less than $100,000 and that over a six year period had only an average of $103 tax owing (which equates to $17 a year additional tax revenue), the IRS imposed a FBAR penalty of $13,320 (i.e. $2,220 a year).  The twenty-fifth percentile paid on average a $5,945 FBAR civil penalty for an average annual $277 tax understatement.  The median FBAR civil penalty imposed was $17,991 a year for a median $2,125 a year tax understatement.  The GAO analysis found that taxpayers with the smallest non-reported foreign financial accounts (i.e., those in the tenth percentile with accounts of $78,315 or lower) paid FBAR penalties as high as 575 percent of the actual tax, interest, and tax penalty owed.

Who is considered an individual FBAR filer? 

An individual FBAR filer is a natural person who owns a reportable foreign financial account or has signature authority but no financial interest in a reportable foreign financial account that requires the filing of an FBAR for the reportable year.

An individual who jointly owns an account with a spouse may file a single FBAR report as an individual filer for that joint account.  However, the FBAR instructions state that a spouse included as a joint owner, who does not file a separate FBAR, must also sign the FBAR.  This is not possible with FinCEN’s BSA E-File system capability because it only allows for one digital signature. In this situation, FinCEN allows the spouses to designate, using Form 114a, which spouse will be designated as the FBAR signatory on the behalf of both.

IRS FBAR on demand webinar

June 25, 2015 in Current Affairs | Permalink | Comments (0)

Swiss release national report on money laundering and terrorist financing risks

The Swiss Federal Department of Finance released its first report on the national assessment of the money laundering and terrorist financing risks in Switzerland.

Swiss logoDrawn up by an interdepartmental working group, the report also contains specific analyses of the most important areas subordinated to the Anti-Money Laundering Act as well as other selected areas that are not.

It shows that Switzerland is not immune to financial crime and is still an attractive location for laundering the proceeds of crime mostly committed abroad. The report concludes that the current legislation takes appropriate account overall of the risks identified. At the same time, it recommends measures to strengthen the effectiveness of the Swiss system for combating money laundering and terrorist financing.

The analyses in the report are based on both quantitative and qualitative data obtained from public sources or provided by various federal and cantonal offices and by private-sector entities. It is clear from the report that Switzerland is not immune to financial crime and is still an attractive location for the laundering of assets derived from crime that is mostly committed abroad. In terms of predicate offences, the main threats for the Swiss financial sector are fraud, embezzlement, corruption and participation in a criminal organisation.

Although the overall assessment of the risks of money laundering resulted in a medium risk for all of the areas covered by the Anti-Money Laundering Act (AMLA), the level of risk differs for each area. The biggest threat has been identified in the area of universal banks. Nevertheless, the vulnerabilities are significantly reduced by the anti-money laundering measures so that appropriate risk management can be expected in this area despite the higher risk. The same is true for the following areas: private banking, asset management, legal professions, fiduciary business, and money and asset transfer services.

The analyses showed that there is a low threat for the areas of insurers, casinos and credit services in Switzerland. The other areas analysed (retail banking, securities trading, trade in precious metals, currency exchange, and payment services) are exposed to a medium threat. The existing measures to prevent and reduce the risk of money laundering and terrorist financing are though proportionate to the risks identified.

The analyses also revealed a limited risk for terrorist financing, which could have a significant impact, however, if it occurred. Furthermore, the risk could increase if terrorist financing networks were to more systematically exploit alternative money transfer systems in Switzerland. This would increase both the threat to Switzerland and its vulnerability.

At present, the financial intermediaries most exposed to the threat of terrorist financing are banks and money and value transmitting service providers and credit business. The sums of money in question are generally small. The authorities are working together closely in this area both at the national and international levels. The continuation and strengthening of this cooperation, particularly between intelligence services, further awareness-raising among entities potentially affected by terrorist financing and the application of other available legal means to combat terrorist financing are essential conditions for making risk mitigation possible.

In addition, six areas not directly subordinated to the AMLA were examined. The interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMT) concluded that the current system adequately responds to the risks. Nevertheless, it recommends measures for improvement.

The CGMT is of the opinion that the legislation for the areas covered by the AMLA, which was completed with the Federal Act of 12 December 2014 for Implementing the 2012 revised Financial Action Task Force (FATF) Recommendations, takes appropriate account overall of the current money laundering and terrorist financing risks. It also believes that the use of the instruments provided by the legislation should be improved further at the operational level. Consequently, the CGMT recommended eight measures in its report for consolidating the current system, which include promoting dialogue between the public and private sectors, developing and systemising statistics and specific recommendations for future analyses as well as with regard to the examinations of the areas not covered by the AMLA, namely the real estate sector, the commodities industry, foundations and free ports.

The national risk analysis is a continuous process. The report is to be updated and supplemented with other reports and analyses to ensure that the effectiveness of the Swiss system is evaluated and new threats are addressed.


The interdepartmental coordinating group on combating money laundering and the financing of terrorism (CGMT) was appointed by the Federal Council at the end of 2013. The CGMF is a permanent body headed by the Deputy State Secretary for International Financial Matters (Federal Department of Finance) and comprised of members of management in the following offices: the Federal Tax Administration (Federal Department of Finance); fedpol, the Federal Office of Justice, the Federal Gaming Board (Federal Department of Justice and Police), the Federal Intelligence Service (Federal Department of Defence, Civil Protection and Sport); the Directorate of Public International Law, Sectoral Foreign Policy Division (Federal Department of Foreign Affairs); FINMA, and the Office of the Attorney General of Switzerland.

The CGMT is tasked with coordinating the measures related to combating money laundering and terrorist financing in the Federal Administration. In this context, it must ensure continuous risk assessment in particular, with the objective of identifying new money laundering and terrorist financing threats and recommending possible measures to mitigate them. The CGMT's report also implements a FATF recommendation, which requires its members to perform risk analyses so that the measures for combating money laundering and terrorist financing can be better adjusted to the actual risks.

Press Release

June 25, 2015 in Current Affairs | Permalink | Comments (0)