Saturday, October 25, 2014
The main issues dealt with by this Plenary were:
- Issuing a statement to clarify the risk-based approach in the light of the de-risking phenomenon: ‘FATF clarifies risk-based approach: case-by-case, not wholesale de-risking’
- Expressing concern with the financing generated by and provided to the terrorist group the Islamic State of Iraq and the Levant (ISIL): 'FATF action on the terrorist group ISIL'
- Producing two public documents identifying jurisdictions that may pose a risk to the international financial system:
- Discussing the fourth round mutual evaluation reports on compliance with the FATF Recommendations of Norway and Spain.
- Approving Turkey’s exit from the targeted follow-up process of the third round of mutual evaluations.
- Welcoming Japan’s important progress in its legislative actions, and encouraging Japan to continue to address deficiencies, including through the adoption of relevant bills.
- Receiving an update on AML/CFT improvements in Argentina, Cuba, Ethiopia, Tajikistan and Turkey
- Reviewing the voluntary tax compliance programmes in several jurisdictions.
- Adopting and publishing:
- Receiving an update on FATF’s membership expansion.
- Hearing a briefing by the Chair of the Egmont Group on recent developments in financial intelligence units and welcoming a closer co-operation with the Egmont Group.
Friday, October 24, 2014
The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and the move to automatic exchange of financial account information took centre stage when Heads of Tax Administration met on 23-24 October in Dublin, Ireland. The FTA is the leading international body concerned with tax administration, bringing together the heads of tax administrations from the OECD, members of the G20 and large emerging economies.
More than forty delegations participated in the Ninth Meeting of the OECD Forum on Tax Administration (FTA) and agreed that ever greater co-operation will be necessary to implement the results of the BEPS project and automatic exchange of information.
Specifically they agreed:
A strategy for systematic and enhanced co-operation between tax administrations;
To invest the resources needed to implement the new standard on automatic exchange of information; and
To improve the practical operation of the mutual agreement process.
The communiqué released at the close of the meeting contains more details and contains links to the following publications that have just been released by the FTA:
The Financial Action Task Force (FATF) and the G20 Anti-Corruption Working Group (ACWG) held a joint Experts’ Meeting on Corruption on Saturday, 18 October 2014. In this meeting, 163 delegates from 28 jurisdictions and 19 organisations participated. This is the fourth time that the FATF and G20 ACWG have held such an event, which brings together anti-money laundering/counter-terrorist financing (AML/CFT) experts and anti-corruption experts to discuss issues of common interest.
The meeting was chaired by the FATF President, Mr. Roger Wilkins AO (Australia), at the OECD headquarters in Paris. The G20 ACWG Co-Chairs – Mr. Stefano Mogini (Italy) and Mr. Kieran Butler (Australia) (acting Co-Chair) – participated and reiterated the G20 support for FATF work to enhance transparency and combat corruption, and encouraged continued engagement on these issues.
The key objectives for this meeting were:
- to discuss the FATF’s draft Guidance on Transparency and Beneficial Ownership, and incorporate feedback from anti-corruption experts to enhance the paper, and
- to build on the previous discussions between the FATF and the G20 on anti-corruption issues, with a particular focus on measures to combat the misuse of corporate vehicles.
PREVENTING THE MISUSE OF CORPORATE VEHICLES
Corporate vehicles, such as companies and trusts, play an integral role in the global economy.
However, under certain conditions, they have been misused for criminal purposes including money
laundering and corruption. Taking action to prevent the misuse of corporate vehicles is essential to
ensure the integrity of the international financial system, and support economic growth and
The FATF has set international standards which require countries to implement measures to
ensure that accurate information on the beneficial ownership of legal persons and legal
arrangements is available to competent authorities in a timely fashion.
Summary of outcomes of the meeting: www.fatf-gafi.org/media/fatf/documents/Outcomes%20Corruption%20Expert%20Meeting%20Oct%202014.pdf
Thursday, October 23, 2014
Six federal agencies approved a final rule requiring sponsors of securitization transactions to retain risk in those transactions. The final rule implements the risk retention requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).
The final rule is being issued jointly by the Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission. As provided under the Dodd-Frank Act, the Secretary of the Treasury, as Chairperson of the Financial Stability Oversight Council, played a coordinating role in the joint agency rulemaking.
The final rule largely retains the risk retention framework contained in the proposal issued by the agencies in August 2013 and generally requires sponsors of to retain not less than five percent of the credit risk of the assets collateralizing the ABS issuance. The rule also sets forth prohibitions on transferring or hedging the credit risk that the sponsor is required to retain.
As required by the Dodd-Frank Act, the final rule defines a "qualified residential mortgage" (QRM) and exempts securitizations of QRMs from the risk retention requirement. The final rule aligns the QRM definition with that of a qualified mortgage as defined by the Consumer Financial Protection Bureau. The final rule also requires the agencies to review the definition of QRM no later than four years after the effective date of the rule with respect to the securitization of residential mortgages and every five years thereafter, and allows each agency to request a review of the definition at any time. The final rule also does not require any retention for securitizations of commercial loans, commercial mortgages, or automobile loans if they meet specific standards for high quality underwriting.
The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securitizations and two years after publication for all other securitization types.
The Financial Crimes Enforcement Network (FinCEN) yesterday issued the SAR Stats quarterly update, which provides information on Suspicious Activity Reports (SARs) filed through Sept. 30, 2014.
Quarterly Update (October 2014)
- Depository Institutions
- Money Services Businesses
- Securities and Futures Firms
- Insurance Companies
- Casinos and Card Clubs
- Other Types of Financial Institutions
Wednesday, October 22, 2014
The Securities and Exchange Commission filed a “record” 755 enforcement actions and obtained orders totaling $4.16 billion in disgorgement and penalties in fiscal 2014, according to preliminary figures released by the agency on Thursday.
read on at ThinkAdvisor
Tuesday, October 21, 2014
Although we think of banking and Wall Street as a bastion of capitalism, sometimes an “occupy wall street” type person sneaks into the club.
An employee of Wells Fargo, Mr. Tyrel Oates, apparently tried an impressive subversive tactic to fight for a little socialism in the financial industry. ... read Jack Kelly's full article at CompliancEx
Sunday, October 19, 2014
SEC Announces Enforcement Action Against Former Wells Fargo Advisors Compliance Officer for Altering Document
The Securities and Exchange Commission announced an enforcement action against a former Wells Fargo Advisors compliance officer who allegedly altered a document before it was provided to the SEC during an investigation.
According to the SEC’s order instituting an administrative proceeding against Judy K. Wolf, she was responsible for identifying potentially suspicious trading by Wells Fargo personnel or the firm’s customers and clients and then analyzing whether the trades may have been based on material nonpublic information. Wolf created a document in September 2010 to summarize her review of a particular Wells Fargo broker’s trading, and she closed her review with no findings. The SEC Enforcement Division alleges that Wolf altered that document in December 2012 afterthe SEC charged the broker with insider trading. By altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had. After Wells Fargo provided the document to the SEC as part of its continuing investigation, SEC enforcement staff spotted the alteration and questioned Wolf specifically about the document. At first she unequivocally denied altering the document after September 2010, but in later testimony she testified that she had done so.
The SEC previously charged Wells Fargo in the case, and the firm agreed to pay $5 million to settle these and other violations of the securities laws. Prior to the enforcement action, Wells Fargo placed Wolf on administrative leave and ultimately terminated her employment.
“We allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit. “Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”
Saturday, October 18, 2014
Backstop Ambiguity: A Proposal for Balancing Specificity and Ambiguity in Financial Regulation, Julian J.Z. Polaris, Yale Law School
Many in the financial sector argue that the Security and Exchange Commission’s (SEC’s) rules are too vague, and have called for greater specificity and predictability. Specific rules serve important functions of notice and efficiency, but this Note argues that the rules in any given area of financial regulation should be paired with purposely vague “backstop ambiguity” provisions. Such a model would allow regulators to target unforeseen harmful behavior, as well as efforts to evade the law by exploiting loopholes. The Note uses the examples of insider trading and tender offers to assess the efficacy and shortcomings of real-world backstop ambiguity, eliciting lessons to construct a normative model for balancing specificity and ambiguity in regulatory design. At a time when the financial industry seems unconcerned with cultivating a reputation for ethical conduct, backstop ambiguity may have a role to play in promoting a culture of compliance.
Friday, October 17, 2014
According to the Chicago Tribune, "Pippen is scheduled to testify for the prosecution Friday at the Dirksen U.S. Courthouse in the trial of his former financial adviser, Robert Lunn, on federal bank fraud charges, prosecutors say."
"A decade ago, Pippen won an $11.8 million judgment against Lunn after alleging the adviser made dubious investments, including real estate purchases and an airplane deal, according to court records.
In 2012, Lunn was criminally charged with fraudulently obtaining a $1.3 million business loan from Oak Brook-based Leaders Bank as well as separate loans of a combined $1.9 million. Lunn misrepresented to Leaders Bank the purpose of the loans as well as the nature of his investment portfolio, the charges alleged."
New IRS rulings have cleared the way for high-income clients looking to maximize the value of their employer-sponsored retirement plan assets.
The new rules change the way that after-tax retirement plan assets are treated upon distribution, providing flexibility and certainty for clients whose accounts contain both pre-tax and after-tax contributions. By allowing pre-tax and after-tax contributions to be distributed to the most appropriate retirement income planning vehicles with ease, the rules remove the complexities that previously discouraged clients seeking to maximize the value of these contributions, and eliminate the tax liability that accompanied a split distribution in the process.
Thursday, October 16, 2014
According to reports with various news outlets, Messi may leave Barca depending on how his tax case proceeds. The Mail reports that "Lionel Messi’s run-in with the Spanish tax man could alter the destiny of his club career. Instead of playing out his days with Barcelona, Messi could finally consider a move elsewhere if things get heavy. Inevitably Manchester City and Paris Saint-Germain are monitoring the Argentine's current complicated situation."
It was recently decided that Messi will have to stand trial for the tax fraud case. According to USA Today, "[D]espite the prosecution's own recommendation to drop charges against the 27-year-old on the basis that his father Jorge controlled his fiscal matters, a judge in the coastal town of Gava held that the case must be answered by both men. "In this type of crime it is not necessary for someone to have complete knowledge of all the accounting and business operations nor the exact quantity, rather it is sufficient to be aware of the designs to commit fraud and to consent to them," read the judge's statement."
Does the IRS Use Quotas To Evaluate Its Agents for Bonus and Promotion (like Traffic Cops with Speeding Tickets)?
IMPACT ON TAXPAYERS
The IRS Restructuring and Reform Act of 1998 (RRA 98) requires the IRS to ensure that managers do not evaluate enforcement employees using any record of tax enforcement results (ROTER) or base employee successes on meeting ROTER goals or quotas. Use of ROTERs may create the misperception that safeguarding taxpayer rights is secondary to IRS enforcement results.
WHY TIGTA DID THE AUDIT
TIGTA is required under Internal Revenue Code Section 7803(d)(1)(2000) to annually evaluate whether the IRS complies with restrictions on the use of enforcement statistics to evaluate employees as set forth in RRA 98 Section 1204. Our review determined whether the IRS complied with:
Section 1204(a), which prohibits the IRS from using any ROTER to evaluate employees or to impose or suggest production quotas or goals.
Section 1204(b), which requires that employees be evaluated using the fair and equitable treatment of taxpayers as a performance standard.
Section 1204(c), which requires each appropriate supervisor to self-certify quarterly whether ROTERs were used in a prohibited manner.
WHAT TIGTA FOUND
There were some instances of noncompliance with RRA 98 Section 1204 requirements. TIGTA identified instances of noncompliance with each subsection of the law:
Section 1204(a) – 13 potential violations.
Section 1204(b) – 55 instances of documentation noncompliance.
Section 1204(c) – three instances of noncompliance.
TIGTA also identified 11 IRS policy violations. In these 11 instances, managers did not reject employee self-assessments containing ROTER information.
In addition, TIGTA determined that changes to a human resources computer system resulted in 466 Section 1204 managers not being listed on the Fiscal Year 2013 Section 1204 Manager Listing, as well as eight employees missing the mandatory ROTER training in Fiscal Year 2013.
WHAT TIGTA RECOMMENDED
TIGTA made seven recommendations, including that Section 1204 noncompliance and IRS policy violations identified in this report be discussed with responsible managers and employees. TIGTA also recommended that IRS management disseminate guidance regarding Section 1204 compliance and that they continue to review human resources data to ensure the appropriate classification of Section 1204 managers and employees. The IRS agreed with all the recommendations and has taken or plans to take corrective actions.
However, the IRS did not agree with four of the 13 Section 1204(a) potential violations, as well as 11 of the 55 instances of Section 1204(b) documentation noncompliance.
READ THE FULL REPORT
To view the report, including the scope, methodology, and full IRS response, go to:
LifeHealthPro reports that In today’s market for financial products, the array of life insurance and annuity optionsthat are available can seem staggering at times, especially for clients whose primary goal is to provide pure life insurance protection, whether business or personal.
Fortunately, the reversionary annuity is gaining traction among carriers — as a product that combines features of both annuities and life insurance in order to provide guaranteed income to survivors — but with modifications that allow it to be stripped of the high-end price tag that often accompanies the modern financial product. read on at LifeHealthPro
Wednesday, October 15, 2014
According to Reuters, "a federal judge on Tuesday said JPMorgan Chase & Co must face a class action lawsuit by investors who claimed the largest U.S. bank misled them about the safety of $10 billion of mortgage-backed securities it sold before the financial crisis."
Judge "Oetken named the Laborers Pension Trust Fund for Northern California and Construction Laborers Pension Trust for Southern California as lead plaintiffs, and their law firm Robbins Geller Rudman & Dowd as lead counsel"
"Oetken rejected JPMorgan's arguments that the case could not be a class action because it was based on the practices of many originators and more than 8,000 underwriting guidelines, some investors were more sophisticated than others, and the MBS had evolved too rapidly during the two-year class period."
The caption of the case is "Fort Worth Employees' Retirement Fund v. JPMorgan Chase & Co, U.S. District Court, Southern District of New York, No. 09-03701."
The 25 largest U.S. public pensions face about $2 trillion in unfunded liabilities, showing that investment returns can’t keep up with ballooning obligations, according to Moody's Investors Service.“Despite the robust investment returns since 2004, annual growth in unfunded pension liabilities has outstripped these returns,” Moody’s said. “This growth is due to inadequate pension contributions, stemming from a variety of actuarial and funding practices, as well as the sheer growth of pension liabilities as benefit accruals accelerate with the passage of time, salary increases and additional years of service.”
The founder of Liberty Reserve, a virtual currency used by cybercriminals around the world to launder proceeds of their illegal activity, was extradited from Spain and arrived in the United States this afternoon.
Arthur Budovsky, 40, a citizen of Costa Rica, was arrested in Spain in May 2013 after being indicted by a grand jury in the Southern District of New York. “Arthur Budovsky allegedly built Liberty Reserve overseas to provide the international underworld with a crime-friendly digital currency and elude the scrutiny of American authorities. He even renounced his U.S. citizenship to try to escape facing justice in an American courtroom,” said Assistant Attorney General Caldwell. “With the cooperation of our foreign partners in Spain and elsewhere, this case and extradition are a clear example that money launderers can run, but they cannot hide from the Department of Justice.”
“For years, Arthur Budovsky allegedly enabled criminals in the United States and around the world to process illegal payments and to launder billions of dollars in crime proceeds through Liberty Reserve,” said U.S. Attorney Bharara. “Budovsky operated Liberty Reserve from Costa Rica, hoping to evade the reach of U.S. law enforcement. Thanks to the cooperative efforts of our law enforcement partners here and in Spain, he was apprehended and extradited to the United States where he will now face justice.”
According to allegations contained in the indictment and statements made in related court proceedings, Liberty Reserve was born out of Budovsky’s unsuccessful experience running a third-party exchange service, called Gold Age Inc., for another digital currency, called E-Gold. In or about 2006, Budovsky was convicted in New York State of operating Gold Age Inc. as an unlicensed money transmitting business. In 2007, the operators of E-Gold were also charged with criminal offenses, including money laundering and operating an unlicensed money transmitting business, and subsequently ceased doing business. In the wake of his own criminal conviction, Budovsky set about building a digital currency that would succeed in eluding law enforcement where E-Gold had failed, by, among other ways, locating the business outside the United States. Accordingly, Budovsky emigrated to Costa Rica, where he and other defendants began operating Liberty Reserve.
Liberty Reserve, which billed itself as the Internet’s “largest payment processor and money transfer system,” was created, structured and operated to help users conduct illegal transactions anonymously and launder the proceeds of their crimes. The indictment alleges that Budovsky devoted himself to building and expanding Liberty Reserve so that the company could profit from attracting more and more criminal customers, all while seeking to evade the scrutiny and reach of U.S. law enforcement authorities. At all relevant times, Budovsky directed and supervised Liberty Reserve’s operations, finances, and corporate strategy.
Liberty Reserve emerged as one of the principal money transfer agents used by cybercriminals around the world to distribute, store, and launder the proceeds of their illegal activity. Liberty Reserve was used extensively for illegal purposes, functioning as the bank of choice for the criminal underworld because it provided an infrastructure that enabled cybercriminals to conduct anonymous and untraceable financial transactions. The indictment alleges that Budovsky was so committed to evading U.S. law enforcement that he formally renounced his U.S. citizenship in 2011 and became a Costa Rican citizen, telling U.S. immigration authorities that he was concerned that the “software” his “company” was developing “might open him up to liability in the U.S.”
Before being shut down by the U.S. government in May 2013, Liberty Reserve had more than one million users worldwide, including more than 200,000 users in the United States, who conducted approximately 55 million transactions through its system totaling more than $6 billion in funds. These funds encompassed suspected proceeds of credit card fraud, identity theft, investment fraud, computer hacking, narcotics trafficking, and other crimes.
Budovsky is among seven individuals charged in the indictment, which was unsealed on May 28, 2013. Four co-defendants – Vladimir Kats, Azzeddine el Amine, Mark Marmilev, and Maxim Chukharev – have pleaded guilty and await sentencing before U.S. District Judge Denise L. Cote. Charges against Liberty Reserve and two individual defendants who have not been apprehended remain pending.
Tuesday, October 14, 2014
According to KLAS-TV Las Vegas, "Two men have been charged with conspiracy and fraud for engaging in a scheme to misappropriate $34 million from two Florida-based hedge funds, that's according to the Department of Justice (DOJ)."
"According to the indictment, from April 2008 through April 2010, Buckhannon and Rawstern, along with some other co-conspirators managed members of two Bradenton, Florida-based hedge funds, Arcanum Equity Fund, LLC and Vestium Equity Fund, LLC.
The DOJ said the defendants engaged in a fraudulent scheme to misappropriate $34 million they raised from investors by misrepresenting how they would use the investors' funds, along with misrepresenting that there were safeguards over the investors' money, such as an independent trustee and independent fund administrator.
The DOJ said the defendants then looted and bankrupted the hedge funds by taking payments on false and fictitious profits, while taking improper and undisclosed loans. The indictment states that as a result of the defendants' conduct, investors lost approximately $13.1 million."