International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, March 28, 2017

Guidance for a Risk-Based Approach to Prepaid Cards, Mobile Payments and Internet-Based Payment Services

New and innovative payment products and services are being developed and used at an ever-increasing pace. These new payment products and services have the potential of being used for money laundering or terrorist financing. Their vulnerabilities, associated risk factors and risk mitigants were described in earlier typologies reports by the FATF.

The FATF has developed guidance for countries and the private sector on how to apply a risk-based approach to implementing AML/CFT measures. This guidance examines how these payment products and services work, and how to regulate and supervise this activity. The FATF consulted with the private sector in the development of this guidance paper and appreciated the feedback received. The guidance recognises the role played by these products in financial inclusion and it should be considered, together with the FATF guidance on financial inclusion. In relation to Internet-based payment systems, the guidance provides advice in relation to the issuance of electronic money. While some alternative currencies, such as decentralised digital currencies, may fall outside the scope of this guidance, the guidance remains relevant where such currencies are exchanged or redeemed. The FATF will continue to consider the risks posed by such currencies and possible mitigating measures, and it encourages countries to monitor developments in the market.

The guidance is structured as follows:  Download FATF Guidance-RBA-NPPS

Section II explains how new payment systems work, who the entities involved in the provision of NPPS are, and their roles/activities 

Section III examines which entities involved in the provision of NPPS are already covered by the FATF Recommendations (i.e., because they fall within the FATF definition of a financial institution)

Section IV determines the risks involved in the provision of NPPS, including through consideration of any relevant risk factors and risk mitigation measures

Section V considers the impact of regulation on the NPPS market, including whether such regulation would impact financial inclusion and the positive implications of money deposits moving to regulated financial institutions

Section VI examines how to regulate and supervise entities involved in providing NPPS, and consider the impact of such regulation and supervision on the effective implementation of AML/CFT measures

Section VII discusses considerations when determining how to apply appropriate AML/CFT regulation of NPPS which addresses the risks, acknowledging that there may be multiple regulated entities

AML bookProfessor Byrnes' Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis) is the financial industry go-to resource designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms contribute analysis to develop this practical risk-based guide.  “One of America’s leading experts on the global battle against money laundering, Professor William Byrnes is the lead author of Money Laundering, Asset Forfeiture & Recovery, and Compliance – A Global Guide.  Ray Camiscioli, Esq., Director, Product Strategy & Development for Tax, Accounting and Estates/Elder Law, LexisNexis, Inc.

March 28, 2017 in Financial Regulation | Permalink | Comments (0)

Monday, March 27, 2017

Dialogue on FinTech and RegTech: Opportunities and Challenges

The Financial Action Task Force (FATF) held a dialogue on FinTech and RegTech in Vienna on 20 March 2017, as part of the FATF Private Sector Consultative Forum. The dialogue was FATF logochaired by the FATF President, Mr. Juan Manuel Vega-Serrano.

This dialogue built upon the FATF’s previous engagement with the private sector at the Roundtable on FinTech and Regtech held in Paris on 18 February 2017. Participants in this dialogue included over 250 representatives from the private sector and FATF members and observers.

Recognising the opportunities that FinTech and RegTech present for the private sector and that innovation in FinTech and RegTech spans across many aspects of the financial system, participants discussed how different jurisdictions are approaching the regulation and supervision of FinTech and RegTech, keeping in mind AML/CFT concerns. Participants shared their views and experiences with regard to the opportunities provided by FinTech and RegTech that are related to FATF’s priorities, and also on the challenges faced by the private sector in this area.

Discussions included the use of biometric technology and centralised databases as a means of verifying customers’ identities, the development of artificial intelligence and machine learning towards more effective monitoring and screening systems for suspicious financial activity, as well as the benefits of technology to improve financial access and reduce reliance on cash payments through more efficient processes and lower costs. Participants noted the potential for technological innovation to assist the public and private sectors in meeting the FATF’s objectives of combating money laundering, terrorist financing and other related threats to the integrity of the international financial system, and suggested that all stakeholders consider how best to take advantage of useful developments in this field.

The FATF will hold a standalone event in the United States on 25-26 May 2017 to further engage the sector on their AML/CFT concerns and to explore how they can potentially contribute towards the FATF’s work going forward.

Background

echnology-based innovations are starting to radically change the financial industry. The FATF has already undertaken a large body of work to understand the risks and vulnerabilities of new payment products and services, and to ensure that AML/CFT measures remain up-to-date as new technologies emerge. The next step and one of the key priorities of the Spanish Presidency is to develop a partnership with the FinTech and RegTech community to support innovation in financial services, while maintaining transparency and mitigating the associated risks. Building such a partnership will enable FATF to become more proactive in the development of standards, guidance and best practice, anticipating and being involved in these new developments rather than responding to them.

Today’s roundtable was a first step to take this initiative forward in order to engage with various stakeholders. The event brought together anti-money laundering/counter-terrorist financing (AML/CFT) professionals, national supervisors, international organisations and other relevant experts, including experts from banks which have partnered with FinTech and RegTech firms to discuss issues of common interest.

Participants in this dialogue included 144 delegates from 30 jurisdictions and 14 organisations, as well as 11 representatives from the banking sector. The key objective of this roundtable was to better understand and exchange views on the current and emerging state of play on interaction of the established traditional financial institutions with the FinTech and RegTech industries, and the impact financial innovations and technologies are having (or expected to have) on reshaping the delivery and provisions of financial services. The practical impact of AML/CFT standards on financial innovation and different approaches followed by a number of jurisdictions to help promote innovative business models and emerging technologies, while mitigating and addressing associated money laundering and terrorist financing risks, were also discussed.

During the half a day-long series of discussions, representatives of financial institutions shared their experiences in the emerging FinTech and RegTech solutions in areas such as distributed ledger technologies, new payment methods and techniques, digital currency, regulatory reporting solutions and products and technologies supporting initial and ongoing customer due diligence measures. Participants also noted how these and other related developments in the emergence of new products, services and technologies are creating opportunities for growth and efficiency, and at the same time, posing challenges both for the private and the public sector.

Since the global nature of some of these developments has a cross-border implication, participants also stressed upon the need to have effective mechanisms for proactive information sharing among relevant stakeholders, in order to take a more coordinated approach in addressing the emerging challenges.

The FATF will continue to remain engaged with these issues through a much broader engagement, including with representatives from the FinTech and RegTech industry, going forward.

 

AML bookProfessor Byrnes' Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis) is the financial industry go-to resource designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms contribute analysis to develop this practical risk-based guide.  “One of America’s leading experts on the global battle against money laundering, Professor William Byrnes is the lead author of Money Laundering, Asset Forfeiture & Recovery, and Compliance – A Global Guide.  Ray Camiscioli, Esq., Director, Product Strategy & Development for Tax, Accounting and Estates/Elder Law, LexisNexis, Inc.

March 27, 2017 in Financial Regulation | Permalink | Comments (0)

Sunday, March 26, 2017

Outcomes from the FATF Private Sector Consultative Forum 20-22 March 2017

The Financial Action Task Force (FATF) held its annual Private Sector Consultative Forum on 20-22 March 2017 in Vienna, Austria, hosted by the United Nations Office on Drugs and FATF logo Crime (UNODC).

The meeting was chaired by the President of the FATF, Mr. Juan Manuel Vega-Serrano (Spain). Over 250 representatives from the financial sector and other businesses and professions subject to AML/CFT obligations, civil society, and FATF members and observers participated in this year’s Private Sector Consultative Forum.

The Forum is an opportunity for the FATF and its members to engage directly with the private sector on anti-money laundering and counter terrorist financing (AML/CFT) issues. It provides a regular platform for the FATF to learn more about the private sector’s views and concerns of AML/CFT-related issues. Over the three days of the Forum, participants held constructive discussions over the following issues:

Information Sharing

Effective information sharing is a cornerstone of a well-functioning AML/CFT framework. The FATF sought feedback from the private sector representatives on barriers to information sharing, their practical impact and measures to address them, information elements needed for an effective group-wide AML/CFT program, the interplay between data protection and privacy (DPP) and AML/CFT frameworks, and practical examples of information sharing between financial institutions which are not part of the same group. The input provided will be taken into account in the draft guidance currently under development by the FATF.

Correspondent Banking

Participants welcomed the 2016 FATF Guidance on Correspondent banking services which they  consider has clarified regulatory and supervisory expectations associated to correspondent banking, and in particular the absence of FATF requirements for correspondent institutions to conduct CDD on each individual customer of their respondent institutions. National supervisors and regulators were encouraged to follow-up on the Guidance at domestic level and clarify how it will be reflected in the national framework and requirements. Some participants called on FATF to conduct further work on the definition of correspondent banking, and consider restricting its scope.

Financial Inclusion

This session focused on the new private sector, technology-driven innovation which is opening new ways of reaching financially excluded and underserved customers, verifying their identities, profiling them, and managing new tailor-made products. Participants heard from financial inclusion initiatives in different countries, including in India. They discussed publicly-sponsored central databases of basic information on people’s identity, authenticated through biometrics or fingerprints. These tools can help financial institutions conduct the basic CDD steps to establish relationships with undocumented people, and play a key role for financial inclusion. Discussions also highlighted products and services, including e-wallets and mobile payments, serving specific needs of unbanked people. Experiences of outreach to unserved groups of populations, remote from bank facilities and branches, were also shared.

Remittances and De-risking

In light of continuing concerns about the impact of de-risking on the remittance sector, the FATF and FSB, with the support of the GPFI and the German G20 Presidency, chaired a special session on remittances and de-risking with experts from the remittances and banking sectors. The discussion aimed to understand how the money and value transfer services sector is affected by loss of correspondent banking services, and the variety of reasons why this can occur. It also reviewed the responses which have been used to address the causes, and maintain access to banking services and remittance services; and sought to identify any remaining gaps or co-ordination needs, at national or international levels that are not already covered by existing initiatives.

Terrorist Financing

The FATF sought feedback on the how the dissemination of the Detecting Terrorist Financing: Relevant Risk Indicators report was made to banks, MSBs and other relevant private sector representatives. Feedback was also sought on the usefulness of the indicators, any tangible results achieved, and how similar projects could be improved in the future. The private sector participants welcomed the information contained in the report, and requested that it be kept up-to-date and specific risk indicators be developed for individual sectors.

Beneficial Ownership

Recognising the need for further guidance on how to identify other legal arrangements which are similar to express trusts within the context of Recommendation 25, the session discussed the uses of trusts and other legal arrangements in a few jurisdictions. Participants then briefly talked about how trustees are required to collect and maintain certain information in order to fulfil their common law obligations. The participants noted that the risks of legal arrangements may vary, depending on the context of the jurisdiction and who the users of the legal arrangements are.

Engaging Non-Profit Organisations

Participants from governments and NPOs shared their experiences with the mutual evaluation process and assessments of Recommendation 8 and Immediate Outcome 10. Participants discussed the importance of involving NPOs in the mutual evaluation process at an early stage to ensure that they understand the purpose, expectations and scope of the process, and are well-prepared for the onsite visit which focuses primarily on effectiveness. The session also discussed the different processes through which several jurisdictions have assessed the risks of their NPO sector. The participants also highlighted the importance of governments and NPOs continuing to engage and collaborate. 

AML bookProfessor Byrnes' Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis) is the financial industry go-to resource designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms contribute analysis to develop this practical risk-based guide.  “One of America’s leading experts on the global battle against money laundering, Professor William Byrnes is the lead author of Money Laundering, Asset Forfeiture & Recovery, and Compliance – A Global Guide.  Ray Camiscioli, Esq., Director, Product Strategy & Development for Tax, Accounting and Estates/Elder Law, LexisNexis, Inc.

March 26, 2017 in Financial Regulation | Permalink | Comments (0)

Saturday, March 25, 2017

Banking Regulators Issue Joint Report to Congress to Reduce Regulations

Continuing their efforts to reduce regulatory burdens while ensuring the safety and soundness of the nation’s financial institutions, member agencies of the Federal Financial FFIEC logoInstitutions Examination Council (FFIEC) today issued a joint report to Congress detailing their review of rules affecting financial institutions.  

Download 2017_FFIEC_EGRPRA_Joint-Report_to_Congress

The review was conducted as part of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 by the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation, and in conjunction with the National Credit Union Administration.

EGRPRA requires the federal banking agencies, along with the FFIEC, to conduct a review of their rules at least every 10 years to identify outdated or unnecessary regulations. While NCUA is not required to participate in the EGRPRA review, the agency’s Board chose to participate to enhance its own regulatory review process.

In particular, the agencies’ review focused on the effect of regulations on smaller institutions, such as community banks and savings associations. The federal banking agencies published four requests for written comment in the Federal Register and hosted six public outreach meetings across the country. NCUA, which regulates credit unions, routinely conducts town-hall meetings, listening sessions, and other outreach activities to hear and discuss stakeholders' views. Altogether, the agencies received more than 250 comment letters from financial institutions, trade associations, and consumer and community groups, as well as numerous comments obtained at the outreach meetings.

The report describes several joint actions planned or taken by the federal financial institutions regulators, including:

  • Simplifying regulatory capital rules for community banks and savings associations;
  • Streamlining reports of condition and income (Call Reports);
  • Increasing the appraisal threshold for commercial real estate loans; and
  • Expanding the number of institutions eligible for less frequent examination cycles.

The report also describes the individual actions taken by each agency to update its own rules, eliminate unnecessary requirements, and streamline supervisory procedures.

The federal financial institutions regulators will continue their efforts to tailor regulations to the size and risks posed by financial institutions while ensuring the safety and soundness of the nation’s financial institutions and banking system.

AML bookProfessor Byrnes' Money Laundering, Asset Forfeiture and Recovery, and Compliance- A Global Guide (LexisNexis) is the financial industry go-to resource designed to provide the compliance officer, BSA counsel, and government agent with accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources.  Special topic chapters assist the compliance officer design and maintain effective risk management programs.  Over 100 country and topic experts from financial institutions, government agencies, law, audit and risk management firms contribute analysis to develop this practical risk-based guide.  “One of America’s leading experts on the global battle against money laundering, Professor William Byrnes is the lead author of Money Laundering, Asset Forfeiture & Recovery, and Compliance – A Global Guide.  Ray Camiscioli, Esq., Director, Product Strategy & Development for Tax, Accounting and Estates/Elder Law, LexisNexis, Inc.

March 25, 2017 in Financial Regulation | Permalink | Comments (0)

Friday, March 24, 2017

FTC Approves Final Order Preserving Competition in 3 Natural Gas Production Areas off the Coast of Louisiana

Energy infrastructure companies Enbridge Inc. and Spectra Energy Corp have agreed to settle Federal Trade Commission charges that the proposed merger of Enbridge and Spectra likely would harm competition in the market for pipeline transportation of natural gas in three production areas off the coast of Louisiana. A pipeline is considered to mean within international agreements the physical facilities through which liquids (e.g., water and slurry) or gases (e.g., natural gas, nitrogen, oxygen and carbon dioxide) are conveyed, including the pipe, valves, control devices and other attachments to the pipe that are considered to be an integral and component part of the pipeline (e.g., its branches, extensions and racks).

According to the FTC’s complaint, the merger likely would reduce natural gas pipeline competition in three offshore natural gas producing areas in the Gulf of Mexico—Green Canyon, Walker Ridge and Keathley Canyon—leading to higher prices for natural gas pipeline transportation from those areas. In portions of the affected areas, the FTC alleged, the merging parties’ pipelines are the two pipelines located closest to certain wells and, as a result, are likely the lowest cost pipeline transportation options for those wells. Under the settlement with the FTC, the companies have agreed to conditions that will preserve competition in those areas.

The proposed transaction was initially valued at $28 billion when it was announced in September 2016. Enbridge is the sole owner and operator of the Walker Ridge Pipeline. Through its indirect stake in DCP Midstream Partners, LP, Houston-based Spectra indirectly owns a 40 percent interest in the Discovery Pipeline.

According to the FTC, the proposed merger will give Canada-based Enbridge an ownership interest in both pipelines, which will give it access to competitively sensitive information of the Discovery Pipeline, as well as significant voting rights over the Discovery Pipeline. Access to its competitor’s competitively sensitive information and significant voting rights would provide Enbridge with the incentive and opportunity to unilaterally increase pipeline transportation costs for natural gas producers located in the affected areas. The exchange of information also may increase the likelihood of tacit or explicit anticompetitive coordination between the Walker Ridge Pipeline and the Discovery Pipeline.

Competition from a new pipeline or from expansion of an existing one appears unlikely. According to the complaint, pipeline applications face a lengthy regulatory review, and laying new pipeline infrastructure in the Gulf of Mexico is expensive.

The proposed consent agreement resolves anticompetitive concerns by requiring Enbridge to establish firewalls to limit its access to non-public information about the Discovery Pipeline. Board members of the Spectra-affiliated companies that hold a 40 percent share in the Discovery Pipeline must recuse themselves from any vote involving the pipeline, with two limited exceptions. Also under the order, Enbridge must notify the Commission before acquiring an ownership interest in any natural gas pipeline operating in the Green Canyon, Walker Ridge and Keathley Canyon areas, or increasing the 40 percent ownership interest of Spectra affiliate DCP Midstream Partners, LP in the Discovery Pipeline.

The proposed order, which is to remain in effect for 20 years, allows the Commission to appoint a monitor to ensure that Enbridge complies.  More information about this proposed merger and the FTC’s consent agreement can be found in the analysis to aid public comment.

The Commission vote to issue a complaint and accept the proposed consent order for public comment was 2-0. The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through March 20, 2017, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit written comments electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

Book cover O&GWilliam Byrnes' Federal Taxation of Oil and Gas Transactions is the authoritative treatise is the go-to analysis of the major issues for the upstream (extraction), midstream (transportation) and downstream (production refinement and distribution) aspects of the oil & gas supply chain.  Professor Byrnes collaboratively brings together the know-how of America’s top oil and gas industry advisors to analyze the following industry challenges: Depletion, Property unit in oil and gas operating and non-operating sites, Joint operations including limited liability companies, Unit operations, Sale versus Lease, Drilling and development, Economic interests issues in mineral taxation, Sharing arrangements, Partnerships, Depreciation, Foreign oil and gas activities, Foreign tax credits, Tax returns, audits and selected audit issues in the oil and gas industry, Federal excise taxes on oil and gas, Selected tax issues and provisions (e.g., alternative minimum tax, at-risk rules, passive activity limits, capitalization rules, and tax treatment of environmental cleanup costs), State tax and substantive law issues compared, and Pipeline taxation.

This treatise contains a new chapter by Knut Olsen that addresses the characterization (also called qualification) of cross-border pipelines and in particular of whether such pipelines constitute permanent establishments (PE). In order to do so, this chapter includes analysis of how pipelines are characterized today from a tax perspective and how they should be characterized. In order to complete this analysis, it is necessary to consider whether transportation of oil or gas in a cross-border pipeline is part of an oil company’s core business that will rise to the level of the recognition of a PE, or is of an auxiliary or preparatory character.  If a cross-border pipeline is found to be a PE, then the next issue concerns allocating the income from the pipeline between the tax authorities.  Another important issue that this chapter addresses is whether tax liability attaches to a transit pipeline laid on another country’s exclusive economic zone or continental shelf.

              Moreover, pipeline agreements between countries play an important role regarding the levy of taxation as pipeline agreement typically also regulate tax issues.  Submarine pipelines and terrestrial pipelines attract different applicable legal regimes. The former is regulated by international law, primarily the Law of the Sea Convention, which regulates the construction, operation, and protection of offshore pipelines. On the other hand, when it comes to onshore pipelines, the practice varies considerably and such pipelines have no special status under international law, their regime depending largely on specific arrangements agreed to among the States involved.

 

 

March 24, 2017 in Financial Regulation | Permalink | Comments (0)

law faculty and fellow positions

Singapore Management University, School of Law Research Fellow

The School of Law at the Singapore Management University (SMU) has an opening for up to two Research Fellow/Research Associate positions for its Applied Research Centre for Intellectual Assets and the Law in Asia (ARCIALA).   The appointments will be on a one-year term contract basis, with the possibility of renewal for a further year subject to good performance and the needs of ARCIALA. Research support will be provided as well as a competitive salary commensurate with relevant qualifications, experience, track record and research potential.  The Research Fellow will be required to:

  • Be resident at SMU School of Law.
  • Conduct research, write research reports and publish in both mainstream media and reputable journals.
  • Assist in the administration work of ARCIALA and SOL, such as the organization of seminars and conferences or other events, and the update of ARCIALA's website.
  • Assist in the academic work of ARCIALA in general.

APPLICATION PROCEDURE: Interested applicants should submit a detailed curriculum vitae, a description of research interest and direction, selected publications, a list of two referees with full contact information, and any other supporting documents to lawcv@smu.edu.sg. Please quote reference number PDF/RF-LSN-ARCIALA2017.

The closing date for the receipt of applications and references is April 30, 2017. The interviews for the position will take place during the month of May 2017 and the tentative start work date for the Research Fellow will be July 2017.  All correspondence should be addressed to Professor Kung-Chung LIU, Director, ARCIALA: kcliu@smu.edu.sg

University of Idaho Hiring Law Professor for New Campus

 The University of Idaho College of Law is doing an off-cycle search for an entry level tenure-track academic year faculty in our Boise location.  The teaching package will include Torts, Advanced Torts, Professional Responsibility and a fourth course in an area of mutual interest to the successful candidate and the College of Law. The job posting can be found at:

https://uidaho.peopleadmin.com/postings/17163

Preference will be given to applications received prior to April 7, 2017.

Barbara Cosens, Professor and Associate Dean of Faculty, University of Idaho College of Law

March 24, 2017 in Education | Permalink | Comments (0)

Thursday, March 23, 2017

Swiss Supreme Court Rules Tax Request Required Even If Based Upon Stolen Bank Data if Stolen From Foreign Bank

Swiss Info reports on a groundbreaking case

The convention on double taxation with Paris does not exclude the possibility to grant legal assistance, as the Swiss law does not apply to cases of stolen banking data in France, the Supreme Court said.  A former employee with UBS France in 2010 forwarded a stolen list with about 600 bank clients to the French authorities, which filed two requests for legal assistance with the Swiss tax authorities.  read the Swiss Info story : 

March 23, 2017 in GATCA | Permalink | Comments (0)

India accreditation body ties up with US' CHEA to up India best practices and standards

 “The National Assessment and Accreditation Council (NAAC), an assessment and accreditation body for higher education institutions in India, has signed a memorandum of affiliation with the Council for Higher Education Accreditation (CHEA) International Quality Group (CIQG) of the US.”  Read the full story at Hindustan Times

see CHEA website here

March 23, 2017 in Education | Permalink | Comments (0)

Wednesday, March 22, 2017

Former Bank Officers And Borrower Convicted In Bank Fraud Scheme

GulfSouth Private Bank Received $7.5 million in TARP funds, which was lost when the bank failed

On Friday, March 10, after a five-day trial, Anthony J. Atkins, 51, of Eufaula, Alabama, was convicted of conspiracy to commit bank fraud, four counts of false statements to a federally Sigtarp_logo insured financial institution, bank fraud, and mail fraud affecting a financial institution. Today, co-conspirator Bruce A. Houle, 57, of Inlet Beach, Florida, pled guilty to conspiracy to commit bank fraud and one count of false statement to a federally insured financial institution. On February 27, 2017, co-conspirator Samuel D. Cobb, 37, of Destin, Florida, pled guilty to conspiracy, four counts of false statement to a financial institution, and bank fraud. 

In 2007, an individual went to Anthony Atkins, the president of GulfSouth Private Bank, and notified Atkins that the individual’s company, which had been loaned $3.4 million, was no longer going to be able to make payments on the mortgage loans issued by GulfSouth Private Bank that had been secured by three condominiums. In an effort to conceal that the loans were going into default, and instead of recognizing that the $3.4 million in loans were losses to the bank, Atkins devised a scheme to conceal the bad debt. 

As a part of the scheme, Atkins and Cobb solicited Houle, Mark W. Shoemaker, Michael Bradley Bowen, and William Blake Cody to take out new loans with the bank to purchase the three condominiums. To persuade Houle, Shoemaker, Bowen, and Cody to engage in the scheme, Atkins and Cobb told these individuals that the loans would be non-recourse, meaning that, if the men defaulted, GulfSouth would have no recourse against them.  

Thereafter, Atkins and Cobb caused new mortgage loans and additional lines of credit to be issued for approximately $3.8 million to the men they had solicited. According to the terms of the fraudulent loans issued during the scheme, the men Atkins and Cobb solicited were not required to make any payments on the loans until the loans came due months down the road.  Issuing these new loans and new Tlines of credit created the appearance that the debt was “performing”, which allowed Atkins to avoid having to report the loans associated with the condominiums as bad debt, as required.  Further, as a part of the scheme, Atkins and Cobb caused fraudulent security agreements to be prepared that falsely represented that Houle, Shoemaker, Bowen, and Cody were obligated to repay their respective new mortgage loans and lines of credit.

In September 2009, GulfSouth received $7,500,000 in Troubled Asset Relief Program (“TARP”) funds from the United States Treasury. Thereafter, Atkins and Cobb allowed the condominiums that were collateral for the mortgage loans to be sold in short sales, resulting in a loss to GulfSouth. Further, Atkins allowed the deficiencies and the lines of credit to be charged off of GulfSouth’s books and records.

The defendants face a maximum of 30 years in prison for each count.

“Unlike most bank executives, Atkins chose the latter and, along with former vice president Samuel Cobb, hatched a scheme to hide the loans and make the bank appear healthier than it actually was. GulfSouth then received $7.5 million from TARP, a program designed for healthy banks. But GulfSouth was not a healthy bank and later failed—causing taxpayers to lose their entire investment. SIGTARP will continue to bring justice to bankers who commit bailout-related fraud.”

 

March 22, 2017 in Financial Regulation | Permalink | Comments (0)

Is selling or buying an essay for a university course illegal?

"University students could be fined or handed criminal records for plagiarized essays", reads the headline of a Telegraph story here.  Apparently, over 20,000 students a year have purchased such services, and PhD dissertations only go for 6,75o pounds sterling (less than $10,000).  Read the Telegraph story   Ireland is also propsoing criminal sanctions - read teh story here at the Irish Times.

Renown economist, Dr. Dan Ariely, tested the quality of these services and published some examples here.

March 22, 2017 in Education | Permalink | Comments (0)

Tuesday, March 21, 2017

California Businessman Sentenced to Prison for Concealing Over $23.5 Million in Israeli Bank Accounts

Evaded More than $8.3 Million in Federal Taxes Over Seven Years

A Los Angeles, California businessman was sentenced to 24 months in prison today for hiding more than $23.5 million in Irs_logooffshore bank accounts, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division.

According to court documents, Masud Sarshar, a U.S. citizen, maintained several undeclared bank accounts at Bank Leumi and two other Israeli banks, both in his name and in the names of entities that he created. Sarshar owned and operated Apparel Limited Inc., a business that designed, manufactured and sold clothing and other apparel. For decades, with the assistance of at least two relationship managers from Bank Leumi and a second Israeli bank (Israeli Bank A), Sarshar hid tens of millions of dollars in assets in these accounts in an effort to conceal income and obstruct the Internal Revenue Service (IRS). Between 2006 and 2009, Sarshar diverted more than $21 million in untaxed gross business income to those undeclared accounts and earned more than $2.5 million in interest income from the funds. Sarshar reported none of this income on his 2006 through 2012 individual and corporate tax returns. He also filed false Reports of Foreign Bank and Financial Accounts, commonly known as FBARs, with the U.S. Department of Treasury on which he omitted his ownership and control of these offshore accounts.

“Masud Sarshar used every trick to avoid paying his taxes: he moved his money from foreign bank to foreign bank; switched passports and had his statements smuggled to the United States on a thumb drive secreted in the necklace of a bank manager,” said Acting Deputy Assistant Attorney General Goldberg. “He even tapped the funds in his offshore accounts through financial maneuvers that he thought would not leave a paper trail. However, Sarshar found out today -- with the imposition of a two-year prison sentence -- that secret foreign bank accounts can no longer be safely hidden from the Department of Justice and the IRS.”

“Mr. Sarshar’s conduct was both egregious and staggering,” said Chief Richard Weber of IRS Criminal Investigation. “He knew the laws and purposefully hid his income to avoid paying taxes, cheating not only the U.S. government, but other law abiding tax payers who uphold their tax obligations. Hiding income in offshore banks is not tax planning, it’s fraud.”

Sarshar’s relationship managers at Israeli Bank A (RM1) and Bank Leumi (RM2) visited him frequently in Los Angeles. At Sarshar’s request, neither bank sent him his account statements by mail. Instead, RM1 and RM2 provided Sarshar with his account information in person. RM2 concealed Sarshar’s account statements on a USB drive hidden in a necklace that she wore when she visited Sarshar in the United States. Sarshar’s meetings with RM1 sometimes occurred in Sarshar’s car. RM1 and RM2 used their visits to offer Sarshar other bank products, including “back-to-back” loans. Through back-to-back loans, which Bank Leumi made to Sarshar through its branch in the United States and which Sarshar collateralized with funds from his account at Israeli Bank A, Sarshar was able to bring back to the United States approximately $19 million of his assets without creating a paper trail or otherwise disclosing the existence of the offshore accounts to U.S. authorities. At the direction of RM1 and RM2, Sarshar also obtained Israeli and Iranian passports in an effort to avoid being flagged as a U.S. citizen by the banks’ compliance departments. The banks still flagged Sarshar as a U.S. citizen after Sarshar received these two passports, so RM1 and RM2 advised him to transfer his remaining funds from Israeli Bank A to Israeli Bank B, which Sarshar did in late 2011. In addition, with the help of someone identified as Individual 1, Sarshar transferred approximately $5.8 million from his Bank Leumi accounts to an account at Hong Kong Bank A, which Individual 1 then helped transfer to Sarshar in the United States, disguising it as a loan to Apparel Limited.

In addition to the term of prison imposed, Sarshar was ordered to serve three years of supervised release and to pay more than $8.3 million in restitution to the IRS, plus interest and penalties. Sarshar also agreed to pay an FBAR penalty of more than $18.2 million for failing to report his Israeli bank accounts.

Acting Deputy Assistant Attorney General Goldberg commended special agents of IRS-Criminal Investigation, who conducted the investigation, and Assistant Chief Tino M. Lisella and Trial Attorney Timothy M. Russo of the Tax Division, who prosecuted the case. Acting Deputy Assistant Attorney General Goldberg also thanked the U.S. Attorney’s Office for the Central District of California for their substantial assistance in the case.

March 21, 2017 | Permalink | Comments (0)

Monday, March 20, 2017

Former Wells Fargo Branch Manager Convicted of Laundering Proceeds of Trademark Scam

A former manager of a Wells Fargo branch in Glendale, California, was convicted on Friday of money laundering and false Treasury-Dept.-Seal-of-the-IRSbank entry charges in connection with laundering the proceeds of a trademark scam.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Sandra R. Brown of the Central District of California, Acting Inspector in Charge William H. Hedrick from the U.S. Postal Inspection Service's (USPIS) Los Angeles Division, Inspector in Charge Regina L. Faulkerson of USPIS Criminal Investigation and Acting Special Agent in Charge Anthony J. Orlando of the Internal Revenue Service Criminal Investigation (IRS-CI) Los Angeles Field Office made the announcement.

After a four-day jury trial, Albert Yagubyan, 37, of Burbank, California, was convicted of one count of conspiracy to launder monetary instruments, four counts of concealment money laundering and one count of false bank entries.  Sentencing has been scheduled for May 22, 2017, before U.S. District Judge Stephen V. Wilson of the Central District of California, who presided over the trial.  

According to the evidence presented at trial, from June 27, 2014 to Sept. 18, 2015, Yagubyan laundered over $1 million of proceeds from a mass-mailing scam run by co-conspirator Artashes Darbinyan, 37, of Glendale, California, who used companies that they called “Trademark Compliance Center” (TCC) and “Trademark Compliance Office” (TCO) in order to make fraudulent offers to trademark applicants for registration and monitoring services.  

Yagubyan laundered the funds by instructing subordinates at the bank to open bogus bank accounts, into which proceeds of the TCC and TCO scam were deposited, and process fraudulent withdrawals, wire transfers and cashier’s checks for co-conspirators Darbinyan and Orbel Hakobyan, 42, also of Glendale, the evidence showed.  The cashier’s checks and wire transfers were made out to gold dealers.  The bank accounts were opened using the identities of individuals from Eastern Europe who were not in the United States at the time the accounts were opened.  The evidence at trial further showed that Darbinyan paid Yagubyan a percentage of the laundered proceeds. Yagubyan, in turn, made payments and promises of promotion to subordinates to induce them to conduct the fraudulent transactions.  When Wells Fargo’s loss prevention office flagged the bogus accounts for closure, Yagubyan intervened to try and keep them open, the evidence showed.

Darbinyan and Hakobyan pleaded guilty in December 2016 to mail fraud and money laundering charges and are scheduled for sentencing on June 19, 2017, before Judge Wilson.  The investigation has resulted in a total of five convictions. 

USPIS and IRS-CI investigated the case.  Trial Attorneys William E. Johnston and Alison L. Anderson and Assistant Chief Brian K. Kidd of the Criminal Division’s Fraud Section are prosecuting the case.

March 20, 2017 | Permalink | Comments (0)

Sunday, March 19, 2017

U.S. Navy Admiral and Eight Other Officers Indicted for Trading Classified Information in Massive International Fraud and Bribery Scheme

Retired U.S. Navy Rear Admiral Bruce Loveless and eight other high-ranking Navy officers are charged in a federal indictment Defense_Contract_Audit_Agency_(emblem)
 with accepting luxury travel, elaborate dinners and services of prostitutes from foreign defense contractor Leonard Francis, the former Chief Executive Officer (CEO) of Glenn Defense Marine Asia (GDMA), in exchange for classified and internal U.S. Navy information.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Alana W. Robinson of the Southern District of California, Director Dermot F. O’Reilly of the Defense Criminal Investigative Service (DCIS) and Director Andrew L. Traver of the Naval Criminal Investigative Service (NCIS) made the announcement.

Including today’s defendants, a total of 25 named individuals have been charged in connection with the corruption and fraud investigation into GDMA, a defense-contracting firm based in Singapore. Of those charged, 20 are current or former U.S. Navy officials and five are GDMA executives. To date, 13 have pleaded guilty while several other cases are pending.

“The defendants in this indictment were entrusted with the honor and responsibility of administering the operations of the U.S. Navy’s Seventh Fleet, which is tasked with protecting our nation by guarding an area of responsibility that spanned from Russia to Southeast Asia and the Indian Ocean,” said Acting Assistant Attorney General Blanco. “With this honor and awesome responsibility came a duty to make decisions based on the best interests of the Navy and the 40,000 Sailors and Marines under their care who put their lives at risk every day to keep us secure and free. Unfortunately, however, these defendants are alleged to have sold their honor and responsibility in exchange for personal enrichment.”

“This is a fleecing and betrayal of the United States Navy in epic proportions, and it was allegedly carried out by the Navy’s highest-ranking officers,” said Acting U.S. Attorney Robinson. “The alleged conduct amounts to a staggering degree of corruption by the most prominent leaders of the Seventh Fleet – the largest fleet in the U.S. Navy - actively worked together as a team to trade secrets for sex, serving the interests of a greedy foreign defense contractor, and not those of their own country.”

“The allegations contained in today’s indictment expose flagrant corruption among several senior officers previously assigned to the U.S. Navy’s Seventh Fleet. The charges and subsequent arrests are yet another unfortunate example of those who place their own greed above their responsibility to serve this nation with honor‎,” said Director O’Reilly. “This investigation should serve as a warning sign to those who attempt to compromise the integrity of the Department of Defense that DCIS and our law enforcement partners will continue to pursue these matters relentlessly.”

“Naval Criminal Investigative Service, in concert with our partner agencies, remains resolved to follow the evidence wherever it leads, and to help hold accountable those who make personal gain a higher priority than professional responsibility,” Director Traver. “It's unconscionable that some individuals choose to enrich themselves at the expense of military security.”

Nine defendants were arrested today on various charges including bribery, conspiracy to commit bribery, honest services fraud, obstruction of justice and making false statements to federal investigators when confronted about their actions. Four of the defendants are retired captains: (1) David Newland, 60, of San Antonio, Texas, (2) James Dolan, 58, of Gettysburg, Pennsylvania, (3) David Lausman, 62, of The Villages, Florida, and (4) Donald Hornbeck, 56, a resident of the United Kingdom. The other defendants arrested today included: (5) Colonel Enrico Deguzman, 48, of Honolulu, Hawaii, (6) retired Chief Warrant Officer Robert Gorsuch, 48, of Virginia Beach, Virginia (7) retired Rear Admiral Bruce Lovelace, 48, of San Diego, California, (8) active duty Lieutenant Commander Stephen Shedd, 48, of Colorado Springs, Colorado and (9) active duty Commander Mario Herrera, 48, of Helotes, Texas.

The defendants were arrested early this morning in California, Texas, Pennsylvania, Florida, Colorado and Virginia. The United States will seek to move all of these cases to federal court in San Diego, California. Admiral Loveless was taken into custody at his home in Coronado and was expected to make his first appearance in federal court this afternoon.

According to the indictment, the Navy officers allegedly participated in a bribery scheme with Leonard Francis, in which the officers accepted travel and entertainment expenses, the services of prostitutes and lavish gifts in exchange for helping to steep lucrative contracts to Francis and GDMA and to sabotage competing defense contractors. The defendants allegedly violated many of their sworn official naval duties, including duties related to the handling of classified information and duties related to the identification and reporting of foreign intelligence threats. According to the indictment, the defendants allegedly worked in concert to recruit new members for the conspiracy, and to keep the conspiracy secret by using fake names and foreign email service providers. According to the indictment, the bribery scheme allegedly cost the Navy – and U.S. taxpayers – tens of millions of dollars.

In addition to the nine defendants charged today, the 11 Navy officials charged so far in the fraud and bribery investigation are: (1) Admiral Robert Gilbeau, (2) retired Captain Michael Brooks, (3) Commander Jose Luis Sanchez, (4) Captain Daniel Dusek, (5) former Department of Defense civilian employee Paul Simpkins, (6) Commander Michael Misiewicz, (7) Lieutenant Commander Gentry Debord, (8) Lieutenant Commander Todd Malaki, (9) Petty Officer First Class Daniel Layug, (10) Naval Criminal Investigative Service Supervisory Special Agent John Beliveau and (11) Commander Bobby Pitts.

Gilbeau, Brooks, Sanchez, Dusek, Simpkins, Misiewicz, Debord, Malaki, Layug and Beliveau have pleaded guilty. Gilbeau, Brooks, and Sanchez await sentencing. On March 25, 2016, Dusek was sentenced to 46 months in prison and ordered to pay a $70,000 fine and $30,000 in restitution to the Navy. On Dec. 2, 2016, Simpkins was sentenced to 72 months in prison. On April 29, 2016, Misiewicz was sentenced to 78 months in prison and ordered to pay a $100,000 fine and $95,000 in restitution to the Navy. On Jan. 12, 2017, Debord was sentenced to 30 months in prison and ordered to pay a $15,000 fine and $37,000 in restitution to the Navy. On Jan. 29, 2016, Malaki was sentenced to 40 months in prison and ordered to pay a $15,000 fine and $15,000 in restitution to the Navy. On Jan. 21, 2016, Layug was sentenced to 27 months in prison and a $15,000 fine. On Oct. 14, 2016, Beliveau was sentenced to 12 years in prison and ordered to pay $20 million in restitution to the Navy. Pitts was charged in May 2016 and his case is pending.

Additionally, to date, five GDMA executives have been charged: (1) Alex Wisidagama, (2) Francis, (3) Edmund Aruffo, (4) Neil Peterson and (5) Linda Raja. Three have pleaded guilty: Wisidagama, Francis and Aruffo. On March 18, 2016, Wisidagama was sentenced to 63 months in prison and ordered to pay $34.8 million in restitution to the Navy. Francis and Aruffo await sentencing. Peterson and Raja were extradited to the United States from Singapore in September 2016 and their cases remain pending.

The charges and allegations contained in an indictment are merely accusations. The defendants are presumed innocent unless and until proven guilty.

DCIS, NCIS and the Defense Contract Audit Agency are investigating the case. Assistant Chief Brian R. Young of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Mark W. Pletcher and Patrick Hovakimian of the Southern District of California are prosecuting the case.

March 19, 2017 | Permalink | Comments (0)

Saturday, March 18, 2017

OECD announces further developments in international tax co-operation

In September 2014, Hong Kong indicated its support for implementing automatic exchange of financial account information (AEOI) on a reciprocal basis with appropriate partners with a view to commencing the first exchanges by the end of 2018. In order to exchange financial account information with a jurisdiction, Hong Kong (China) needs to have or enter into a double tax convention or tax information exchange agreement that allows for AEOI and to sign a competent authority agreement (CAA) with that jurisdiction.

Today, six treaty partners of Hong Kong (China) signed a competent authority agreement with Hong Kong (China) bringing the total number of CAAs to nine. Jurisdictions included Belgium, Canada, Guernsey, the Netherlands, Italy and Mexico (joining Japan, Korea and the United Kingdom). More agreements are expected in the coming months so that Hong Kong (China) will be able to exchange data with all interested and appropriate partners.

The Global Forum on Transparency and Exchange of Information for Tax Purposes is monitoring the implementation of tax transparency standards to ensure the effective and timely delivery of the commitments made, the confidentiality of information exchanged and to identify areas where support is needed. It is also assisting its developing country members to ensure that they can also receive the benefits of the ongoing global move to automatic exchange of financial account information. 

Belgium, Canada, Guernsey, the Netherlands, Italy and Mexico sign competent authority agreement with Hong Kong (China).
OECD Headquarters, Paris, 16 March 2017
Photo: Andrew Wheeler/OECD

In addition, Panama today deposited its instrument of ratification for the Convention on Mutual Administrative Assistance in Tax Matters ("the Convention"). By doing so, Panama underlines its commitment to fighting tax evasion and avoidance and has put in place an important pre-condition for delivering on its commitment to start exchanging Common Reporting Standard information in 2018. The Convention will enter into force for Panama on 1 July 2017.

March 18, 2017 in GATCA | Permalink | Comments (0)

Friday, March 17, 2017

Marco Rubio Reintroduces His Bill to Expand Accreditation

Inside Higher Ed reports that Senators Marco Rubio and Michael Bennet this week reintroduced a bill that would create an alternative accreditation pathway. The proposed legislation would give previously unaccredited institutions access to federal financial aid under a five-year pilot program. Providers, including new ones, would be eligible for aid through contracts with the U.S. Department of Education, but only if they can demonstrate quality through positive student outcomes, the two senators said in a written statement. Read the full Inside Higher Ed article

Read Senator Marco Rubio's Bill here

March 17, 2017 in Education | Permalink | Comments (0)

Thursday, March 16, 2017

U.S. v. Odebrecht: White Collar Crime & the DOJ

One example I will begin with is a FCPA case, Odebrecht, a case that squarely demonstrates how the world is partnering to investigate and prosecute corruption.  Among the most Justice logouseful tools in the department’s arsenal to prosecute corruption is the enforcement of the FCPA’s anti-bribery provisions.  These prosecutions are necessary to combat global corruption that stifles economic growth, creates an uneven playing field for businesses and corporations, and threatens the national security of the United States and other civilized nations.  Often, however, the principal acts of criminality are committed in foreign countries and often by foreign actors. 

In December of last year, Brazilian construction conglomerate Odebrecht and Brazilian petrochemical company Braskem pleaded guilty and agreed to pay a combined total penalty of around $3.5 billion to resolve charges with the United States, Brazil and Switzerland—three jurisdictions – arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.  Odebrecht and Braskem engaged in a world-wide bribery scheme designed to improperly obtain and retain business contracts in 12 countries: Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru and Venezuela.  As part of the scheme, Odebrecht and its co-conspirators created and funded an elaborate, secret financial structure within the company that operated to account for and disburse bribe payments to foreign political parties, foreign officials, and their representatives, including through U.S. financial institutions and offshore shell companies set up from within the United States.

Multiple other countries have opened investigations and prosecutions of Odebrecht and individuals allegedly involved in the scheme.  It has been reported that more than 10 additional countries have publicly confirmed their own investigations into the corruption at Odebrecht.    

Indeed, in some countries, domestic legislation mandates the immediate initiation of criminal investigations when confronted with evidence of public corruption.  Many of our foreign partners have been acting swiftly to bring corrupt officials to justice in their countries.  For example, Brazil has already charged more than 70 individuals just in this one case.  

As a general matter, the Criminal Division’s Fraud Section, in coordination with the Office of International Affairs, is able effectively to share information and evidence with foreign authorities.  Also, it is often the case that plea agreements with companies require them to cooperate by continuing to provide evidence and information to the prosecution team.  The combination of those two phenomena often position our prosecution teams with the ability to assist our foreign counterparts to advance their work.  Ideally, of course, the consequence of the enforcement efforts of the department is to encourage voluntary compliance with the FCPA and other applicable domestic laws that disallow conduct, such as bribery to foreign officials.

Let me just add that, as it relates to the FCPA, from a policy perspective, we like to see more countries enforcing anti-bribery laws.  Since the 1980s, there has been a growing international recognition that all countries should aim to disrupt corrupt payments in order to create an even playing field for global business.  In the absence of effective domestic anti-corruption laws or resources to prosecute violators of those laws, we would be left with geographical gaps to a collective global effort to halt corruption in its tracks.  Allow me to move on to another case example to highlight a few other points.

March 16, 2017 | Permalink | Comments (0)

Wednesday, March 15, 2017

Defendant in Multi-Million Dollar Scheme to Deceive Homeowners into Selling Their Homes Extradited From Ukraine

Herzel Meiri is Charged with Advertising Help to Those Seeking to Avoid Foreclosure in Order to Deceive Homeowners into Selling Their Homes

HERZEL MEIRI, extradited from Ukraine, was indicted on March 16, 2016, on fraud and money laundering charges in connection with a scheme to fraudulently induce distressed homeowners to sell their homes to a company he owned and controlled. MEIRI, who arrived in the District yesterday, had been arrested by Ukrainian authorities on October 27, 2016.

MEIRI was the seventh defendant to be indicted in connection with the scheme.

Special Inspector General for TARP Christy Goldsmith Romero said: “Herzel Meiri is charged with preying on struggling homeowners trying to avoid foreclosure. Meiri and his co- Sigtarp_logoconspirators allegedly promised victims mortgage modifications when in fact they were swindling them out of their homes. SIGTARP thanks U.S. Attorney Bharara, Superintendent Vullo, and the FBI for their commitment to protecting taxpayers from TARP-related crime.”

U.S. Attorney Preet Bharara said: “Herzel Meiri allegedly concocted a callous scheme to swindle desperate homeowners out of their homes. As alleged, Meiri lied to his victims, who thought that they were getting the financial help they needed but instead were being tricked into signing over their homes. Thanks to our law enforcement partners – the FBI, SIGTARP, and DFS – Meiri is now in U.S. custody and will have to answer for his alleged crimes.”

Assistant Director-in-Charge William F. Sweeney Jr. said: “When desperate homeowners fall prey to false relief schemes, their vulnerabilities are often exploited by those who seek to benefit from their misfortune. As alleged, Meiri’s behavior caused serious damage to struggling families who unknowingly funded his extravagant scheme. The FBI continues to support partnerships within the financial industry and law enforcement as we work together to combat this serious crime.

DFS Financial Services Superintendent Maria T. Vullo said: “These allegations paint the portrait of a con artist who cold-heartedly preyed on financially distressed homeowners – some of whom are among our most vulnerable – to satisfy his selfish greed. The Department of Financial Services is proud to have worked with our fellow law enforcement partners in helping to bring this defendant to justice.” 

According to the allegations in the Fourth Superseding Indictment, which was unsealed in November 2016, as well as the Complaints previously filed in this action1 : Since at least 2013, MEIRI and his co-defendants have defrauded distressed homeowners throughout the Bronx, Brooklyn, and Queens. MEIRI and others falsely represented to these homeowners – some of whom were elderly or in poor health – that they could assist them with a loan modification or similar relief from foreclosure that would allow the homeowners to save their homes. But rather than actually assisting these homeowners, the defendants deceived them into selling their homes to Launch Development LLC (“Launch Development”), a for-profit real estate company owned and controlled by MEIRI.

MEIRI and others lured victims through Homeowners Assistance Service of New York (“HASNY”), which purported to provide assistance to homeowners who were seeking to avoid foreclosure of their homes. As part of the scheme, MEIRI directed employees of Launch Development to solicit owners of distressed properties and invite them to meet with HASNY representatives so that they could learn more about avoiding foreclosure and saving their homes. When a homeowner arrived at the HASNY office, he or she met with a co-conspirator, who typically advised the homeowner that HASNY could assist him or her with a loan modification. In other cases, the homeowner was advised that a loan modification could not be completed, but that the homeowner could engage in a type of short sale in which the homeowner would sell the property to a third party, Launch Development, and then within approximately 90 days arrange for a relative of the homeowner to repurchase the property from Launch Development.

Homeowners were typically advised that they could remain in their homes throughout the entire process. At the closing that followed, a homeowner who had been led to believe that he or she was about to receive a loan modification or transfer the property to a trusted relative was encouraged to sign documents presented by another co-conspirator, which in some cases were blank. Unbeknownst to the homeowners, by signing the documents, they were selling to Launch Development the homes they had hoped to save. Homeowners often were then forced to vacate their homes soon thereafter, and Launch Development re-sold many of the homes, which were purchased at fraudulently deflated prices, for an enormous profit.

MEIRI and a co-conspirator transferred the proceeds of the home sales from Launch Development to other companies MEIRI owned and controlled, falsely describing the transfers as, among other things, rent payments. The proceeds were ultimately transferred back to Launch Development or spent on luxury items for MEIRI.

MEIRI is charged with one count of conspiracy to commit wire fraud and bank fraud and one count of conspiracy to commit bank fraud, each of which carries a maximum term of 30 years in prison. In addition, MEIRI is charged with two counts of money laundering, one of which carries a maximum term of 20 years in prison and one of which carries a maximum term of 10 years in prison, and one count of conspiracy to commit money laundering, which carries a maximum term of 20 years in prison.

The Office of the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) is a federal law enforcement agency that targets financial institution crime and is an independent watchdog protecting taxpayer dollars. As of February 2, 2017, SIGTARP investigations have resulted in the recovery of $10 billion to the government and 192 defendants sentenced to prison.

March 15, 2017 | Permalink | Comments (0)

Tuesday, March 14, 2017

1Malaysia Development Berhad (1MDB): White Collar Crime & the DOJ

In 2016, the department filed the largest single action ever brought by the Kleptocracy Initiative, marking a significant milestone in the department’s ongoing fight against global Justice logocorruption, involving two bond offerings in 2012 through which 1Malaysia Development Berhad (1MDB) raised money that was siphoned off by the corrupt officials and their associates. 
 
The stated purpose of the 2012 bond offerings was to allow 1MDB to invest, for the benefit of the Malaysian government, in certain energy assets.  But almost immediately after receiving the proceeds of these two bond issues, roughly 40 percent of the funds raised –approximately $1.37 billion – was transferred out of 1MDB’s accounts.  The money went into the Swiss bank account of a shell company incorporated in the British Virgin Islands.  The complaint alleges that the name of this shell company was intended to suggest an affiliation with a legitimate company involved in the bond offering but, in fact, the Swiss bank account was controlled by corrupt officials.

This case is yet another example of what happens when individuals and criminal organizations are able to use shell companies to move, and ultimately conceal, the proceeds of crime and kleptocracy.  Gaps in the legal regimes across the globe – including, as I have already noted, here in the United States  – allowed these criminals to avoid disclosing the ultimate beneficial owners of the accounts to which 1MDB funds were diverted.  The significant assistance we received from our international partners was critical in identifying and restraining assets in this case.  

March 14, 2017 | Permalink | Comments (0)

New FATCA foreign partnership (WP) agreement and withholding foreign trust (WT) agreements released, 2014 agreements expire

The IRS released Revenue Procedure 2017-21, which contains the updated withholding foreign partnership (WP) agreement and withholding foreign trust (WT) agreement.  

These WP and WT agreements allow a foreign partnership or foreign trust to assume the withholding and reporting obligations under chapters 3 (provisions relating to withholding of Irs_logotax on nonresident aliens and foreign corporations) and 4 (provisions under the Foreign Account Tax Compliance Act, or FATCA) for certain payments of US source income (such as interest, dividends, and royalties) made to its direct partners, beneficiaries, or owners, and in some cases, persons holding interests in the partnership or trust through one or more foreign intermediaries or flow-through entities (indirect partners).  

The revenue procedure also provides information on submitting an application or request for renewal of a WP or WT agreement. 

William Byrnes' best-selling Guide to FATCA & CRS Compliance published by LexisNexis – NEW 2017 Edition free download here

Over 1,800 pages of analysis of the FATCA and CRS compliance challenges,  79 chapters by FATCA and CRS contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2017 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The Lexis Guide to FATCA Compliance, designed from interviews with over 100 financial institutions and professional firms, is a primary reference source for financial institutions and service providers, advisors and government departments.  The chapters include by example in-depth analysis of designing a FATCA internal policy, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters.  This fifth edition provides the financial enterprise’s FATCA compliance officer the tools for developing and maintaining a best practices compliance strategy.  No filler of forms and regs – it’s all beef !

March 14, 2017 in GATCA | Permalink | Comments (0)

Former NGA Employee Sentenced for Taking Classified Information

Mohan L. Nirala, 52, of Laurel, Maryland, was sentenced today to 12 months and one day in prison for willful retention of national defense information.

Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney Dana J. Boente for the Eastern District of Virginia and Special Agent in Charge Gordon B. Johnson of the FBI’s Baltimore Field Office made the announcement after sentencing by U.S. District Judge Gerald Bruce Lee. 

Nirala pleaded guilty on Sept. 16, 2016. According to the statement of facts filed with the plea agreement, Nirala was a full-time government employee and imagery scientist at the U.S. Export ControlNational Geospatial-Intelligence Agency (NGA) from February 2009 to 2015. On Jan 10, 2014, eight days after his clearances were suspended, FBI agents recovered over 20 classified documents at Nirala’s home during the execution of a federal search warrant. A review of these documents determined that they ranged in classification from Secret to Top Secret. During the search, Nirala falsely stated that he did not bring home any classified documents.

According to the statement of facts, on March 8, 2016, agents arrived at Nirala’s home to execute an arrest warrant. After Nirala failed to answer the door, agents made a forced entry and found Nirala in the basement before taking him into custody. During a sweep of the basement, agents discovered a white duct-taped box underneath the basement stairs. Inside the box were over 500 pages of documents classified at Top Secret and Secret levels.

March 14, 2017 | Permalink | Comments (0)