International Financial Law Prof Blog

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

Wednesday, April 25, 2018

International Tax Law Research and Teaching Associate Position

We are pleased to announce that the Institute for Austrian and International Tax Law is offering a position as research and teaching associate. The deadline for applications is May 30, 2018.
We would be delighted if you applied for this position and please kindly distribute this announcement to other qualified colleagues.
For more information on the position, please see our website under "Further Information": If you would like to apply, or you know somebody who may be interested, please send your application to Ms. Theodora Stergidou (

Institute for Austrian and International Tax Law, WU

WU (Vienna University of Economics and Business)
Welthandelsplatz 1
Vienna 1020

April 25, 2018 in Academia | Permalink | Comments (0)

OECD and IGF invite comments on a draft practice note that will help developing countries address profit shifting from their mining sectors via excessive interest deductions

 For many resource-rich developing countries, mineral resources present an unparalleled economic opportunity to increase government revenue. Tax base erosion and profit shifting (BEPS), combined with gaps in the capabilities of tax authorities in developing countries, threaten this prospect. One of the avenues for international profit shifting by multinational enterprises is the use of excessive interest deductions.   Download Limiting-excessive-interest-deductions-discussion-draft

Building on BEPS Action 4, this practice note has been prepared by the OECD Centre for Tax Policy and Administration under a programme of co-operation with the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF), to help guide tax officials on how to strengthen their defences against BEPS. It is part of wider efforts to address some of the challenges developing countries are facing in raising revenue from their mining sectors. This work also complements action by the Platform for Collaboration on Tax and others to produce toolkits on top priority tax issues facing developing countries.

Comments on the draft are invited from interested stakeholders by 18 May 2018 and should be sent by email to A version in French will also be released in the coming weeks.

April 25, 2018 in BEPS, OECD | Permalink | Comments (0)

Altaba, Formerly Known as Yahoo!, Charged With Failing to Disclose Massive Cybersecurity Breach; Agrees To Pay $35 Million

The Securities and Exchange Commission announced that the entity formerly known as Yahoo! Inc. has agreed to pay a $35 million penalty to settle charges that it misled investors by failing to disclose one of the world’s largest data breaches in which hackers stole personal data relating to hundreds of millions of user accounts.

According to the SEC’s order, within days of the December 2014 intrusion, Yahoo’s information security team learned that Russian hackers had stolen what the security team referred to internally as the company’s “crown jewels”: usernames, email addresses, phone numbers, birthdates, encrypted passwords, and security questions and answers for hundreds of millions of user accounts.  Although information relating to the breach was reported to members of Yahoo’s senior management and legal department, Yahoo failed to properly investigate the circumstances of the breach and to adequately consider whether the breach needed to be disclosed to investors.  The fact of the breach was not disclosed to the investing public until more than two years later, when in 2016 Yahoo was in the process of closing the acquisition of its operating business by Verizon Communications, Inc.  

“We do not second-guess good faith exercises of judgment about cyber-incident disclosure.  But we have also cautioned that a company’s response to such an event could be so lacking that an enforcement action would be warranted.  This is clearly such a case,” said Steven Peikin, Co-Director of the SEC Enforcement Division.

Jina Choi, Director of the SEC's San Francisco Regional Office, added, “Yahoo’s failure to have controls and procedures in place to assess its cyber-disclosure obligations ended up leaving its investors totally in the dark about a massive data breach.  Public companies should have controls and procedures in place to properly evaluate cyber incidents and disclose material information to investors.”

The SEC’s order finds that when Yahoo filed several quarterly and annual reports during the two-year period following the breach, the company failed to disclose the breach or its potential business impact and legal implications.  Instead, the company’s SEC filings stated that it faced only the risk of, and negative effects that might flow from, data breaches.  In addition, the SEC’s order found that Yahoo did not share information regarding the breach with its auditors or outside counsel in order to assess the company’s disclosure obligations in its public filings.  Finally, the SEC’s order finds that Yahoo failed to maintain disclosure controls and procedures designed to ensure that reports from Yahoo’s information security team concerning cyber breaches, or the risk of such breaches, were properly and timely assessed for potential disclosure.

Verizon acquired Yahoo’s operating business in June 2017.  Yahoo has since changed its name to Altaba Inc.

April 25, 2018 in AML | Permalink | Comments (0)

Tuesday, April 24, 2018

OECD addresses the misuse of residence/citizenship by investment schemes

Revelations from the "Daphne Project" on the Maltese residence and citizenship by investment schemes underline the crucial importance of the OECD's work to ensure that the integrity of the OECD/G20 Common Reporting Standard (CRS) is preserved and that any circumvention is detected and addressed.   Download Consultation-document-preventing-abuse-of-residence-by-investment-schemes

Over the last months, the OECD has been taking a set of actions to ensure that all taxpayers maintaining financial assets abroad are effectively reported under the CRS, including by:

  • issuing new model disclosure rules that require lawyers, accountants, financial advisors, banks and other service providers to inform tax authorities of any schemes they put in place for their clients to avoid reporting under the CRS. The adoption of such model mandatory disclosure rules will have a deterrent effect on the promotion of CBI/RBI schemes for circumventing the CRS and provide tax authorities with intelligence on the misuse of such schemes as CRS avoidance arrangements. The EU Member States have already agreed  to implement these rules as part of a wider directive on mandatory disclosures;
  • reaching out to individual jurisdictions, including Malta, to make them aware of the risk of abuse of their CBI/RBI schemes and offer assistance in adopting mitigating measures; and
  • establishing a list of high risk schemes in order to further raise awareness amongst stakeholders of the potential of such schemes to undermine the CRS due diligence and reporting requirements.

Download Public-input-received-misuse-of-residence-by-investment-schemes-to-circumvent-the-common-reporting-standard

In addition, on 19 February 2018, the OECD issued a consultation document, outlining potential situations where the misuse of CBI/RBI schemes poses a high risk to accurate CRS reporting and seeking public input both to obtain evidence on the misuse of CBI/RBI schemes and on effective ways for preventing such abuse.

The substantial amount of input received in response to the consultation further underlines the importance of the OECD's actions in this field. It also contains a wide range of proposals for further addressing the misuse of RBI/CBI schemes, including: 1) comprehensive due diligence checks to be carried out as part of the RBI/CBI application process, 2) the spontaneous exchange of information about individuals that have obtained residence/citizenship through such a CBI/RBI scheme with their original jurisdiction(s) of tax residence; and 3) strengthened CRS due diligence procedures on financial institutions with respect to high risk accounts.

The OECD will take the next step in addressing the issue, when experts from OECD and G20 countries meet in Paris this May to further elaborate actions to be taken to effectively address the misuse of CBI/RBI schemes.

April 24, 2018 in OECD, Tax Compliance | Permalink | Comments (0)

OECD Seeks to Hire Tax Capacity Building Adviser, Forum on Tax Administration International Co-operation and Tax Administration Division (CTPA/ICA) (Job Number: 12032)

App Deadline 13-05-2018, 9:59:00 PM 

The OECD is a global economic forum working with 35 member countries and more than 100 emerging and developing economies to make better policies for better lives. Our mission is to promote policies that will improve the economic and social well-being of people around the world. The Organisation provides a unique forum in which governments work together to share experiences on what drives economic, social and environmental change, seeking solutions to common problems. 

The OECD has earned a leading role in international tax issues. The Centre for Tax Policy and Administration (CTPA) is the focal point for the OECD’s work on all taxation issues, both international and domestic, and it works to advance the Strategic Orientations of the Secretary General, ensuring impact of the OECD tax work in the international governance architecture, in co-ordination with the OECD Sherpa team. The CTPA collaborates with other parts of the Organisation on issues such as tax and climate change, tax and growth, and the impact of taxation on labour markets and several other multidisciplinary projects. The CTPA also provides the analytical support to the OECD’s Committee on Fiscal Affairs and Inclusive Framework on BEPS, which consists of senior tax policy and administration officials from OECD countries, Associate and Partner countries, Inclusive Framework members, and other international and regional tax organisations. Through its work, the CTPA enhances the OECD’s global role in standard-setting, building knowledge, communicating with the world and interacting with governments from around the world to inform and influence policy making in the tax area. 

The CTPA is looking for an Adviser to support the work of the Secretariat for the Forum on Tax Administration (FTA) on the opportunities and risks for tax administrations of new technologies and in particular to lead a project to set a strategic framework for future work on the use, implementation and management of technology to help build tax capacity in developing countries.  There is significant global demand for guidance in this area, especially in the context of the BEPS Actions, many of which depend on effective use of technology by tax administrations.  The successful candidate will report to the Head of the FTA Secretariat within the International Co-operation and Tax Administration Division (CTPA/ICA) and will work closely with the Global Relations and Development Division (CTPA/GRD). 

The FTA is a unique body, bringing together the leaders of tax administrations from 50 advanced and emerging countries.  The FTA enables member administrations to work together on projects and through enduring networks to enhance domestic and international tax administration, to deepen co-operation between tax administrations and share and develop knowledge on common challenges.  FTA members, bilaterally and through the FTA’s Capacity Building Network support wider OECD work on tax capacity building for developing countries. 

NB This position will require travel to all regions of the world.
 The vacancy is open to nationals of countries and jurisdictions participating in the Inclusive Framework on BEPS (see link for full list of members)
Main Responsibilities 
  1. Project management and Drafting 
  • Draft a report setting a strategic framework for tax technology tools for developing countries and other outputs relevant to opportunities and risks of new technologies. This will require working closely with a wide range of stakeholders, including developing country experts, technical experts, the FTA’s Capacity Building Network, the Platform for Collaboration on Tax, regional tax organisations, academics and other relevant stakeholders.
 Ensure that reports are well-scoped with clear milestones and delivery targets and that there is an inclusive stakeholder engagement plan in place (in particular, leveraging the expertise and resources of other organisations).
  • Ensure that reports are well-written, focussed on accurate elements and take account of other existing work and developments.  
  • Ensure that reports are widely disseminated and that recommendations are taken forward as well as putting a framework in place for monitoring and evaluation.    
2. Liaison and representation
  • Establish and maintain close contact with national authorities, academics and research institutes, donor agencies, the private sector and other international organisations with expertise and/or interest in working with developing countries’ tax administrations on the use of digital technologies.  
  • Represent the OECD in internal and external fora. 

Ideal Candidate Profile

 Academic Background 
  • An advanced university degree or equivalent in taxation, law, economics, public finance, accounting or business administration. , with a focus on economics, technology and administrative applications, development assistance or other areas of public policy. 
Professional Background
  • At least three, preferably five years’ relevant experience in a national administration, international organisation, research institution, university or the private sector.
  •  Very good knowledge of the introduction and use of digital technologies and ideally some experience of capacity building in developing countries. 
  • Proven analytical ability.
  • Fluency in one of the two OECD official languages (English and French) and knowledge of the other, with a commitment to reach a good working level. 
  • Knowledge of other languages would be an asset. 

Core Competencies

For this role, the following competencies would be particularly important: Achievement focus, Drafting skills, Managing resources, Teamwork, Strategic Thinking and Strategic Networking.

Please refer to the OECD Core Competencies and the level 3 indicators.
Contract Duration 

Two year fixed-term appointment, with the possibility of renewal. 

What the OECD offers 

  • Depending on level of experience, monthly salary starts at either 5,800 EUR or 7100 EUR, plus allowances based on eligibility, exempt of French income tax.

April 24, 2018 in OECD | Permalink | Comments (0)

Monday, April 23, 2018

Dun & Bradstreet China Bribery Case Resolved for $9 million

1. These proceedings arise from violations of the Foreign Corrupt Practices Act of 1977 (the “FCPA”) [15 U.S.C. § 78dd] by D&B arising out of conduct at two of its indirect subsidiaries in China, Shanghai Huaxia Dun & Bradstreet Business Information Consulting Co., Limited (“HDBC”) and Shanghai Roadway D&B Marketing Services Co., Ltd. (“Roadway”).

2. During the time period from approximately 2006 through 2012, D&B’s HDBC and Roadway subsidiaries made unlawful payments in order to obtain or retain business.

3. These unlawful payments were not accurately reflected in the books and records of HDBC and Roadway, which were consolidated into D&B’s books and records. During the relevant period, D&B also failed to devise and maintain sufficient internal accounting controls to detect or prevent the improper payments.

5. HDBC is a Chinese limited liability company that was formed in November 2006 as a joint venture between D&B’s Chinese subsidiary, Dun & Bradstreet International Consultant
(Shanghai) Co. Ltd. (“D&B China”), and Huaxia International Credit Consulting Co. Limited (“Huaxia”). D&B China is the fifty-one percent majority shareholder of HDBC and its books,
records, and financial accounts are consolidated into D&B’s books and records and reported by D&B on its financial statements.

6. Roadway was, during the relevant time period, a Chinese limited liability company. In June 2009, D&B (through a wholly-owned subsidiary) acquired ninety percent of Roadway’s shares. Roadway’s books, records, and financial accounts were, during the relevant time period, consolidated into D&B’s books and records and reported by D&B on its financial statements. In March 2012, D&B voluntarily suspended, and then in May 2012, voluntarily shut down the operations of Roadway in part as a result of its discovery of the illegal conduct described herein.

9. D&B first entered the China market in the early 1990’s through a joint venture and by the mid-2000’s, began to consider strategic alternatives to grow its China-based business.
Ultimately, D&B chose a growth strategy that would be executed through acquisitions, mergers, or joint venture partnerships. In 2006, D&B promoted a successful European executive to be President of its Asia-Pacific region and tasked him with the mission of finding strategic partners to grow the China business.

10. In 2006, the new President of the Asia-Pacific region considered and courted several potential partners for merger or acquisition but ultimately focused on Huaxia as a joint
venture partner. Among other things, Huaxia was considered attractive as a result of its “government connections.”

11. As part of its due diligence, a review of Huaxia’s data and operations was conducted by an executive from D&B’s Greater China management. The data and operations review focused on, among other things, data acquisition and sources of data at Huaxia. The report explicitly noted that, unlike D&B’s China operations, Huaxia used its government connections to source financial statement information directly from provincial offices of the Chinese State Administration of Industry and Commerce (“AIC”), Chinese National Bureau of Statistics, lawyers, and other individuals rather than publicly available sources. D&B’s due diligence procedures failed to address the information in the report, rather, D&B provided a short FCPA training session to Huaxia executives and then requested that they complete an anti-bribery questionnaire and certification.

15. D&B’s due diligence efforts indicated that Huaxia was directly acquiring certain non-public AIC business data through unofficial arrangements. D&B’s Greater China management understood that Huaxia routinely obtained information through agents and the agents obtained information by making improper payments to government officials. The due diligence package disclosing these arrangements was circulated to the D&B transaction team, including the President of the Asia-Pacific region, who was also a member of D&B’s Global  Leadership Team, and a manager at D&B International.

17. In the fall of 2008, D&B Greater China management sought to reduce HDBC’s financial data acquisition costs. At the time, data acquisition costs in China were substantially higher than similar data costs in other countries. D&B Greater China management considered eliminating the use of agents and authorizing HDBC employees to purchase data directly from AIC officials, as this would significantly reduce costs. Separately, employees in the data and operations unit at HDBC noted in a report to the executive responsible for data acquisition in China that purchasing data directly from AIC individuals would be at a high cost and require “lots of palm grease (kind of bribe)” to the AIC officials. While the managers involved were not concerned with making improper payments directly to these government officials, they were concerned that HDBC would be unable to obtain proper fapiao (tax receipt) under this proposal. As a result, they explored ways to generate fake fapiao for the payments that would be made to local officials.

25. In addition to failing to ensure the legality of the Roadway-acquired data, postacquisition, D&B also failed to take steps to determine whether Roadway employees were paying
customer “decision-makers” to get business. From July 2009 through March 2012, Roadway employees continued to make improper payments to customer “decision-makers” to obtain or retain business, including customers that were Chinese government agencies or entities that were SOEs. These payments were called “Pin Tui,” or promotional expenses, and were inaccurately recorded in Roadway’s books and records as legitimate promotion and advertisement expenses. The Pin Tui payments were made directly by Roadway employees and through third-party agents in connection with over thirty-four percent of the customer transactions at Roadway between July 2009 and March 2012. Of the 1,036 customers whose “decision makers” received payments in this period, 156 were Chinese government agencies or SOEs.

Download D&B SEC

Fine: Disgorgement of $6,077,820, which represents profits gained as a result of the conduct described herein, prejudgment interest of $1,143,664, and a civil money penalty in the amount of $2 million to the Securities and Exchange Commission for transfer to the general fund of the United States Treasury, subject to Exchange Act Section 21F(g)(3). 

April 23, 2018 in AML | Permalink | Comments (0)

Saturday, April 21, 2018

Department of Justice Begins Second Distribution of Funds Recovered Through Asset Forfeiture Totaling $1.2 Billion to Compensate Victims of Bernard Madoff Fraud Scheme

The Department of Justice announced that the Madoff Victim Fund (MVF) began its second distribution of $504 million in funds forfeited to the U.S. Government in connection with the Bernard L. Madoff Investment Securities LLC (BLMIS) fraud scheme, bringing the total distributed to over $1.2 billion.  These funds will be sent to over 21,000 victims across the globe. This distribution represents the second in a series of payments that will eventually return over $4 billion to victims as compensation for losses they suffered from the collapse of the BLMIS.  The MVF has received over 65,000 petitions from victims in 136 countries. 

Attorney General Jeff Sessions, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Geoffrey S. Berman for the Southern District of New York made the announcement. 

“In one of the most notorious and unconscionable financial crimes in history, Bernie Madoff robbed tens of thousands of individuals, pension plans, charitable organizations and others, all the while funding a lavish personal lifestyle,” said Attorney General Sessions.  “Through the use of asset forfeiture, the Department of Justice has recovered over $4 billion of Mr. Madoff’s fraud, and we continue to work to compensate those he defrauded.  Last June, the Department approved more than 39,000 petitions for compensation.  Today, during National Crime Victims’ Rights Week, the Department returns more than a half-billion dollars to nearly 22,000 law-abiding people and organizations. We cannot undo the damage that Bernie Madoff has done, but today’s distribution will provide significant relief to many of the victims of one of the worst frauds of all time.”

“Bernie Madoff committed history’s largest Ponzi scheme,” said U.S. Attorney Berman.  “This Office prosecuted Madoff himself, and others who helped perpetrate his fraud, and continues to vigorously pursue money recoveries for his victims.  Today’s payment of more than $500 million is this Office’s second installment in a series of distributions that represent our ongoing commitment to find relief for victims of Madoff’s heinous crimes.”

For decades, Bernard L. Madoff used his position as Chairman of BLMIS, the investment advisory business he founded in 1960, to steal billions from his clients.  On March 12, 2009, Madoff pleaded guilty to 11 federal felonies, admitting that he had turned his wealth management business into the world’s largest Ponzi scheme, benefitting himself, his family and select members of his inner circle.  On June 29, 2009, U.S. District Judge Denny Chin sentenced Madoff to 150 years in prison for running the largest fraudulent scheme in history.  Judge Chin ordered Madoff to forfeit $170.799 billion as part of Madoff’s sentence.  

Of the approximately $4.05 billion that will be made available to victims, approximately $2.2 billion was collected as part of the historic civil forfeiture recovery from the estate of deceased Madoff investor Jeffry Picower.  An additional $1.7 billion was collected as part of a Deferred Prosecution Agreement with JPMorgan Chase Bank N.A. and civilly forfeited in a parallel action.  The remaining funds were collected through a civil forfeiture action against investor Carl Shapiro and his family, and from civil and criminal forfeiture actions against Bernard L. Madoff, Peter B. Madoff and their co-conspirators.

The MVF’s payouts would not have been possible without the extraordinary efforts of the U.S. Department of Justice Criminal Division’s Money Laundering and Asset Recovery Section, the U.S. Attorney’s Office for the Southern District of New York, and the FBI in the prosecution of these crimes and the recovery of assets supporting the forfeiture in this case.  The MVF is overseen by Richard Breeden, former Chairman of the U.S. Securities and Exchange Commission, in his capacity as Special Master appointed by the Department of Justice to assist in connection with the victim remission proceedings.

More information about MVF and its compensation to victims of BLMIS is available on the MVF website at, such as eligibility criteria, process updates, and frequently asked questions.  Further questions may be directed to the MVF at 866-624-3670 or

April 21, 2018 in AML | Permalink | Comments (0)

Friday, April 20, 2018

Tax Cuts and Jobs Act: Assessment of Implementation Planning Efforts

The Treasury Inspector General for Tax Administration (TIGTA) released its audit report of the Internal Revenue Service’s (IRS) efforts in implementing the Tax Cuts and Jobs Act of 2017.

The Act makes significant changes to the tax code affecting individuals, businesses, and tax-exempt organizations. It also contains 119 new provisions that are administered by the IRS and affect both domestic and international taxes. The Joint Committee on Taxation estimates a net reduction in tax of almost $1.5 trillion over Fiscal Years 2018 through 2027 under this law.

TIGTA’s new report concludes that the IRS’s Legislative Affairs function monitored the pending legislation to identify provisions that would affect the IRS and informed the various IRS operating divisions so they could begin to assess how to handle the implementation. Once the law was enacted, the IRS immediately began the task of implementing the new provisions. In addition, the IRS established a multifaceted oversight structure to coordinate implementation activities among the various IRS operating divisions. This included creating an Executive Steering Committee led by the Acting IRS Commissioner, the Tax Reform Implementation Office, and the Tax Reform Implementation Council. The IRS worked with the Department of the Treasury and estimated that implementation of the Act would cost approximately $397 million. This includes hiring an estimated 1,734 full time equivalent positions to implement tax reform over the next two calendar years.

The IRS also took adequate steps to develop the new tax withholding tables. The Tax Cuts and Jobs Act included a provision that made significant changes to income tax rates, income tax deductions and credits, and Federal income tax withholding. The IRS, in conjunction with the Department of the Treasury, designed the Tax Year 2018 withholding table to work with an employee’s existing Form W-4. The IRS also updated its online withholding calculator to work with the revised tax tables to provide taxpayers with the ability to estimate their tax liability and withholding under the Tax Cuts and Jobs Act. The calculator also provides taxpayers with a suggestion as to the number of withholding allowances they should claim for the remainder of Tax Year 2018.

This audit report was prepared only for the purpose of providing information; therefore, no recommendations were made in this report.

Read the report.

April 20, 2018 in Tax Compliance | Permalink | Comments (0)

Thursday, April 19, 2018

Aruban Telecommunications Purchasing Official Pleads Guilty to Money Laundering Conspiracy Involving Violations of the Foreign Corrupt Practices Act

Conspirators Paid Over $1.3 Million to Influence the Official and to Secure Business with State-Owned Telecommunications Company

An Aruban official residing in Florida pleaded guilty today to money laundering charges in connection with his role in a scheme to arrange and receive corrupt payments to influence the awarding of contracts with an Aruban state-owned telecommunications corporation.

Acting Assistant Attorney General John P. Cronan of the Department of Justice’s Criminal Division, U.S. Attorney Benjamin G. Greenberg of the Southern District of Florida and Special Agent in Charge Robert F. Lasky of the FBI’s Miami Field Office made the announcement.

Egbert Yvan Ferdinand Koolman, 49, a Dutch citizen residing in Miami, Florida, was an official of Servicio di Telecommunicacion di Aruba N.V. (Setar), an instrumentality of the Aruban government.  Koolman pleaded guilty before U.S. District Judge Frederico A. Moreno of the Southern District of Florida to one count of conspiracy to commit money laundering.  He is scheduled to be sentenced on June 27.

In connection with the scheme, Lawrence W. Parker, Jr., 42, of Miami, pleaded guilty on Dec. 28, 2017 to one count of conspiracy to violate the Foreign Corrupt Practices Act (FCPA) and to commit wire fraud.  Parker’s sentencing is scheduled for April 30.

According to admissions made as part of his plea agreement, between 2005 and 2016, Koolman operated a money laundering conspiracy from his position as Setar’s product manager.  Koolman admitted that, as part of the scheme, he conspired with Parker and others to transmit funds from Florida and elsewhere in the United States to Aruba and Panama with the intent to promote a wire fraud scheme and a corrupt scheme that violated the FCPA.  Koolman was promised and received bribes from individuals and companies located in the United States and abroad in exchange for using his position at Setar to award lucrative mobile phone and accessory contracts, he admitted.  He received the corrupt payments via wire transfer from banks located in the United States, in cash during meetings in Miami and in Aruba, and by withdrawing cash in Aruba using a bankcard that drew money from a United States-based bank account, he further admitted.  In exchange for the more than $1.3 million in corrupt payments that he received, Koolman also admitted providing favored vendors with Setar’s confidential information.

The FBI’s International Corruption Squads is investigating the case.  Trial Attorneys Jonathan Robell and Vanessa Snyder of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Lois Foster-Steers of the Southern District of Florida are prosecuting the case.  The Criminal Division’s Office of International Affairs also provided significant assistance.

April 19, 2018 in AML | Permalink | Comments (0)

Wednesday, April 18, 2018

Three Men Plead Guilty to Concealing Sending Funds to Anwar Al-Awlaki

Ibrahim Zubair Mohammad, 38; Asif Ahmed Salim, 38; and Sultane Room Salim, 43, pleaded guilty to one count of concealment of financing of terrorism, for their roles in concealing the provision of thousands of dollars to Anwar Al-Awlaki in an effort to support violent jihad against U.S. military personnel in Iraq, Afghanistan and throughout the world.

Assistant Attorney General for National Security John C. Demers, U.S. Attorney Justin E. Herdman of the Northern District of Ohio and Special Agent in Charge Stephen D. Anthony of the FBI’s Cleveland Division announced the pleas.

A fourth defendant, Yahya Farooq Mohammad, pleaded guilty last year to one count of conspiracy to provide and conceal material support or resources to terrorists and one count of solicitation to commit a crime of violence.  Farooq Mohammed admitted to conspiring to travel to Yemen to provide thousands of dollars, equipment and other assistance to Al-Awlaki.  He also admitted to soliciting an undercover FBI employee posing as a hitman to kidnap and murder U.S. District Judge Jack Zouhary.  He was sentenced to 27 ½ years in prison last year.

Ibrahim Mohammad, an Indian citizen, studied engineering at the University of Illinois Urbana-Champaign from 2001 through 2005.  In or around 2006, he moved to Toledo, Ohio, and married a U.S. citizen.  He became a lawful permanent resident of the United States in or around 2007.

Asif Salim, a U.S. citizen, studied at Ohio State University between 2000 and 2005.  He became a resident of Overland Park, Kansas, in 2007.  His brother, Sultane Salim, is also a U.S. citizen who resided in the Chicago area from 2006 through 2012, until he moved to the Columbus area, according to court documents.

The three defendants who pleaded guilty this week acted to conceal supplying funds to Anwar Al-Awlaki in 2009.  Al-Awlaki, a key leader of Al Qaeda in the Arabian Peninsula, advocated violence against the United States and supported and was involved in attempted terrorist attacks against civilians, according to court documents. 

Farooq Mohammad travelled with two other people to Yemen in 2009 to meet Awlaki.  They were unable to meet with Awlaki, so instead travelled to Sana’a, Yemen, to meet with one of his associates.  Farooq Mohammad and his two fellow travelers gave the associate approximately $22,000 to be given to Awlaki, according to court documents.  The money Farooq Mohammad provided included approximately $17,000 that had been provided by Asif and Sultane Salim in the United States.  Ibrahim Mohammad facilitated the transfer of the money to Farooq Mohammad overseas for him to take to Awlaki in Yemen. 

After law enforcement began investigating the financial transactions involved in the funds provided to Awlaki, Ibrahim Mohammad, Asif Salim and Sultane Salim attempted to conceal the source of the funds provided to Awlaki by lying to investigators and deleting emails from their accounts that were related to the transactions.

April 18, 2018 in AML | Permalink | Comments (0)

Tuesday, April 17, 2018

Former Puerto Rico Senator and Businessman Sentenced to Prison for Bribery

Former Puerto Rico Senator Hector Martinez Maldonado and Juan Bravo Fernandez, the former president of Ranger American, one of the largest private security companies in Puerto Rico, were each sentenced to 48 months in prison, respectively, for their roles in a bribery scheme involving the passage of legislation beneficial to Bravo Fernandez’s business, announced Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division. 

Martinez Maldonado, 49, of Carolina, Puerto Rico, and Bravo Fernandez, 63, of San Juan, were each sentenced by Judge Francisco A. Besosa.  Judge Besosa also ordered Bravo Fernandez to pay a $150,000 fine and Martinez Maldonado to pay a $15,000 fine.  Maldonado and Fernandez were convicted on May 26, 2017, of federal program bribery.

According to evidence presented at trial, Martinez Maldonado was elected to the Puerto Rico Senate in 2004 and began serving a four-year term in January 2005. He was reelected in 2008.  Beginning in 2005, Martinez Maldonado served as Chairman of the Puerto Rico Public Safety Committee, exercising significant control over legislation related to security and community safety.  Bravo Fernandez was the president and chief executive officer of Ranger American, one of the largest private security firms in Puerto Rico.

The jury convicted the defendants for their role in a bribery scheme in which Bravo Fernandez provided Martinez Maldonado and Jorge de Castro Font, another former Puerto Rico senator, with a trip to Las Vegas to watch a championship boxing match between Winky Wright and Felix “Tito” Trinidad, a legendary Puerto Rican boxer, in exchange for the senators’ help with legislation favorable to Bravo Fernandez’s business interests. 

Documents and evidence presented at trial showed that the trip to Las Vegas included first-class airfare; meals and drinks; hotel rooms at the Mandalay Bay Resort and Casino; $1,000 tickets to the Trinidad vs. Wright boxing match; and hotel rooms in Miami for the return trip.  On March 2, 2005, the day that Bravo Fernandez paid for the boxing tickets, Martinez Maldonado submitted one of the bills favorable to Bravo Fernandez for consideration by the Puerto Rico Senate.  The evidence at trial also showed that the hotel reservation was made the day after Martinez Maldonado presided over a Public Safety Committee hearing for one of the bills at which Bravo Fernandez testified, and that, the day after the three men returned from their trip to Las Vegas, Martinez Maldonado and de Castro Font both cast their votes in support of one of Bravo Fernandez’s bills in the Senate.

De Castro Font, 54, served in the Puerto Rico House of Representatives from 1989 to 2004, and served in the Puerto Rico Senate from 2005 to 2008.  De Castro Font pleaded guilty on Jan. 21, 2009, to 20 counts of honest services wire fraud and one count of conspiracy to commit extortion.  He was sentenced on May 17, 2011, to 60 months in prison. 

April 17, 2018 in AML | Permalink | Comments (0)

Monday, April 16, 2018

UBER failed to disclose another data breach during FTC investigation

Uber Technologies, Inc. has agreed to expand the proposed settlement it reached with the Federal Trade Commission last year over charges that the ride-sharing company deceived consumers about its privacy and data security practices.

After the announcement of last year’s proposed settlement, the Commission learned that Uber had failed to disclose a significant breach of consumer data that occurred in 2016 -- in the midst of the FTC’s investigation that led to the August 2017 settlement announcement. Due to Uber’s misconduct related to the 2016 breach, Uber will be subject to additional requirements. Among other things, the revised settlement could subject Uber to civil penalties if it fails to notify the FTC of certain future incidents involving unauthorized access of consumer information.

“After misleading consumers about its privacy and security practices, Uber compounded its misconduct by failing to inform the Commission that it suffered another data breach in 2016 while the Commission was investigating the company’s strikingly similar 2014 breach,” said Acting FTC Chairman Maureen K. Ohlhausen. “The strengthened provisions of the expanded settlement are designed to ensure that Uber does not engage in similar misconduct in the future.”

In announcing the original proposed settlement with Uber in August 2017, the FTC charged that the company had failed to live up to its claims that it closely monitored employee access to rider and driver data and that it deployed reasonable measures to secure personal information stored on a third-party cloud provider’s servers.

In the revised complaint issued today, the FTC alleges that Uber learned in November 2016 that intruders had again accessed consumer data the company stored on its third-party cloud provider’s servers by using an access key an Uber engineer had posted on a code-sharing website. This time, the intruders used the access key to download from Uber’s cloud storage unencrypted files that contained more than 25 million names and email addresses, 22 million names and mobile phone numbers, and 600,000 names and driver’s license numbers of U.S. Uber drivers and riders.

The revised proposed complaint further notes that Uber paid the intruders $100,000 through its third-party “bug bounty” program and failed to disclose the breach to consumers or the Commission until November 2017. The bug bounty program was created to provide financial rewards to parties who responsibly disclose security vulnerabilities rather than those who maliciously exploit vulnerabilities to access consumers’ personal information.

In addition to compelling Uber to disclose certain future incidents involving consumer data, the new provisions in the revised proposed order include requirements for Uber to submit to the Commission all the reports from the required third-party audits of Uber’s privacy program rather than only the initial such report. It also must retain certain records related to bug bounty reports regarding vulnerabilities that relate to potential or actual unauthorized access to consumer data.

The Commission vote to withdraw the original administrative complaint and proposed consent agreement and to issue the revised administrative complaint and to accept the revised proposed consent agreement was 2-0. The FTC will publish a description of 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 May 14, 2018, after which the Commission will decide whether to make the proposed consent order final.

April 16, 2018 in Financial Regulation | Permalink | Comments (0)

Sunday, April 15, 2018

The Long Run: Maximizing Innovation Incentives Through Advocacy and Enforcement

Good afternoon. It is great to be here at the Leadership IP conference. This conference for many years now has brought together a broad network of experts and policymakers with diverse viewpoints to discuss what I view as some of the most important issues of our day. Thanks to the organizers, and especially to my friend, the Honorable Jim Rill, for inviting me to speak.

As I look out from this lectern, I am humbled to be in the company of the most sophisticated and knowledgeable people in the world in the areas of antitrust and intellectual property. I know that all of you follow developments in this area closely, and that you are likely already aware of the views I have shared in my recent speeches on antitrust and IP, first at the University of Southern California last November, and more recently, at the University of Pennsylvania in March. Having provided much detail on my policy views already, today I thought it would be most useful to expand on the Division’s role—or roles—when it comes to issues at the intersection of antitrust and IP. 

As I see it, the Division wears two hats in this space. One is the hat of the competition advocate; the other is the hat of the competition enforcer. Both important, but distinct, roles.

As an agency with more than 125 years of experience observing and analyzing markets in this country, more than 300 lawyers who spend countless hours poring over business documents and interviewing executives in various industries, and another 50 PhD economists who are thought leaders in the field of competition, we are well-positioned to consider what effect a given policy is likely to have on the U.S. market. Naturally, given our mission of protecting and promoting competition, we aim to bring our resources and experience to bear in encouraging, or advocating for, policies that will incentivize innovation for the benefit of American consumers.  

In our role as competition enforcer, we take action when we have sufficient evidence to suspect the existence of an anticompetitive restraint of trade that undermines our free market, or when we determine that a proposed merger may substantially lessen competition in violation of the Clayton Act. In our enforcement role, we bring cases against conduct that has been outlawed by Congress, and we prove those cases in U.S. courts.

Both of these roles are important to the Division’s core mission of protecting and promoting competition, but they are distinct, to be sure. So in the interest of transparency, let me elaborate on how we carry out our dual roles in the area of antitrust and IP; and then I will highlight a few risks associated with conflating the Division’s advocacy and enforcement work in this area, with the goal of avoiding such risks.
Competition Advocacy

There is a great deal of work that we do in our role as an advocate for competition. A primary method of advocacy is giving speeches. Conferences like today’s allow us to share with the public—in person and on our website, where many of the Division leadership’s speeches are published—the Division’s views about what conditions will make the market most dynamic, innovative and competitive. Although we speak often about the application of the antitrust laws, our advocacy extends more broadly. For example, when I spoke at USC, I addressed remedies in patent infringement litigation, and described my concern that by denying injunctive relief to standard essential patent holders except in the rarest circumstances, courts in the U.S. run the risk of turning a FRAND commitment into a compulsory license. As a defender of competitive markets, I am concerned that these patent law developments could have an unintended and harmful effect on dynamic competition by undermining important incentives to innovate, and ultimately, have a detrimental effect on U.S. consumers.

Another advocacy position we have taken relates to how patent holders are held to their commitments to license on FRAND terms. At Penn last month, I noted that so-called unilateral patent hold-up is not an antitrust problem. Where a patent holder has made commitments to license on particular terms, a contract theory is adequate and more appropriate to address disputes that may arise regarding whether the patent holder has honored those commitments. The Division will not hesitate to bring a sound antitrust case, but as competition advocates, we must strive to ensure that we use the antitrust laws for their intended purpose, which is to address practices that harm competition. Using the antitrust laws to impugn a patent holder’s efforts to enforce valid IP rights risks undermining the dynamic competition we are charged with fostering. So when it comes to disputes that arise between intellectual property holders and implementers regarding the scope of FRAND commitments, we advocate for the application of more appropriate theories, other than the blunt instrument of antitrust.

A third topic I have addressed recently is the need for balanced patent policies in standard setting organizations. As I and others at the Division have said on many occasions, by allowing products designed and manufactured by many different firms to function together, interoperability standards create enormous value for consumers. But standard setting only works—and consumers only reap the benefits of innovative and interoperable products—when both patent holders and patent implementers have the incentives to participate in the process. To that end, I have encouraged standard setting organizations to think carefully about the patent policies they adopt, so that incentives are not skewed towards one group or the other.

While I have focused so far today on speech-related advocacy work, the Division has many other mechanisms for promoting the discussion of pro-competitive policies. 

Our business review letter process might, in one sense, be viewed as a mechanism to share our policies on competition. While a business review letter is, of course, a statement of our enforcement intentions with respect to the particular arrangement described in the request, others in the antitrust community look to these letters for insight about our prospective enforcement views. It is in that context that I include our business review letters as a facet of our advocacy function. And as many of you know, the Antitrust Division has had a number of occasions to opine on issues of antitrust and IP through the business review process over the years. 

The Division also represents the Department of Justice on the administration’s trade policy staff committee. And, in that context, we engage with other executive branch agencies to discuss issues at the intersection of antitrust and IP in an effort to ensure that the promotion of competition and innovation are key considerations in trade-related actions taken by the U.S. government. 

A fourth facet of our competition advocacy, which I am excited to mention, is our recent effort to expand our amicus program to increase our participation in private litigation not only in the Supreme Court, but at the district and appellate courts as well. While this effort is certainly not limited to issues involving the interface between antitrust and IP, I can envision these issues attracting our interest as an amicus, given their relevance to our mission of promoting competition.

Having described in more detail our competition advocacy role, let me turn to the Division’s role as an enforcer. As I have said previously, in the context of antitrust and IP, we will be inclined to investigate and enforce when we see evidence of collusive conduct undertaken for the purpose of fixing prices, or excluding particular competitors or products. So what type of conduct in particular might attract enforcement scrutiny? 

In the context of standard setting, cases like Radiant Burners, Hydrolevel, and Allied Tube provide helpful guidance regarding the kinds of collusive conduct that, naturally, would garner our attention. They are particularly helpful in illuminating our concern about situations in which competitors either corrupt the standard setting process so that decisions are not made by a balanced group of IP holders and implementers, or where competitors reach anticompetitive agreements outside of the scope of a legitimate standard setting exercise, with a detrimental effect on competition. 

Let me describe two related situations that would raise concerns in the context of voluntary consensus standards development. First, if a group of patent implementers were to engage in concerted efforts to exclude a patent holder from meaningful participation in standard setting unless the patent holder agreed to offer particular licensing terms dictated by the group of implementers, those facts would raise red flags. Similarly, if patent holders A, B and C were to agree to exclude from consideration for inclusion substitute technology owned by their competitor patent holder D—for the purpose of harming patent holder D, rather than as a result of good-faith efforts to incorporate the most effective technology—that would also raise concerns. 

While I believe in a very restrained approach to antitrust enforcement when it comes to the legitimate exploitation of valid IP rights, the Division will not hesitate to enforce against anticompetitive collusive conduct, particularly in an area as high-stakes for the American consumer as this one.

Over the years, the Division has made efforts to ensure that the advocacy positions we take are not misconstrued by the public. For example, when the Division issued the 2007 IP Report, we, and the Federal Trade Commission, included in the chapter on patent pools—arrangements through which multiple patent owners collaborate to offer a single license to a package of their patents—a description of certain safeguards that patent pool participants had put into place in various arrangements submitted to the Division for business review to ensure that efficiency would be enhanced, and that potential competitive harm would be mitigated. We were careful to note, however, that although the safeguards we described were a basis upon which we articulated our intention not to bring enforcement actions, “in an enforcement investigation examining a patent pool . . . failure to incorporate all the safeguards set forth in the pooling business review letters [would] not automatically lead to the conclusion that a pool is anticompetitive.” We stated that we would instead “evaluate the particular facts and circumstances to determine whether the actual conduct has an anticompetitive effect.”  

I point out the distinction between advocacy and enforcement, and the Division’s efforts to highlight it, because I believe there are some risks associated with conflating the two. First, it can be the case that advocacy positions lead to unsupportable or even detrimental legal theories when taken out of context. As I explained at Penn, as a result of past speeches and position statements about hold-up that may have been intended to be limited to the context of competition advocacy, I worry that putative licensees have been emboldened to stretch antitrust theories beyond their rightful application, and that courts have indulged these theories at the risk of undermining patent holders’ incentives to participate in standard setting at all.

Another risk of conflating advocacy positions with enforcement intentions is that industry leadership in standard setting could be stifled or undermined if business leaders are concerned that each decision they make will be called into question by antitrust enforcers in the context of an investigation. That is why our statements regarding antitrust and IP aim to clarify what conditions are ideal, and at the opposite end of the spectrum, what conduct might attract enforcement scrutiny. As a prior Division official said, 

“The great strength of the competitive marketplace is its ability to experiment, recover from false starts, and seek an efficient equilibrium through an organic development process. We should not expect to be able to predict where the best ideas will come from, but with all respect to my colleagues in the enforcement community, I doubt they will be developed entirely from the top down by antitrust enforcers in the U.S. or elsewhere.”  

While the Division will not hesitate to advocate for the conditions that are most likely to attract robust participation in standard setting, we want standard setting bodies to be industry-led, and we encourage them to experiment, to compete with one another, and to be creative. This is a point we have supported making to foreign governments in the trade context—something I will be talking more about in the coming months.

With respect to the difference between advocacy and enforcement, a final point I want to make is how important it is that foreign enforcers are aware of our two distinct roles. Recently, I have noticed that some of the Division’s work, including business review letters, has been cited to support foreign enforcement actions that we would not bring under U.S. antitrust law. For example, while the Division decided that it would not challenge as unlawful the IEEE’s patent policy update in 2015—including the portion of the policy that limits the availability of injunctions to holders of FRAND-encumbered patents—for the reasons I have just explained, this letter should never be cited for the proposition that what IEEE did is required, or that a patent holder who seeks an injunction is somehow in violation of the antitrust laws. 

On the topic of international enforcement in the antitrust and IP context, let me make a few additional points. As I highlighted when I spoke at Penn, as enforcers, we have an obligation to ensure that antitrust policy remains sound, so that consumers enjoy the benefits of dynamic competition, and also so that we do not export unsound theories of antitrust liability abroad, where dubious enforcement actions would have harmful effects here in the U.S. 

In pursuit of that ideal, we strive to be disciplined in our own analysis and enforcement procedures, not only because it is the right thing to do, but also because we want to lead the way as enforcers around the world grapple with the issues presented by today’s high-tech markets. For example, when we look at IP-related conduct, we do not simply assume that a patent confers market power. Even where market power may exist, we focus our analysis on the actual competitive effects of the conduct at issue. This was not always our approach. In the 1970s, U.S. antitrust law took a skeptical view of patent licensing, out of concern that the exclusive rights of a patent might be leveraged into monopolies over unpatented products, causing harm to consumers. As former Assistant Attorney General Rick Rule has written, “Fear that the patentee would exercise market power and harm consumers of the product overwhelmed recognition of the benefits that dynamism spurred by patents could create for all consumers.” Over time, we came to understand the importance of dynamic competition, and that is a principle we want to share with our foreign enforcer colleagues.

We also strive to impose remedies that are carefully tailored to the harm we identify, whether in the context of a conduct or a merger investigation. Requiring remedies that go beyond that scope—particularly when those remedies relate to the exploitation of IP rights—risks unnecessarily undermining innovation incentives. With respect to remedies, we also give careful consideration to territorial scope, and we urge our enforcer colleagues to do the same. As Deputy AAG Roger Alford explained earlier this year in Korea, “In a world of concurrent authority, it behooves us to recognize that conduct we condemn abroad may affect international commerce and impact the power of other nations to grant rights to their subjects and regulate conduct within the scope of their authority.”

Finally, we adhere to sound and transparent enforcement procedures, because doing so is a fundamental part of operating according to the rule of law, and also because providing parties with opportunities to test our evidence and to push back on our legal theories helps us refine our thinking. This ultimately allows us to reach the right substantive conclusions. As we engage with our foreign counterparts on this topic, we are considering some innovations of our own regarding how we and other jurisdictions might increase our mutual commitments to these principles.

Ultimately, it is the people in this room—who work for some of the most innovative companies in our country and the world—who will enable the next great technological leap. My responsibility is first, to ensure we don’t implement policies that unduly limit your incentives; and second, to leverage actively all of the tools at the Division’s disposal to ensure that you are motivated and able to thrive in a market-based system. As part of that responsibility, I want to ensure that our policies and enforcement intentions are clear and well-understood, so that you can proceed with the business of developing the next generation of technology for the benefit of all of us. I also want to ensure that our enforcement intentions are clear to our enforcer colleagues outside the U.S., given the interconnectedness of the world when it comes to high technology. 

Thank you very much for inviting me to speak today. 

Assistant Attorney General Makan Delrahim Delivers Keynote Address at the LeadershIP Conference on IP, Antitrust, and Innovation Policy

April 15, 2018 in Financial Regulation | Permalink | Comments (0)

Saturday, April 14, 2018

Cypriot National Pleads Guilty to Money Laundering

A Cypriot national pleaded guilty to money laundering.  Esam Sakkal, 40, a national of Cyprus, pleaded guilty to one count of money laundering conspiracy and two counts of laundering of monetary instruments.  U.S. District Court Judge Rya W. Zobel scheduled sentencing for July 10.  In June 2017, Sakkal and his brother, Nabeel Sakkal, aka Traycho Marinov Mitchov, Nabil Cieckal and Nabil Imadein Bazul Siggal, a dual national of Cyprus and Jordan, were indicted.  Nabeel Sakkal remains a fugitive.

At the plea hearing, Sakkal admitted his role in the charged criminal conduct, including that he advised his brother regarding methods to transport cash obtained from an undercover agent and that he attempted to launder money from drug sales when he met with an undercover agent in Warsaw, Poland.  Sakkal further admitted that he agreed to obtain money from the undercover agent, and agreed to cause the money to be wired to the United States.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Andrew E. Lelling for the District of Massachusetts, Special Agent in Charge Michael J. Ferguson of the Drug Enforcement Administration’s (DEA) New England Division; Special Agent in Charge Harold H. Shaw of the FBI Boston Field Division and Special Agent in Charge Kristina O’Connell of the Internal Revenue Service Criminal Investigation (IRS-CI) in Boston, made the announcement. 

April 14, 2018 in AML | Permalink | Comments (0)

Friday, April 13, 2018

Cyber Insurance and Its Potential Role in Risk Management Programs

Cyber Insurance and Its Potential Role in Risk Management Programs

The Federal Financial Institutions Examination Council (FFIEC) members1 developed this statement to provide awareness of the potential role of cyber insurance in financial institutions’ risk management programs. This statement does not contain any new regulatory expectations. Use of cyber insurance may offset financial losses resulting from cyber incidents; however, it is not required by the agencies. Financial institutions should refer to the FFIEC Information Technology (IT) Examination Handbook booklets referenced in this statement for information on regulatory expectations regarding IT risk management.


Financial institutions face a variety of risks from cyber incidents. These can include financial, operational, legal, compliance, strategic, and reputation risks resulting from fraud, data loss, or disruption of service.


While cyber insurance may be an effective tool for mitigating financial risk associated with cyber incidents, it is not required by the agencies. Purchasing cyber insurance does not remove the need for a sound control environment. Rather, cyber insurance may be a component of a broader risk management strategy that includes identifying, measuring, mitigating, and monitoring cyber risk exposure. An effective system of controls remains the primary defense against cyber threats.

If institution management is considering cyber insurance, the assessment of cyber insurance benefits should include an analysis of the institution’s existing cybersecurity and IT risk management programs to evaluate the potential financial impact of residual risk. As institutions weigh the benefits and costs of cyber insurance, considerations may include:

  • Involving multiple stakeholders in the cyber insurance decision

- Include appropriate departments across the institution such as legal, enterprise risk management, operational risk management, finance, information technology, and information security management.

- Assess the sufficiency of existing control environments to address the potential impact of cyber risk exposures and attestation requirements for the insurance policy.

- Communicate the cyber insurance decision-making process, including the assessment of cyber insurance options, to the appropriate level of management.

  • Performing proper due diligence to understand available cyber insurance coverage

- Review the scope of existing or proposed insurance coverage to identify gaps.

- Understand insurance policy terms, coverage, exclusions, and costs for cyber events.

- Consider the potential benefits and costs to assess the insurance coverage appropriateness.

- Avoid overreliance on insurance coverage as a substitute for sound operational risk management practices.

- Recognize that policy terms and language may not be standardized. Coverage may be different among insurance providers and tailored for institutions.

- Consider how the coverage is triggered, if certain types of cyber incidents (e.g., cyber terrorism) are excluded from coverage, and the impact that sub-limits may have in the total coverage and claims process.

- Assess the financial strength (ratings) and claims paying history of insurance companies providing coverage and their ability to fulfill obligations under the policy if multiple institutions file claims.

- Assess how the proposed policies fit within the business strategies, insurance programs, and risk management programs.

- Understand risk management and control requirements outlined in the policy and ensure the institution would be able to comply.

- As appropriate, engage outside advisors, such as attorneys and brokers, to assist in the due diligence process to assess the benefits of cyber insurance relative to the cost.

  • Evaluating cyber insurance in the annual insurance review and budgeting process - Assessing the benefits of cyber insurance relative to the cost.

- Determining the sufficiency of existing insurance coverage as cyber risk exposures, insurance products, and the threat landscape evolve.

- Confirming that any cyber insurance includes coverage expected by the institutions.

- Engaging the board to assess these factors in insurance program reviews.

April 13, 2018 in Financial Regulation | Permalink | Comments (0)

Thursday, April 12, 2018

Global Forum issues tax transparency compliance ratings for nine jurisdictions as membership rises to 150

The Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) published today nine peer review reports assessing compliance with international standards on tax transparency.

Eight of these reports assess countries against the updated standards which incorporate beneficial ownership information of all legal entities and arrangements, in line with the Financial Action Task Force international definition. 

Four jurisdictions – EstoniaFranceMonaco and New Zealand –  received an overall rating of “Compliant.” Three others – The BahamasBelgium and Hungary were rated “Largely Compliant.” Ghana was rated “Partially Compliant.”

Progress for Jamaica were recognised through a Supplementary Report which attributes a “Largely Compliant” rating.

The Global Forum now includes 150 members on an equal footing as Montenegro has just joined the international fight against tax evasion. Members of the Global Forum already include all G20 and OECD countries, all international financial centres and many developing countries.

The Global Forum also runs an extensive technical assistance programme to provide support to its members in implementing the standards and helping tax authorities to make the best use of cross-border information sharing channels.

For additional information on the Global Forum peer review process, and to read all reports to date, go to:

April 12, 2018 in GATCA | Permalink | Comments (0)

Wednesday, April 11, 2018

Justice Department Leads Effort to Seize Backpage.Com, the Internet’s Leading Forum for Prostitution Ads, and Obtains 93-Count Federal Indictment

The Justice Department seized, the Internet’s leading forum for prostitution ads, including ads depicting the prostitution of children.  Additionally, seven individuals have been charged in a 93-count federal indictment with the crimes of conspiracy to facilitate prostitution using a facility in interstate or foreign commerce, facilitating prostitution using a facility in interstate or foreign commerce, conspiracy to commit money laundering, concealment money laundering, international promotional money laundering, and transactional money laundering.| To view the indictment click here

The seven defendants charged in the indictment are Michael Lacey, 69, of Paradise Valley, Arizona; James Larkin, 68, of Paradise Valley, Arizona; Scott Spear, 67, of Scottsdale, Arizona; John E. “Jed” Brunst, 66, of Phoenix, Arizona; Daniel Hyer, 49, of Dallas, Texas;  Andrew Padilla, 45, of Plano, Texas and Jaala Joye Vaught, 37, of Addison, Texas. 

Attorney General Jeff Sessions, Deputy Attorney General Rod Rosenstein, Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, First Assistant U.S. Attorney Elizabeth A. Strange for the District of Arizona, U.S. Attorney Nicola T. Hanna of the Central District of California, FBI Director Christopher A. Wray,  U.S. Postal Inspection Service Chief Postal Inspector Guy Cottrell and Chief Don Fort of Internal Revenue Service Criminal Investigation (IRS-CI) made the announcement.

“For far too long, existed as the dominant marketplace for illicit commercial sex, a place where sex traffickers frequently advertised children and adults alike,” said Attorney General Sessions.  “But this illegality stops right now.  Last Friday, the Department of Justice seized Backpage, and it can no longer be used by criminals to promote and facilitate human trafficking. I want to thank everyone who made this important seizure possible: all of our dedicated and committed professionals in the Child Exploitation and Obscenity Section and our U.S. Attorney’s Office in the District of Arizona, the FBI, our partners with the IRS Criminal Investigation, our Postal Inspectors, and the Texas and California Attorney Generals’ offices. With their help, we have put an end to the violence, abuse, and heartache that has been perpetrated using this site, and we have taken a major step toward keeping women and children across America safe.”

“Backpage has earned hundreds of millions of dollars from facilitating prostitution and sex trafficking, placing profits over the well-being and safety of the many thousands of women and children who were victimized by its practices,” said First Assistant U.S. Attorney Elizabeth A. Strange.  “It is appropriate that Backpage is now facing criminal charges in Arizona, where the company was founded, and I applaud the tremendous efforts of the agents who contributed to last Friday’s enforcement action and who assisted in obtaining the indictment in this case.  Some of the internal emails and company documents described in the indictment are shocking in their callousness.”

“This website will no longer serve as a platform for human traffickers to thrive, and those who were complicit in its use to exploit human beings for monetary gain will be held accountable for their heinous actions,” said FBI Director Wray.  “Whether on the street or on the Internet, sex trafficking will not be tolerated. Together with our law enforcement partners, the FBI will continue to vigorously combat this activity and protect those who are victimized.”  

“The events of last Friday and today are a big win, not only for the agents who investigated these crimes, but more importantly for the victims, including children, who were harmed as a consequence of the alleged actions of,” said Chief Postal Inspector Cottrell.  “By laundering the illegal gains of an enterprise, Backpage perpetuated the exploitation of victims and continued to finance their business. The U.S. Postal Inspection Service is committed to protecting our customers by stopping the money laundering to ensure the cycle of victimization ends.”

“An indictment of this magnitude is particularly troubling when you look at the various layers of corruption and exploitation that are alleged to have occurred,” said IRS-CI Chief Fort.  “The masterminds behind Backpage are not only alleged to have committed egregious amounts of financial crimes such as money laundering, they did so at the expense of innocent women and children.  While these types of investigations can be made more challenging with the use of virtual currency, offshore banking, and the anonymity of the Internet, it should serve as an example to all criminals that there is not a place they can hide where we will not find them.”

The charges and allegations contained in an indictment are merely accusations.  The defendant is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The effort to seize Backpage was led by the Justice Department’s Child Exploitation and Obscenity Section and the U.S. Attorney’s Office for the District of Arizona, with significant support from the U.S. Attorney’s Office for the Central District of California, the office of the California Attorney General, and the office of the Texas Attorney General.  The law enforcement agencies conducting the investigation and seizure include the FBI Phoenix Field Office, the U.S. Postal Inspection Service and IRS-CI.  The criminal case is being prosecuted by Assistant U.S. Attorneys Kevin Rapp, Dominic Lanza, and Margaret Perlmeter of the District of Arizona and Senior Trial Attorney Reginald E. Jones of the Criminal Division’s Child Exploitation and Obscenity Section.  Assistant U.S. Attorney John Kucera of the Central District of California is handling the asset forfeiture aspects of the case.

April 11, 2018 in AML | Permalink | Comments (0)

Tuesday, April 10, 2018

OECD releases new edition of the CRS Implementation Handbook

The OECD published a new set of bilateral exchange relationships established under the Common Reporting Standard Multilateral Competent Authority Agreement (CRS MCAA) which for the first time includes activations by Panama.

In total, there are now over 2700 bilateral relationships for the automatic exchange of offshore financial account information under the CRS in place across the globe. The full list of automatic exchange relationships that are currently in place under the CRS MCAA is available online. A further update is expected to be published in May.

The OECD today also released the second edition of the Common Reporting Standard Implementation Handbook.

The Handbook provides practical guidance to assist government officials and financial institutions in the implementation of the CRS and to provide a practical overview of the CRS to both the financial sector and the public at-large.

Changes reflected in this second edition of the Handbook offer further guidance on the features of the legal framework of the CRS, data protection aspects, IT and administrative requirements as well as on measure to ensure compliance with the CRS. It also expands the trust section in relation to the identification of Controlling Persons and includes all frequently asked questions in relation to the CRS that have so far been issued by the OECD.

April 10, 2018 in GATCA | Permalink | Comments (0)

Monday, April 9, 2018

Chinese Scientist Sentenced to Prison in Theft of Engineered Rice

A Chinese scientist was sentenced to 121 months in a federal prison for conspiring to steal samples of a variety of rice seeds from a Kansas biopharmaceutical research facility.

Weiqiang Zhang, 51, a Chinese national, and U.S. legal permanent resident residing in Manhattan, Kansas, was sentenced by U.S. District Court Judge Carlos Murguia in the District of Kansas. Zhang was convicted on Feb. 15, 2017 of one count of conspiracy to steal trade secrets, one count of conspiracy to commit interstate transportation of stolen property and one count of interstate transportation of stolen property.

Evidence at trial established that Zhang worked as a rice breeder for Ventria Bioscience in Junction City, Kansas.  Ventria develops genetically programmed rice to express recombinant human proteins, which are then extracted for use in the therapeutic and medical fields.  Zhang has a master’s degree in agriculture from Shengyang Agricultural University in China and a doctorate from Louisiana State University.

According to trial evidence, Zhang acquired without authorization hundreds of rice seeds produced by Ventria and stored them at his residence in Manhattan.  The rice seeds have a wide variety of health research applications and were developed to produce either human serum albumin, contained in blood, or lactoferrin, an iron-binding protein found, for example, in human milk.  Ventria spent millions of dollars and years of research developing its seeds and cost-effective methods to extract the proteins, which are used to develop lifesaving products for global markets. Ventria used locked doors with magnetic card readers to restrict access to the temperature-controlled environment where the seeds were stored and processed.

Trial evidence demonstrated that in the summer of 2013, personnel from a crop research institute in China visited Zhang at his home in Manhattan.  Zhang drove the visitors to tour facilities in Iowa, Missouri and Ohio.  On Aug. 7, 2013, U.S. Customs and Border Protection officers found seeds belonging to Ventria in the luggage of Zhang’s visitors as they prepared to leave the United States for China.

“Weiqiang Zhang betrayed his employer by unlawfully providing its proprietary rice seeds to representatives of a Chinese crop institute,” said Acting Assistant Attorney General Cronan. “Today’s sentence demonstrates the significant consequences awaiting those who would steal trade secrets from American companies.  The Criminal Division and its law enforcement partners will continue to work closely with companies like Ventria to protect American intellectual property—which is essential to our economy and way of life—against all threats both foreign and domestic.” 

“Cross-border intellectual property theft not only hurts victim companies, it also threatens our national security,” said Assistant Attorney General Demers.  “FBI’s vigilance stopped Ventria’s intellectual property from leaving our country in the nick of time, but it was Ventria’s cooperation that allowed us to hold Zhang accountable for his crimes.”

“Ventria invested years of research and tens of millions of dollars to create a new and beneficial product,” said U.S. Attorney McAllister. “It is vital that we protect such intellectual property from theft and exploitation by foreign interests. We all benefit when American companies continue to drive socially valuable advancements in food, medicine and technology.”

April 9, 2018 in AML | Permalink | Comments (0)

U.S. International Trade in Goods and Services February 2018

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods
and services deficit was $57.6 billion in February, up $0.9 billion from $56.7 billion in January,
Exports, Imports, and Balance (exhibit 1)
Goods and Services Trade Deficit
February exports were $204.4 billion, $3.5 billion more than January exports. February imports
were $262.0 billion, $4.4 billion more than January imports.

The February increase in the goods and services deficit reflected an increase in the goods deficit
of $0.3 billion to $77.0 billion and a decrease in the services surplus of $0.6 billion to $19.4

Year-to-date, the goods and services deficit increased $21.1 billion, or 22.7 percent, from the
same period in 2017. Exports increased $22.4 billion or 5.9 percent. Imports increased $43.6 billion
or 9.1 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit increased $2.2 billion to $56.1 billion for the three
months ending in February.
     * Average exports increased $1.4 billion to $203.0 billion in February.
     * Average imports increased $3.6 billion to $259.1 billion in February.

Year-over-year, the average goods and services deficit increased $10.1 billion from the three
months ending in February 2017.
     * Average exports increased $12.2 billion from February 2017.
     * Average imports increased $22.3 billion from February 2017.

Exports (exhibits 3, 6, and 7)

Exports of goods increased $3.0 billion to $137.2 billion in February.
  Exports of goods on a Census basis increased $3.1 billion.
     * Industrial supplies and materials increased $2.0 billion.
          o Nonmonetary gold increased $0.6 billion.
          o Crude oil increased $0.3 billion.
          o Natural gas increased $0.3 billion.
     * Automotive vehicles, parts, and engines increased $0.9 billion.
          o Passenger cars increased $0.7 billion.
     * Capital goods increased $0.7 billion.
          o Civilian aircraft increased $0.2 billion.
          o Drilling and oilfield equipment increased $0.2 billion.
     * Consumer goods decreased $0.8 billion.
          o Pharmaceutical preparations decreased $0.6 billion.
  Net balance of payments adjustments decreased $0.1 billion.

Exports of services increased $0.5 billion to $67.3 billion in February.
     * Transport increased $0.2 billion.
     * Travel (for all purposes including education) increased $0.1 billion.
     * Charges for the use of intellectual property increased $0.1 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods increased $3.3 billion to $214.2 billion in February.
  Imports of goods on a Census basis increased $3.5 billion.
     * Capital goods increased $1.8 billion.
          o Civilian aircraft increased $0.5 billion.
          o Materials-handling equipment increased $0.3 billion.
          o Computers increased $0.3 billion.
     * Industrial supplies and materials increased $0.8 billion.
          o Crude oil increased $0.7 billion.
     * Foods, feeds, and beverages increased $0.8 billion.
  Net balance of payments adjustments decreased $0.2 billion.

Imports of services increased $1.1 billion to $47.8 billion in February.
     * The largest increase was in charges for the use of intellectual property ($1.0 billion).
       The increase reflects payments for the rights to broadcast the 2018 Winter Olympic Games.
     * The largest decrease was in travel (for all purposes including education) ($0.2 billion).

Real Goods in 2009 Dollars – Census Basis (exhibit 11)

The real goods deficit decreased $0.9 billion to $69.1 billion in February.
     * Real exports of goods increased $2.5 billion to $129.4 billion.
     * Real imports of goods increased $1.7 billion to $198.5 billion.


Revisions to January exports
     * Exports of goods were revised down $0.1 billion.
     * Exports of services were revised up $0.1 billion.

Revisions to January imports
     * Imports of goods were revised up $0.1 billion.
     * Imports of services were revised down less than $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The February figures show surpluses, in billions of dollars, with South and Central America
($3.4), Hong Kong ($3.1), Brazil ($0.9), United Kingdom ($0.6), and Singapore ($0.5). Deficits
were recorded, in billions of dollars, with China ($34.7), European Union ($15.3), Germany ($6.7),
Mexico ($6.6), Japan ($6.0), Italy ($2.8), OPEC ($2.3), India ($1.9), Taiwan ($1.5), France ($1.4),
South Korea ($1.1), Saudi Arabia ($0.4), and Canada ($0.4).

     * The deficit with Mexico increased $1.0 billion to $6.6 billion in February. Exports decreased
       less than $0.1 billion to $21.9 billion and imports increased $0.9 billion to $28.5 billion.
     * The deficit with Germany increased $0.4 billion to $6.7 billion in February. Exports decreased
       $0.2 billion to $4.7 billion and imports increased $0.2 billion to $11.3 billion.
     * The deficit with Canada decreased $1.2 billion to $0.4 billion in February. Exports increased
       $1.2 billion to $26.1 billion and imports increased less than $0.1 billion to $26.4 billion.

April 9, 2018 in Economics | Permalink | Comments (0)