International Financial Law Prof Blog

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

Tuesday, May 22, 2018

inCEN Beneficial Ownership Requirements for Legal Entity Customers of Certain Financial Products and Services with Automatic Rollovers or Renewals

The Financial Crimes Enforcement Network (FinCEN) is issuing this ruling to provide a 90-day limited exceptive relief to covered financial institutions from the obligations of the Beneficial Ownership Requirements for Legal Entity Customers (31 CFR § 1010.230) (Beneficial Ownership Rule) with respect to certain financial products and services that automatically rollover or renew (i.e., certificate of deposit (CD) or loan accounts) and were established before the Beneficial Ownership Rule’s Applicability Date, May 11, 2018. This exception begins, retroactively, on May 11, 2018, and will expire on August 9, 2018. During this time, FinCEN will determine whether and to what extent additional exceptive relief may be appropriate for such financial products and services that were established before May 11, 2018, but are expected to rollover or renew after such date.

Consistent with the definition of “account” in the Customer Identification Program (CIP) rules and subsequent interagency guidance, each time a loan is renewed or a certificate of deposit is rolled over, the bank establishes another formal banking relationship and a new account is created. As clarified in the Customer Due Diligence Frequently Asked Questions (CDD FAQs) published on April 3, 2018, covered financial institutions are required to obtain information on the beneficial owners of a legal entity that opens a new account for each new formal banking relationship established, even if the legal entity is an existing customer. FinCEN understands that some covered institutions have not treated such rollovers or renewals as new accounts and have established automatic processes to continue the banking relationship with the customer.

These covered financial institutions have expressed concern regarding their ability to comply with the Beneficial Ownership Rule with respect to such accounts. FinCEN believes that further consideration of this issue is appropriate and is, therefore, granting this temporary exception with respect to collecting beneficial ownership on certain financial products and services (i.e., CD and loan accounts) that automatically rollover or renew and were established before the Beneficial Ownership Rule’s Applicability Date.

Download FinCEN Ruling CD and Loan Rollover Relief_FINAL 508

May 22, 2018 in AML | Permalink | Comments (0)

Sunday, May 20, 2018

Lindsay Columbo: How do we reconcile UBO due diligence and GDPR obligations?

excellent article in FCPA blog: ... a financial institution identifying and verifying UBO information of EU data subjects will need specifically identify and address its obligations as a data processor.

Under the GDPR, data processors must have a legal basis for processing the personal data, as well as explicit consent to process the data from the data subject. 

Read the FCPA blog here

May 20, 2018 in AML | Permalink | Comments (0)

Saturday, May 19, 2018

Rabobank NA Sentenced for Conspiring to Impair, Impede, and Obstruct Its Primary Regulator

Rabobank National Association (Rabobank), a Roseville, California subsidiary of the Netherlands-based Coöperatieve Rabobank U.A., was sentenced today by U.S. District Judge Jeffrey T. Miller of the Southern District of California for impairing, impeding and obstructing its primary regulator, the Department of the Treasury’s Office of the Comptroller of the Currency (the OCC), by concealing deficiencies in its anti-money laundering (AML) program and for obstructing the OCC’s examination of Rabobank.  Rabobank was sentenced to a two-year term of probation, and ordered to pay the statutory maximum fine of $500,000.  Additionally, as part of its guilty plea, Rabobank forfeited $368,701,259 to the United States as a result of allowing illicit funds to be processed through the bank. 

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Adam L. Braverman for the Southern District of California, Special Agent in Charge Dave Shaw of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in San Diego and Special Agent in Charge R. Damon Rowe of Internal Revenue Service Criminal Investigation (IRS-CI) Los Angeles Field Office made the announcement. 

“Rabobank’s branches on the Mexican border processed hundreds of millions of dollars in suspicious transactions likely tied to international narcotics trafficking, organized crime, and money laundering,” said Acting Assistant Attorney General Cronan.  “Instead of filing reports that would have alerted law enforcement to the suspicious activity, as required by law, the bank looked the other way and then compounded its misconduct by conspiring to cover-up its failures and deceiving its regulator.  Today’s sentence and the related forfeiture demonstrate that the Department of Justice will use all the tools at our disposal to combat drug trafficking and transnational crime—including prosecuting financial institutions that turn a blind eye to illicit proceeds moving through their customers’ accounts.” 

“The U.S. Attorney’s Office is intent on securing our border and preventing the laundering of narco-dollars through financial institutions like Rabobank,” said U.S. Attorney Braverman.  “In doing so we will safeguard our communities and protect our citizens from drug traffickers and corporate criminals alike.”

 “It is the responsibility of Homeland Security Investigations (HSI) to monitor and investigate illicit activity that exploits the global infrastructure, particularly in financial systems,” said HSI San Diego Special Agent in Charge, Dave Shaw.  “This complex investigation revealed, and Rabobank admits, that Rabobank was aware of the extreme risk involved in processing million dollar financial transactions linked to transnational crime and international money laundering – activity which plagues the southwest  border.  Today’s sentencing and the significant forfeitures in this case sends a strong message to financial institutions that illicit financial activity inside banking institutions will not be tolerated.”

“Rabobank’s sentencing today is a victory for all Americans and sends a strong message about the need for transparency in banking and ultimately contributes to the fight against money laundering,” said IRS-CI Special Agent in Charge Rowe. “IRS-Criminal Investigation works diligently with our law enforcement partners to ensure funds obtained through illegal means do not find their way into our financial institutions.”

On Feb. 7, Rabobank pleaded guilty to conspiracy to defraud the United States and to corruptly obstruct an examination of a financial institution.  Specifically, Rabobank admitted to conspiring with several former executives to defraud the United States by unlawfully impeding the OCC’s ability to regulate the bank and to obstruct the OCC’s 2012 examination of Rabobank’s Bank Secrecy Act (BSA)/AML compliance program.  In connection with that guilty plea, Rabobank admitted that between 2009 and 2012 it implemented BSA/AML policies and procedures that precluded and suppressed its investigations into potentially suspicious transactions near the U.S.-Mexico border, much of which was conducted by customers and through accounts that Rabobank had previously designated “High-Risk.” 

As a result of its BSA/AML failures, Rabobank admitted that certain customer accounts were involved in not less than $368,701,259 in suspicious transactions that were either unreported or untimely reported to the Financial Crimes Enforcement Network (FinCEN), as required by the BSA.  These transactions included high-volume cash deposits and withdrawals, check transactions, electronic transfers, and wire transfers that were consistent with illegal activity such as trade-based money laundering, bulk cash smuggling, structuring, and the black market peso exchange.

According to its statement of facts, Rabobank’s branches in Imperial County, California were heavily dependent on cash sourced from Mexico – cash the bank knew was likely tied to narcotics trafficking and organized crime.  In particular, Rabobank’s Calexico, California branch, located approximately two blocks from the U.S.-Mexico border, was the highest performing branch in the Imperial Valley region due to its receipt of cash from Mexico.  Rabobank continued soliciting cash-intensive customers from Mexico, while failing to employ appropriate BSA/AML policies and procedures to address the heightened risk, until approximately May 2013, when Rabobank placed a moratorium on originating new account relationships for Mexico-based businesses entities.

Rabobank also admitted that the bank, through at least three executives, knowingly obstructed the OCC’s 2012 examination by responding to the OCC’s February 2013 initial report of examination with false and misleading information about the state of Rabobank’s BSA/AML program and by making false and misleading statements to the OCC regarding the existence of reports developed by a third-party consultant that described the deficiencies and resulting ineffectiveness of Rabobank’s BSA/AML program.  In furtherance of the scheme to defraud the OCC, Rabobank also demoted or terminated two RNA employees who provided information to the OCC regarding Rabobank’s BSA/AML deficiencies. 

The investigation was conducted by HSI, IRS-CI, and the Financial Investigations and Border Crimes Task Force (the FIBC), a multiagency Task Force based in San Diego and Imperial Counties, and funded by the Treasury Executive Office of Asset Forfeiture (TEOAF).  The investigation occurred in parallel with regulatory investigations by the OCC, Office of General Counsel, and FinCEN, Enforcement Division.  The case is being prosecuted by Trial Attorneys Kevin G. Mosley and Maria K. Vento of the Criminal Division’s Money Laundering and Asset Recovery Section, Bank Integrity Unit, and Assistant U.S. Attorneys Daniel C. Silva, Mark W. Pletcher and David J. Rawls of the Southern District of California. 

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

Friday, May 18, 2018

Chairman of Macau Real Estate Development Company Sentenced to Prison for Role in Scheme to Bribe United Nations Ambassadors to Build A Multi-Billion Dollar Conference Center

The chairman of a real estate development company was sentenced to 48 months in prison and three years of supervised release for his role in a scheme to bribe United Nations ambassadors to obtain support to build a conference center in Macau that would host, among other events, the annual United Nations Global South-South Development Expo.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman of the Southern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office and Special Agent in Charge James D. Robnett of the IRS Criminal Investigation’s (IRS-CI) New York Field Office made the announcement.

Ng Lap Seng, aka “David Ng,” 69, of Macau, China, was sentenced by U.S. District Judge Vernon S. Broderick of the Southern District of New York.  In addition to his prison sentence, Judge  Broderick ordered Ng to pay a $1 million fine and $302, 977 in restitution to the United Nations.  He also ordered a forfeiture money judgment of $1.5 million in forfeiture. Ng must report to the U.S. Marshals Service by July 10 to start his prison sentence.  Ng was convicted on July 27, 2017, after a five-week trial of two counts of violating the Foreign Corrupt Practices Act, one count of paying bribes and gratuities, one count of money laundering and two counts of conspiracy.

“Corruption at any level of government undermines the rule of law and cannot be tolerated,” said Acting Assistant Attorney General Cronan. “But corruption is especially corrosive when it occurs at an international body like the United Nations.  By paying bribes to two U.N. ambassadors to advance his interest in obtaining formal support for the Macau conference center project, Ng Lap Seng tried to manipulate the functions of the United Nations.  The sentence handed down today demonstrates that those who engage in corruption will pay a heavy price and serves as a reminder that no one stands above the law.”

“Billionaire Ng Lap Seng corrupted the highest levels of the United Nations in pursuit of a multibillion-dollar real estate deal in Macau,” said U.S. Attorney Berman. “Ng exploited a center for international diplomacy as an instrument for his greedy intentions.  This Office is committed to policing official corruption wherever it may be found.”

“Gaining the upper hand in a business venture by engaging in corrupt practices is bribery in its purest form. Today, Ng Lap Seng has learned the price he will have to pay for his actions,” said Assistant Director in Charge Sweeney. “I commend the investigators and prosecutors who continue to work together at home and abroad to vigorously enforce the law within the confines of the Foreign Corrupt Practices Act.”

“No matter if money is funneled through New York corporations or transferred offshore, IRS-CI is always ready to follow the money,” said IRS-CI Special Agent-in-Charge Robnett. “Today’s sentencing shows that IRS-CI is committed to rooting out public corruption by investigating individuals who misuse their positions of public trust for personal financial gain.”

According to the evidence presented at trial, Ng, the chairman of the Sun Kian Ip Group, conspired with and paid bribes to Francis Lorenzo, a former UN Ambassador from the Dominican Republic, and John W. Ashe, the late former Permanent Representative of Antigua and Barbuda to the UN and the 68th President of the UN General Assembly (UNGA).  With the assistance of Jeff C. Yin, an accountant and co-conspirator who worked with Ng and others and previously pleaded guilty to conspiring to defraud the United States, Ng orchestrated a scheme with the principal objective of obtaining the formal support of the UN for a multi-billion dollar facility that Ng hoped to build in Macau using the Sun Kian Ip Group (the “Macau Conference Center”).  Ng wanted the Macau Conference Center to serve as a location for meetings, discussions, forums, and other events associated with the UN.  In particular, he wanted it to serve as the permanent home of the annual “Global South-South Development Expo,” which is run by the UN Office for South-South Cooperation, and is hosted in a different country or city every year.

The trial evidence showed that Ng bribed Ambassador Ashe and Ambassador Lorenzo (together, the “Ambassadors”) in exchange for their agreement to use their official positions to advance Ng’s interest in obtaining formal UN support for the Macau Conference Center.  As the evidence demonstrated at trial, Ng paid the Ambassadors in a variety of forms.  For example, Ng appointed Ambassador Lorenzo as the President of South-South News, a New York-based organization — funded by Ng — which described itself as a media platform dedicated to advancing the implementation of the UN’s Millennium Development Goals, a set of philanthropic goals.  Ng provided bribe payments to Ambassador Lorenzo through South-South News by transmitting payments from Macau to a company in the Dominican Republic affiliated with Ambassador Lorenzo’s brother (the “Dominican Company”).  Through South-South News, Ng also made payments to Ambassador Ashe, including to Ambassador Ashe’s wife, who was paid in her capacity as a “consultant” to South-South News, and to an account that Ambassador Ashe had established, purportedly to raise money for his role as President of UNGA. 

According to the trial evidence, one of the actions that the Ambassadors took in exchange for bribe payments, to advance Ng’s objectives, was to submit an official document to the then-UN Secretary-General in support of the Macau Conference Center (the “UN Document”).  The UN Document claimed that there was a need to build the Macau Conference Center to support the UN’s global development goals.  Ambassador Ashe, aided by Ambassador Lorenzo, initially submitted the UN Document to the UNGA in or about late February 2012.  More than a year later, at Ng’s behest, the Ambassadors revised the UN Document to refer specifically to Ng’s company, the Macau Real Estate Development Company, as a partner in the Macau Conference Center project.  The UN Document requested that the Secretary-General circulate the UN Document “as a document of the 66th session of the General Assembly,” under a specific item of the official UNGA agenda.  The Secretary-General followed this request, thereby making the UN Document an official part of the UNGA record. 

Five other defendants have been charged in this matter.  Lorenzo and Heidi Hong Piao pleaded guilty to various charges, including bribery, and are awaiting sentencing.  Jeff C. Yin pleaded guilty to conspiracy to defraud the United States and was sentenced to seven months in prison.  Shiwei Yan pleaded guilty to bribery and was sentenced to 20 months in prison.  Co-defendant Ashe passed away in 2016 and the charges against him were dismissed. 

This case was investigated by the FBI and IRS-CI.  The Criminal Division’s Office of International Affairs provided significant assistance.  Assistant Chief David A. Last of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Daniel C. Richenthal, Janis M. Echenberg, and Douglas S. Zolkind of the Southern District of New York are prosecuting the case.  

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

Thursday, May 17, 2018

FCA and PRA jointly fine Barclay's Bank CEO James Staley £642,430 and announce special requirements regarding whistleblowing systems and controls

The Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) have together fined Mr James Staley, Chief Executive of Barclays Group (Barclays), a total of £642,430. Mr Staley failed to act with due skill, care and diligence in the way he acted in response to an anonymous letter received by Barclays in June 2016.

Barclays is also now subject to special requirements by which it must report annually to the regulators detailing how it handles whistleblowing, with personal attestations required from those Senior Managers responsible for the relevant systems and controls.

Mark Steward, FCA Executive Director of Enforcement and Market Oversight, said:

“Given the crucial role of the Chief Executive, the standard of due skill, care and diligence is more demanding than for other employees.

“Mr Staley breached the standard of care required and expected of a Chief Executive in a way that risked undermining confidence in Barclays’ whistleblowing procedures. Chief Executives must act with a high degree of care and prudence at all times. Whistleblowers play a vital role in exposing poor practice and misconduct in the financial services sector. It is critical that individuals are able to speak up anonymously and without fear of retaliation if they want to raise concerns.”

Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA, said:

“Protection for whistleblowers is an essential part of keeping the financial system safe and sound. Mr Staley’s behaviour fell below the standard we require, resulting in today’s fine and public censure. In addition, Barclays is now subject to special requirements to report to the PRA and FCA how it handles its whistleblowing cases in the coming years.”

Mr Staley attempted to identify the author of an anonymous letter received by Barclays in June 2016 that claimed to be from a Barclays shareholder. The letter contained various allegations, some of which concerned Mr Staley. Given his conflict Mr Staley should have maintained an appropriate distance; he should not have taken steps to identify the author. Mr Staley should have explicitly consulted fully with those with expertise and responsibility for whistleblowing in Barclays and sought express confirmation from them that what he wanted to do was permissible. He failed to do this.

The investigation found this to be a breach of the requirement to act with due skill, care and diligence (Individual Conduct Rule 2) but not a breach of the requirement to act with integrity (Individual Conduct Rule 1). As CEO, Mr Staley should have identified that:

  • He had a conflict of interest in relation to the letter, and needed to take particular care to maintain an appropriate distance from Group Compliance’s investigation.
  • There was a risk he would not be able to exercise impartial judgement in relation to how Barclays should respond.
  • Once the complaint was in the hands of the Group Compliance team, it was important that Group Compliance retained control over its investigation process.

This is the first case brought by the FCA and PRA under the Senior Managers Regime. The investigation found that Mr Staley made serious errors of judgement. While he made no personal gain in this instance, both regulators viewed his misconduct as sufficiently serious for each to impose a penalty of 10% of Mr Staley’s relevant annual income. Taking into account that he has settled at an early stage, Mr Staley has been fined a combined sum of £642,430. The FCA and PRA consider this to be appropriate and proportionate given the seniority of Mr Staley and the potential impact of the breach. In addition Mr Staley is censured by the publication of the regulators’ Final Notices.

Barclays

In light of Mr Staley’s actions above, the FCA and PRA have some concerns about the Firm’s whistleblowing systems and controls, and have concluded that these require enhanced monitoring and scrutiny. Barclays is, therefore, now subject to requirements by which it must report annually to the FCA and PRA, including any whistleblowing cases involving allegations made against its Senior Managers and any cases where Barclays has sought to identify any anonymous whistleblowers. Barclays’ Whistleblowers’ Champions, who are approved by the FCA and PRA under the Senior Managers Regime, will have to attest personally to the soundness of its whistleblowing systems and controls on an annual basis. These measures, which apply to all cases until the end of 2020, are the first of their kind applied to a regulated firm in relation to whistleblowing. Barclays agreed to the requirements. They are published today by the FCA and PRA.

Notes to editors

  1. Mr Staley has been fined according to the FCA and PRA penalty regimes which each have five steps to calculate the level of the fines imposed. The detailed calculations are set out in both the PRA and FCA Final Notices. Mr Staley agreed to settle at an early stage of the regulators’ investigation and therefore qualified for a 30% reduction in the overall fine. Without this discount, the combined fine imposed by the FCA and PRA would have been £917,800. 

  2. The relevant events occurred during the period when Barclays’ whistleblowing policy applied only to employees. It was not until 7 September 2016 that the FCA and the PRA introduced new rules requiring firms to provide whistleblowing protections for ‘reportable concerns’ raised by ‘any person’ (i.e. not just workers). These rules require that firms have ‘appropriate and effective whistleblowing arrangements in place’; this includes requiring that all employees have appropriate training in relation to whistleblowing processes.

  3. Final Notice: Mr James Edward Staley

  4. Voluntary Application for Imposition of Requirements: Barclays Bank UK plc

  5. Voluntary Application for Imposition of Requirements: Barclays Bank plc

  6. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).

  7. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  8. Find out more information about the FCA.

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

Wednesday, May 16, 2018

Money laundering and terrorist financing: EU Adopts new rules

On 14 May 2018, the Council adopted a directive strengthening EU rules to prevent money laundering and terrorist financing.

The directive sets out to close down criminal finance without hindering the normal functioning of payment systems. Amending directive 2015/849, it is part of an action plan launched after a spate of terrorist attacks in Europe in 2016.

"These new rules respond to the need for increased security in Europe by further removing the means available to terrorists", said Vladislav Goranov, minister for finance of Bulgaria, which currently holds the Council presidency. "They will enable us to disrupt criminal networks without compromising fundamental rights and economic freedoms."

The directive was adopted at a meeting of the General Affairs Council, without discussion. This follows an agreement with the European Parliament reached in December 2017. The Parliament approved the agreed text on 19 April 2018.

The main changes to directive 2015/849 involve:

  • broadening access to information on beneficial ownership, improving transparency in the ownership of companies and trusts;
  •  addressing risks linked to prepaid cards and virtual currencies;
  • cooperation between financial intelligence units;
  • improved checks on transactions involving high-risk third countries.

May 16, 2018 in AML | Permalink | Comments (0)

Tuesday, May 15, 2018

South Texas Doctor Charged with $240 Million Health Care Fraud and International Money Laundering Scheme

A physician based in the McAllen, Texas area was charged in an indictment unsealed today for his role in a $240 million health care fraud and international money laundering scheme.  Download Zamora-Quezada Indictment

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Ryan J. Patrick of the Southern District of Texas, Special Agent in Charge C.J. Porter of the U.S. Department of Health and Human Services Office of Inspector General’s (HHS-OIG) Dallas Region and Special Agent in Charge Christopher Combs of the FBI’s San Antonio Field Office made the announcement. 

Jorge Zamora-Quezada, 61, of Mission, Texas, was charged in a seven-count indictment filed in the Southern District of Texas.  He was charged with one count of conspiracy to commit health care fraud, five counts of health care fraud and one count of conspiracy to commit money laundering.  Zamora-Quezada had his initial court appearance earlier today. His detention hearing is tomorrow, May 15, at 2 p.m. CDT before U.S. Magistrate Judge Peter E. Ormsby in the McAllen Division of the Southern District of Texas.

“Jorge Zamora-Quezada allegedly orchestrated a massive fraud scheme that jeopardized the health and wellbeing of innocent children, elderly, and disabled victims,” said Acting Assistant Attorney General Cronan.  “The allegations that Zamora-Quezada violated his oath to do no harm by administering unnecessary chemotherapy and other toxic medications to patients with serious diseases — including some of the most vulnerable victims imaginable — are almost beyond comprehension.  The Criminal Division is committed to combatting health care fraud and protecting victims of reprehensible schemes like the one alleged in this case.”

“We take allegations of this nature very seriously,” said U.S. Attorney Patrick.  “The prosecution of health care fraud is a high priority for the Southern District of Texas, especially when we suspect vulnerable patients have been allegedly exploited, misdiagnosed or possibly given potentially harmful medications as a means of committing that fraud.”

“Today’s indictment is the first step in holding Dr. Zamora-Quezada accountable for his allegedly egregious criminal conduct,” said HHS-OIG Special Agent in Charge Porter.  “His patients trusted him and presumed his integrity; in return he allegedly engaged in a scheme of false diagnoses and bogus courses of treatment, and doled out prescriptions for unnecessary and harmful medications, all for his personal financial gain and with no regard for patient well-being.  HHS-OIG will always pursue criminals masquerading as legitimate physicians, weed them out, and seek the harshest possible punishment, particularly when patient harm is a factor.” 

“The FBI is dedicated to working with our task force partners to address health care fraud, which is a growing and serious crime that impacts every city and small town in the nation,” said FBI Special Agent in Charge Combs.  “This investigation highlights an even greater concern presented by health care fraud than the significant financial losses—the physical and emotional harm suffered by the patients and their families.  It is why we at the FBI, together with our task force partners, are dedicated to seeking justice for the victims of Dr. Zamora-Quezada’s alleged crimes.”

 As set forth in the indictment, from 2000 through the filing of the indictment, Zamora-Quezada and his co-conspirators falsely diagnosed vulnerable patients -- including the young, elderly and disabled, from the Rio Grande Valley, San Antonio, and elsewhere -- with various degenerative diseases, including rheumatoid arthritis.  He and his co-conspirators then administered chemotherapy and other toxic medications to the patients based on that false diagnosis.  In addition to falsely diagnosing patients, Zamora-Quezada and his co-conspirators allegedly conducted a battery of fraudulent, repetitive, and excessive medical procedures on patients in order to increase revenue and fund Zamora-Quezada’s lavish and opulent lifestyle.

The indictment alleges that Zamora-Quezada and his co-conspirators flew in Zamora-Quezada’s million-dollar private jet or drove in his Maserati, which were both emblazoned with his initials, “ZQ,” between his offices in the Rio Grande Valley and San Antonio in order to perpetuate the fraud.  He and his co-conspirators transferred the proceeds derived from the conspiracy to purchase private jets, luxury vehicles, clothing from high-end retailers such as Louis Vuitton, and exclusive real estate located throughout the United States and Mexico.  He and his co-conspirators allegedly obstructed investigations by causing the creation of false and fictitious patient records, and concealed thousands of medical records from Medicare by stashing them in an unsecured and dilapidated barn located in the Rio Grande Valley.

The indictment also alleges that Zamora-Quezada and his co-conspirators laundered the proceeds of their fraud scheme by dissipating, transforming and concealing the source and location of the fraud proceeds by investing such proceeds in commercial and residential real estate in the United States and Mexico.  Among other properties, he and his co-conspirators acquired two penthouses in Puerto Vallarta, Mexico; a condominium in Aspen, Colorado; a condominium in Punta Mita, Mexico; and multiple homes and commercial properties located throughout Texas.  He then created the false appearance of legitimate wealth and income by renting the various commercial and residential properties that he acquired to individuals and entities.  Zamora-Quezada and his co-conspirators allegedly laundered the proceeds through a casa de cambio, or money exchange house, to various accounts maintained by financial institutions in Mexico. 

The indictment seeks the forfeiture of Zamora-Quezada’s personal jet, Maserati and multiple residential and commercial properties in the United States and Mexico.

An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The case is being investigated by the HHS-OIG’s McAllen Field Office, the FBI’s San Antonio Division-McAllen Resident Agency’s Rio Grande Valley Health Care Fraud Task Force and the McAllen Complex Financial Crimes Task Force. These task forces are comprised of investigators from Texas Department of Insurance, McAllen Police Department, Pharr Police Department and the Texas Health and Human Service Commission.  Trial Attorney Kevin Lowell of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Andrew Swartz of the Southern District of Texas are prosecuting the case.

The FBI is seeking to identify potential victims of Zamora-Quezada and his co-conspirators.  If you were a patient of Zamora-Quezada from January 2000 through May 2018 and believe you may have been affected by his or his co-conspirators alleged crimes, please contact the FBI via the FBI victim’s hotline, 1-833-432-4873, Option 8, or if you have access to email you may email the taskforce at ZamoraPatient@fbi.gov. The FBI is legally mandated to identify victims of federal crimes that it investigates and provide these victims with information, assistance services, and resources.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  The Medicare Fraud Strike Force operates in nine locations nationwide.  Since its inception in March 2007, the Medicare Fraud Strike Force has charged over 3,500 defendants who collectively have falsely billed the Medicare program for over $12.5 billion. 

May 15, 2018 in AML | Permalink | Comments (0)

Sunday, May 13, 2018

BVI Finance Remains Optimistic about the Future of its Industry Read more at: http://bvifinance.vg/language/en-GB/News-Resources/ArticleID/1976/BVI-Finance-Remains-Optimistic-about-the-Future-of-its-Industry To learn more about the British Virgin Islands'

Following the decision by the UK’s House of Commons to force the Overseas Territories to adopt public registers of beneficial ownership of companies, the Premier of the British Virgin Islands responded swiftly to reassure the financial sector and those who use its services around the world. The Sanctions and Anti-Money Laundering Bill now requires the UK’s Secretary of State to prepare a draft Order in Council by 31 December 2020 in the event the Overseas Territories, including the BVI, have not adopted public registers.  

The Premier Dr D Orlando Smith OBE stated: “As a constitutional democracy, the BVI believes in the rule of the law. According to the rule of law and our constitution, the fundamental rights of privacy of all citizens and corporate entities will be protected and upheld”.   BVI Finance welcomes this statement.   The Territory has been at the forefront of global transparency initiatives by creating an innovative digital platform, the Beneficial Ownership Secure Search System.   The information accessed through the system is verified for accuracy by regulated corporate service providers and available to the British authorities within as little as an hour of a valid request being made.  

Like the British Virgin Islands Government, BVI Finance is strongly of the view that a verified private register is a far more robust and effective approach to ensure transparency than an unverified public register.  Despite events in the UK, there will be no changes in the foreseeable future and over the next two years, BVI Finance will continue to engage with relevant stakeholders and work closely with the British Virgin Islands Government as it examines all possible remedies to ensure that the BVI continues to play a leading role in the global financial services industry.

Lorna Smith, OBE, Interim Executive Director of BVI Finance said: “The world will continue to need high quality international financial services and the British Virgin Islands will continue to play a leading role in meeting the needs of our clients. We look forward to taking our message to the world starting with the STEP Caribbean Conference this weekend and into Asia with our major roadshow in June”.  

Read more at: http://bvifinance.vg/language/en-GB/News-Resources/ArticleID/1976/BVI-Finance-Remains-Optimistic-about-the-Future-of-its-Industry

May 13, 2018 in AML | Permalink | Comments (0)

Saturday, May 12, 2018

Former Military Sealift Command Contractor Sentenced to 87 Months for Bribery and Fraud

A former contractor at the Military Sealift Command was sentenced to 87 months for his role in a bribery and fraud conspiracy through which he received nearly $3 million in bribes from approximately 1999 to approximately 2014. 

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division; Acting United States Attorney Tracy Doherty-McCormick for the Eastern District of Virginia; Special Agent in Charge Martin Culbreth of the FBI’s Norfolk Field Office; Special Agent in Charge Robert E. Craig, Jr. of the Defense Criminal Investigative Service (DCIS) Mid-Atlantic Field Office and Special Agent in Charge Clifton J. Everton, III of the Naval Criminal Investigative Service (NCIS)’s Norfolk Field Office, made the announcement.

Scott B. Miserendino, Sr., 59, formerly of Stafford, Virginia, pled guilty on January 24, 2018, to one count of conspiracy to commit bribery and honest services mail fraud, one count of bribery, and three counts of honest services mail fraud.  

Miserendino was a government contractor at MSC, an entity of the U.S. Department of the Navy that provides support and specialized services to the Navy and other U.S. military forces.  According to the plea agreement, Miserendino and Joseph P. Allen, the owner of a government contracting company, conspired to use Miserendino’s position at MSC to enrich themselves through bribery. 

Specifically, beginning in or around 1999, Miserendino used his position and influence at MSC to help Allen and his company obtain and expand a commission agreement with a telecommunications company that sold maritime satellite services to MSC.  With that agreement in place, for more than a decade, Miserendino used his influence at MSC to take official acts to benefit the telecommunications company, which, through the commission agreement, also benefited Allen and his company. 

Unknown to MSC or the telecommunications company, Allen then paid half of the commission payments from the telecommunications company to Miserendino as bribes.  In total, between approximately 1999 and approximately 2014, Allen received more than $6 million from the telecommunications company, and in turn paid more than $2.8 million to Miserendino in bribes.

For his role in the scheme, Allen, 57, formerly of Panama City, Florida, pleaded guilty to one count of conspiracy to commit bribery in April 2017, and was sentenced on July 28, 2017, to five years in prison by U.S. District Judge Arenda L. Wright Allen, in Norfolk.

The FBI, DCIS, and NCIS are investigating the case.  Trial Attorneys Sean Mulryne and Molly Gaston of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Steve Haynie for the Eastern District of Virginia are prosecuting the case.

May 12, 2018 in AML | Permalink | Comments (0)

Friday, May 11, 2018

Conference on the Foreign Corrupt Practices Act

I did not intend to deliver two speeches about white collar crime today. When I received the invitations a few months ago, I hoped to delegate one of them to a Senate-confirmed Assistant Attorney General for the Justice Department’s Criminal Division.

The President nominated a highly qualified lawyer named Brian Benczkowski to serve in that position almost one year ago. But Brian is still awaiting a confirmation vote, as are Jeffrey Clark, our nominee for the Environment and Natural Resources Division; Eric Dreiband for the Civil Rights Division; and Jody Hunt for the Civil Division.

Each nominee meets or exceeds the qualifications normally required for those important jobs. President Trump deserves great credit for nominating champions of the rule of law to serve in the Department of Justice. But one year later, too many of them are still waiting in the wings.

There are seven litigating components in Main Justice. Only two of them have Senate-confirmed nominees.

When the founders drafted the Constitution in 1787, this is probably not what they had in mind.

It used to take only a few days to secure the Senate’s advice and consent for presidential nominations.

Fortunately, we assembled a superb team to serve as acting leaders of the Justice Department’s key components, and we will keep moving forward.

My first litigation job was with the Public Integrity Section of the Justice Department’s Criminal Division. Public corruption offenses involving federal, state, and local government officials differ from bribery and other offenses under the Foreign Corrupt Practices Act. But they are similar in how they erode public trust in government and stifle competition, efficiency, and innovation. 

Capital markets operate only because of rules and regulations promulgated and enforced by lawyers and government officials.

In Shakespeare’s play about Henry VI, a character named Dick the Butcher proclaims: “The first thing we do, let’s kill all the lawyers.” 

Some people mistakenly assume that Shakespeare was poking fun at lawyers. But Dick the butcher is not a businessman upset about overregulation. He is a villain scheming to take over the government.

Shakespeare’s point is that without lawyers, nobody would need to follow the law.

That would be good for criminals. But it would be very bad for business!

The rule of law is essential to commerce. It allows people to enter contracts, make investments and project revenue with some assurance about the future. It establishes a mechanism to resolve disputes, and it provides a degree of protection from arbitrary government action.

Foreign Corrupt Practices Act enforcement focuses on the global marketplace, because the world is interconnected. Economic problems in distant places affect American businesses and financial markets. So too does foreign corruption.

Foreigners who avail themselves of the American marketplace need to abide by our rules and standards. And our citizens, whether doing business here or overseas, remain accountable to the statutes and regulations of this great and prosperous nation. 

Paying bribes to government officials is destructive because it impels leaders to advance their personal interests instead of the interests of their citizens.

Thomas Jefferson famously stated: "On matters of style, swim with the current. On matters of principle, stand like a rock." We must always stand for the principle that government exists to serve the interests of the citizens.

Before the FCPA was enacted in 1977, paying bribes was viewed as an ordinary aspect of doing business overseas. Some businesses believed that prohibiting corrupt payments would put them at a competitive disadvantage.  But Congress passed the FCPA with bipartisan support, and the marketplace adapted to America’s effort to establish and enforce anti-bribery laws.

The Organization for Economic Co-operation and Development (OECD) adopted an Anti-Bribery Convention in 1997.  The Convention established legally binding standards to prohibit bribery of public officials in international business transactions. Forty-three countries are now signatories to the Anti-Bribery Convention.

The United States was one of the first. Our leadership through the years encouraged other major world powers to commit to doing business with integrity.

Last November, the Department co-hosted a conference with the Securities and Exchange Commission and the OECD. The conference focused on strengthening international anti-bribery initiatives and improving coordination across borders. 

Federal prosecutors and investigators recently secured a number of convictions and other resolutions against companies and individuals in major FCPA-related cases. The FCPA Unit has announced eight guilty pleas since the start of 2018 alone. Our FCPA Unit Chief, Dan Kahn, is hard at work, along with the excellent Assistant U.S. Attorneys from the Eastern and Southern Districts of New York who participated in this conference.

We also benefit from the exceptional assistance of the Securities and Exchange Commission and other federal agencies, as well as law enforcement partners around the world. 

The Department works closely with counterparts in the United Kingdom, France, Germany, Switzerland, the Netherlands, Brazil, and many other nations. 

Last December, we announced the first coordinated resolution with enforcement authorities in Singapore. That investigation secured a $400 million corporate resolution involving a deferred prosecution agreement, a related guilty plea by a subsidiary, and a guilty plea by an individual executive.

Corruption is often a tool for companies that are unable to keep up with competitors through innovation, quality, and efficiency. When we speak of leveling the playing field for businesses, we mean leveling up to higher standards, not down.

Law enforcement efforts are most effective when we build bridges with law-abiding members of the business community.

One of America's best crime-fighting weapons is the ingenuity and integrity of its people. Good corporate citizens play a critical role in upholding the rule of law.

So the Department should reward companies that try in good faith to deter crime. That means developing corporate compliance programs that help to prevent problems in the first instance, and that detect problems early and stop them from spreading. It also means investigating misconduct, voluntarily reporting it, cooperating fully in investigations, and implementing appropriate remedies.

When I started my first supervisory job in 2001, one of the most popular management books was “Who Moved My Cheese?”  If you are about my age, you probably are familiar with it.  It is a fable about how to manage change.

The story involves two men who live in a maze.  There is a place in the maze where they can always find cheese, which represents success.

But one day, the cheese stops showing up in the usual spot.  In the face of this new challenge, one man decides to adapt. He ventures through the maze looking for more cheese.  The other man sticks with his old routine and refuses to change.  

The adaptable man realizes that the cheese is always moving.  He constantly monitors his cheese supply and explores the maze to prevent complacency from setting in.

The complacent man goes hungry.

That simple lesson is a reminder about the need to evolve to meet changing circumstances.

The Department announced our FCPA Corporate Enforcement Policy last November, with the aim of encouraging responsible corporate behavior. The policy authorizes benefits to companies that meet rigorous requirements of disclosure, cooperation, and remediation, including disgorgement of ill-gotten gains.

The Corporate Enforcement Policy is not an offer of immunity, and it contains no guarantees, but it provides companies with greater predictability to inform their decision-making.

For example, we instituted a new “presumption” in favor of a declination for eligible companies that satisfy relevant standards.

In addition, we incorporated the policy into the U.S. Attorneys’ Manual, the central resource manual for Department policies. The manual does not create a private right of action and is not enforceable in court. I need to be careful to emphasize that point in a room filled with defense lawyers!

For many decades, former Deputy Attorneys General have lived on through corporate fraud memoranda bearing their names. We followed the Holder Memo, the Thompson Memo, the Filip Memo and the Yates Memo, to name a few. One of my goals in taking this job was to make sure there would be no Rosenstein memo!

It is difficult to keep track of all the memos, particularly for busy prosecutors. By incorporating the FCPA Corporate Enforcement Policy in our manual, we make it clear that the policy extends to prosecutors beyond the Fraud Section, we make it more accessible to employees, we provide greater transparency for stakeholders, and we promote greater consistency in FCPA investigations around the country.

We are applying a similar approach to Department policies and memos across the board. The U.S. Attorneys’ Manual was designed to be a quick and ready source of internal Department policies and procedures for our 115,000 personnel, but its utility diminished over the years as it became bloated with unnecessary rhetoric in some areas and failed to keep up with new policies in other areas.

As part of the effort to consolidate and streamline our policies, we initiated a comprehensive review and update to the manual, for the first time in at least 20 years. We are reviewing the entire manual, a total of approximately 11,000 pages. Our goals are to identify redundancies, clarify ambiguities, eliminate surplusage, and incorporate constructive additions.

I hope these efforts will encourage future Department leaders to write fewer memos, and instead to put policy changes directly into the manual.

The manual helps to guide our exercise of prosecutorial discretion. That is important because the rule of law is about applying neutral principles and basing our decisions on the truth.

Two weeks ago, we announced the first corporate declination under our new FCPA Policy. The company engaged in responsible corporate conduct after discovering of a violation and satisfied the rigorous requirements of the policy. The Department gave the company credit for its disgorgement as part of a $9 million payment in a related SEC administrative proceeding.

So I hope you will advise your clients to work more closely with the Department when FCPA issues arise.  It is the right thing to do, and it makes strategic sense. 

One of the things companies worry about is the risk of facing multiple enforcement actions for the same conduct. It is important for us to be aggressive in pursuing wrongdoers, but we should discourage disproportionate enforcement of corruption laws by multiple authorities. In football, the term “piling on” refers to a player jumping on a pile of other players after the opponent is already tackled.

"Piling on” is the subject of a new Department policy that we are announcing today. The policy instructs Department components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company for the same conduct.

In highly regulated industries, a company may be accountable to multiple regulatory bodies. That creates a risk of repeated punishment that goes beyond what is necessary to rectify the harm and deter future violations.

Business operations regularly span jurisdictions and borders. Whistleblowers routinely report allegations to multiple enforcement authorities, which may investigate the claims jointly or through their own separate and independent proceedings.

By working with agencies such as the SEC, CFTC, Federal Reserve, FDIC, OCC, and OFAC, our Department is better able to detect sophisticated financial fraud schemes and deploy adequate penalties and remedies.

The Department also works closely with many foreign partners to uncover and redress violations that occur overseas.

But the rule of law compels us to ensure that corporate resolutions that flow from parallel or joint investigations into the same conduct are reasonable and proportionate to that conduct. 

"Piling on” can deprive a company of the benefits of certainty and finality ordinarily available through a full and final settlement. We need to consider the impact on innocent employees, customers, and investors who seek to resolve problems and move on. We need to think about whether it would be preferable to address a new scheme instead of devoting additional enforcement resources to an old violation.

Our new policy is directed internally at Department personnel. It provides no private right of action and is not enforceable in court, but it will be incorporated into the U.S. Attorneys’ Manual and will guide our decisions.

This is another step towards greater transparency and consistency in corporate enforcement. In our fight against white collar crime and corporate wrongdoing, we want companies and their counsel to promptly report suspected crimes, and we want them to expeditiously negotiate reasonable resolutions.

There are four core features of the new policy.

First, the policy reaffirms that the federal government’s criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime. Department attorneys may not invoke the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. 

That is not a policy change. It is a reminder of and commitment by the Department to principles of fairness and the rule of law. 

Second, the policy addresses situations in which Department attorneys in different components and offices may be seeking to resolve a corporate case based on the same misconduct.

The new policy directs Department components to coordinate with one another, and achieve an overall equitable result. The coordination may include crediting and apportionment of financial fines, forfeitures, and penalties, and other means of avoiding disproportionate punishment.

Third, the policy encourages Department attorneys, when possible, to coordinate with other federal, state, local, or foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.

The Department’s cooperation with agency and enforcement partners here and abroad is stronger than ever. Together, we are rooting out sophisticated financial schemes and sharing investigative techniques.

Finally, the new policy sets forth some factors that Department attorneys may evaluate in determining whether multiple penalties serve the interests of justice in a particular case.

Sometimes, penalties that may seem duplicative really are essential to achieve justice and protect the public. In those cases, we will not hesitate to pursue complete remedies, and to assist our law enforcement partners in doing the same.

Factors identified in the policy that may guide this determination include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Department.

Cooperating with a different agency or a foreign government is not a substitute for cooperating with the Department of Justice. And we will not look kindly on companies that come to us after making inadequate disclosures to secure lenient penalties with other agencies or foreign governments. In those instances, the Department will act without hesitation to fully vindicate the interests of the United States.

The Department’s ability to coordinate outcomes in joint and parallel proceedings is also constrained by more practical concerns.  The timing of other agency actions, limits on information sharing across borders, and diplomatic relations between countries are just a few issues we confront that do not always lend themselves to easy solutions. 

But all of our Department components should seek to coordinate with domestic and foreign authorities, when consistent with their enforcement mission.

In order to promote consistency, we established a new Working Group on Corporate Enforcement and Accountability within the Justice Department. The working group includes Department leaders and senior officials from the FBI, the Criminal Division, the Civil Division, other litigating divisions involved in significant corporate investigations, and the U.S. Attorney’s Offices.

The working group will make internal recommendations about white collar crime, corporate compliance, and related issues.

We look forward to collaborating with other agencies in implementation efforts. And we welcome input from stakeholders who share our commitment to uphold the rule of law.

Most American companies are serious about engaging in lawful business practices.  They want to do the right thing. They need and deserve our support to help protect them from criminals who seek unfair advantages.

Corporate America should regard law enforcement as an ally.  In turn, the government should provide incentives for companies to engage in ethical corporate behavior and to assist in federal investigations. 

That is the best way to deter crime and maintain the rule of law.

Companies can help protect themselves by using caution when choosing business associates and by ensuring appropriate oversight of their activities.

An ancient proverb counsels that if you want to know a person’s character, you should consider his friends.

My advice to corporate officers is to make sure that you can stand proudly with the company you keep.  If you and your associates respect the law, the Department of Justice will stand with you.

And may we always follow Thomas Jefferson’s advice to stand like a rock on matters of principle.

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

Thursday, May 10, 2018

Deputy Attorney General Rod Rosenstein Delivers Remarks to the New York City Bar White Collar Crime Institute

After I speak with you this morning, I need to head across Times Square to participate in the annual conference about the Foreign Corrupt Practices Act.

I did not intend to deliver two speeches about white collar crime today. When I received the invitations a few months ago, I hoped to delegate one of them to a Senate-confirmed Assistant Attorney General for the Justice Department’s Criminal Division.

The President nominated a highly qualified lawyer named Brian Benczkowski to serve in that position almost one year ago. But Brian is still awaiting a confirmation vote, as are Jeffrey Clark, our nominee for the Environmental Division; Eric Dreiband for the Civil Rights Division; and Jody Hunt for the Civil Division.

Each nominee meets or exceeds the qualifications normally required for those important jobs. President Trump deserves great credit for nominating champions of the rule of law to serve in the Department of Justice.

There are seven litigating components in Main Justice. Only two of them have Senate-confirmed leaders.

When the founders drafted the Constitution in 1787, this is probably not what they had in mind.

It used to take only a few days to secure the Senate’s advice and consent for presidential nominations.

Fortunately, under the leadership of Attorney General Jeff Sessions, we assembled a superb team to serve as acting heads of the Justice Department’s key components, and we will keep moving forward.

We are aggressively pursuing the crimes that pose imminent danger to the American people. They include terrorism, gang violence, drug trafficking, child exploitation, elder abuse and human smuggling.

Fortunately, we have sufficient resources to enhance our commitment to our new enforcement priorities without detracting from our commitment to prosecute other violations, including white collar crime.

White collar crime undermines the rule of law, defrauds victims, and disrupts the marketplace.  Our goal is to deter crime, and we can only do that by holding accountable the perpetrators who cheat in an effort to gain a competitive advantage.

Effective crime prevention requires strong relationships among enforcement authorities and law-abiding businesses. Our Department is committed to reinforcing its relationships with good corporate citizens. 

That is reflected in a series of concrete policies announced by the Department over the past year. You will continue to see it in the faithful execution of those policies by our agents and lawyers.

One of my favorite management parables is about a child who watches her mother prepare a roast beef.  The mother cuts the ends off the roast before she puts it in the oven.  The child asks why. The mother says that she learned it from her mother. So the child asks her grandmother. The grandmother explains, “When your mother was a child, I cut the ends off because my pan was too small to fit the whole roast beef.”

The moral is that the solutions of the past are not necessarily the right solutions today.  Circumstances change.   We should be willing to reconsider our assumptions.

Whenever we mention that an existing policy is under review, defenders of the status quo proclaim that the current version of the policy is exactly right.  Maybe so.  Maybe some Department policies are exactly right.  But sometimes we need to review whether an existing policy accomplishes its goals and best meets our current needs.

I hope that our attorneys continue to share their experiences, to accept input from stakeholders, and to make suggestions about policy changes.

Let me discuss a few recent policy changes.

In June of 2017, Attorney General Sessions announced that the Department would end the practice of directing third-party settlement payments to non-governmental entities that were not harmed by a defendant’s conduct. 

Last November, the Attorney General announced a Department policy to prohibit improper use of and reliance on agency guidance documents.

Also in November, we announced the Department’s new Foreign Corrupt Practices Act Corporate Enforcement Policy. It promotes greater clarity and consistency in FCPA enforcement efforts, and provides stronger incentives for companies to voluntarily disclose misconduct, fully cooperate, and remediate any harm. 

Today, we are announcing a new Department policy that encourages coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct. 

The aim is to enhance relationships with our law enforcement partners in the United States and abroad, while avoiding unfair duplicative penalties.

It is important for us to be aggressive in pursuing wrongdoers. But we should discourage disproportionate enforcement of laws by multiple authorities. In football, the term “piling on” refers to a player jumping on a pile of other players after the opponent is already tackled.

Our new policy discourages “piling on” by instructing Department components to appropriately coordinate with one another and with other enforcement agencies in imposing multiple penalties on a company in relation to investigations of the same misconduct.

In highly regulated industries, a company may be accountable to multiple regulatory bodies. That creates a risk of repeated punishments that may exceed what is necessary to rectify the harm and deter future violations.

Sometimes government authorities coordinate well.  They are force multipliers in their respective efforts to punish and deter fraud. They achieve efficiencies and limit unnecessary regulatory burdens.

Other times, joint or parallel investigations by multiple agencies sound less like singing in harmony, and more like competing attempts to sing a solo.

Modern business operations regularly span jurisdictions and borders. Whistleblowers routinely report allegations to multiple enforcement authorities, which may investigate the claims jointly or through their own separate and independent proceedings.

By working with other agencies, including the SEC, CFTC, Federal Reserve, FDIC, OCC, OFAC, and others, our Department is better able to detect sophisticated financial fraud schemes and deploy adequate penalties and remedies to ensure market integrity.

But we have heard concerns about “piling on” from our own Department personnel. Our prosecutors and civil enforcement attorneys prize the Department’s reputation for fairness.

They understand the importance of protecting our brand. They asked for support in coordinating internally and with other agencies to achieve reasonable and proportionate outcomes in major corporate investigations. 

And I know many federal, state, local and foreign authorities that work with us are interested in joining our efforts to show leadership in this area.

“Piling on” can deprive a company of the benefits of certainty and finality ordinarily available through a full and final settlement. We need to consider the impact on innocent employees, customers, and investors who seek to resolve problems and move on. We need to think about whether devoting resources to additional enforcement against an old scheme is more valuable than fighting a new one.

Our new policy provides no private right of action and is not enforceable in court, but it will be incorporated into the U.S. Attorneys’ Manual, and it will guide the Department’s decisions.

This is another step towards greater transparency and consistency in corporate enforcement. To reduce white collar crime, we need to encourage companies to report suspected wrongdoing to law enforcement and to resolve liability expeditiously.

There are four key features of the new policy.

First, the policy affirms that the federal government’s criminal enforcement authority should not be used against a company for purposes unrelated to the investigation and prosecution of a possible crime. We should not employ the threat of criminal prosecution solely to persuade a company to pay a larger settlement in a civil case. 

That is not a policy change. It is a reminder of and commitment to principles of fairness and the rule of law. 

Second, the policy addresses situations in which Department attorneys in different components and offices may be seeking to resolve a corporate case based on the same misconduct.

The new policy directs Department components to coordinate with one another, and achieve an overall equitable result. The coordination may include crediting and apportionment of financial penalties, fines, and forfeitures, and other means of avoiding disproportionate punishment.

Third, the policy encourages Department attorneys, when possible, to coordinate with other federal, state, local, and foreign enforcement authorities seeking to resolve a case with a company for the same misconduct.

Finally, the new policy sets forth some factors that Department attorneys may evaluate in determining whether multiple penalties serve the interests of justice in a particular case.

Sometimes, penalties that may appear duplicative really are essential to achieve justice and protect the public. In those cases, we will not hesitate to pursue complete remedies, and to assist our law enforcement partners in doing the same.

Factors identified in the policy that may guide this determination include the egregiousness of the wrongdoing; statutory mandates regarding penalties; the risk of delay in finalizing a resolution; and the adequacy and timeliness of a company’s disclosures and cooperation with the Department.

Cooperating with a different agency or a foreign government is not a substitute for cooperating with the Department of Justice. And we will not look kindly on companies that come to the Department of Justice only after making inadequate disclosures to secure lenient penalties with other agencies or foreign governments. In those instances, the Department will act without hesitation to fully vindicate the interests of the United States.

The Department’s ability to coordinate outcomes in joint and parallel proceedings is also constrained by more practical concerns.  The timing of other agency actions, limits on information sharing across borders, and diplomatic relations between countries are some of the challenges we confront that do not always lend themselves to easy solutions. 

The idea of coordination is not new. The Criminal Division’s Fraud Section and many of our U.S. Attorney’s Offices routinely coordinate with the SEC, CFTC, Federal Reserve, and other financial regulators, as well as a wide variety of foreign partners. The FCPA Unit announced its first coordinated resolution with the country of Singapore this past December.

The Antitrust Division has cooperated with 21 international agencies through 58 different merger investigations during the past four years. 

And the National Security Division works with the Treasury Department’s Office of Foreign Assets Control, among others, to coordinate and secure resolutions of sanctions and export control violations in which OFAC deems its penalties satisfied by a company’s payments to the Department of Justice.

Coordination also will help us to identify culpable individuals and hold them accountable. We will seek appropriate corporate penalties when justified by the facts and the law. But the primary question should be, “Who made the decision to set the company on a course of criminal conduct?” Our investigations should focus on those individuals.

Our commitment to enhancing international coordination and promoting individual accountability is demonstrated by our increased cross-border enforcement.  The Attorney General assigned additional attorneys and paralegals to the Department’s Office of International Affairs to achieve those goals.

The additional resources help us promptly and efficiently obtain necessary evidence from abroad through Mutual Legal Assistance Treaties and other mechanisms of foreign assistance. They also strengthen efforts to return fugitives from abroad for prosecutions here in the United States.

At the same time, we will improve our ability to support our foreign counterparts by more expeditiously responding to their requests for assistance in securing evidence and fugitives located within our borders. 

In 2017, our Office of International Affairs successfully returned more than 70 individuals to the United States to face fraud-related charges. 

That trend continues. In March, the Office of International Affairs successfully concluded a 10-year long extradition process that led to the criminal conviction of a Canadian fraudster. The defendant orchestrated a telemarketing scheme that cheated at least 60,000 victims of more than $18 million.

We often talk about deterrence as a goal of law enforcement, but what causes deterrence?

For twelve years, I commuted 40 miles each way from Bethesda to Baltimore, mostly on Interstate 95. The speed limit is 65 miles per hour. Some people take that as a suggestion. They know the enforcement strategy.

During those long drives, I sometimes thought about how well traffic laws illustrate the mission of law enforcement.

Speed limit signs deter law-abiding people. If the rules are clear, most people obey them out of a sense of duty and honor.

But some people are not deterred by rules. If we announce a speed limit, but we do not enforce it, then law-breakers always get ahead of law-abiding people.

What if we post a speed camera? A speed camera deters many law-breakers. They slow down as they approach the camera. Then they speed up again. It is not a complete solution. Nonetheless, it does illustrate deterrence.

But some people do not bother to slow down at all. Those people are thinking one of two things. Either they do not believe the government will enforce the penalty, or they calculate that the likely benefit of breaking the rule outweighs the potential penalty.

The lesson is that deterrence requires enforcement.  The rules that matter most are the ones that carry expected penalties that decision-makers are unwilling to pay.

Focusing on deterrence requires us to think carefully about what we can achieve in our enforcement actions. Corporate settlements do not necessarily directly deter individual wrongdoers. They may do so indirectly, by incentivizing companies to develop and enforce internal compliance programs. But at the level of each individual decision-maker, the deterrent effect of a potential corporate penalty is muted and diffused. Our goal in every case should be to make the next violation less likely to occur by punishing individual wrongdoers.

In order to promote consistency in our white collar efforts, we established a new Working Group on Corporate Enforcement and Accountability within the Justice Department. The working group includes Department leaders and senior officials from the FBI, the Criminal Division, the Civil Division, other litigating divisions involved in significant corporate investigations, and the U.S. Attorney’s Offices.

The working group will make internal recommendations about white collar crime, corporate compliance, and related issues.

We look forward to collaborating with other agencies and regulators in implementing the new coordination policy. And we welcome input from stakeholders who share our commitment to reduce crime and uphold the rule of law.

Most American companies are serious about engaging in lawful business practices.  They want to do the right thing. They need and deserve our support to help protect them from criminals who seek unfair advantages.

Corporate America should regard law enforcement as an ally.  In turn, the government should provide incentives for companies to engage in ethical corporate behavior and to assist in federal investigations. 

Companies can help protect themselves by using caution when choosing business associates and by ensuring appropriate oversight of their activities.

By effectively combating white collar crime and prosecuting individuals when appropriate, we can protect Americans from fraud, and reduce the risk of another corporate-fraud epidemic.

That will require us to get the policies right, articulate the policies clearly, train our agents and attorneys properly, and provide appropriate supervision.

The Department’s rhetoric gets a lot of attention – the policy memos and speeches.  But performance matters most.

When we are serious about wanting people to follow the law, it does no good merely to post a sign. We need to make clear our intent to enforce the law, with sufficient vigor that people fear the consequences of violating it.

That is the lesson I learned on I-95. I appreciate the opportunity to share it with you today.

May 10, 2018 in AML | Permalink | Comments (0)

Monday, May 7, 2018

UK Enacts Sanctions and Anti-Money Laundering Bill Requiring Territories to Make Corporate Beneficial Owner Registries Public Access

A bill to make provision enabling sanctions to be imposed where appropriate for the purposes of compliance with United Nations obligations or other international obligations or for the purposes of furthering the prevention of terrorism or for the purposes of national security or international peace and security or for the purposes of furthering foreign policy objectives; to make provision for the purposes of the detection, investigation and prevention of money laundering and terrorist financing and for the purposes of implementing Standards published by the Financial Action Task Force relating to combating threats to the integrity of the international financial system; and for connected purposes.

Download AML Bill 18176

Download Report on the AML Bill-8232

May 7, 2018 in AML | Permalink | Comments (0)

Saturday, May 5, 2018

Money laundering supervision: report covering 2015 to 2017

This report describes HMRC's role in tackling financial crime in the supervised sectors and highlights its priorities and achievements.  Download Report_on_Tackling_Financial_Crime_in_the_supervised_sectors_2015_to_2017

This is the first HM Revenue and Customs (HMRC) report on its anti-money laundering supervisory activities and wider role in tackling financial crime. It covers the 2 financial years from 2015 to 2017 across all the business sectors it supervised.

The report describes HMRC’s role as an anti-money laundering supervisor under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, how this role is funded, and what HMRC does with this funding.

It explains HMRC’s priorities and achievements in those years, as well as how HMRC’s response to anti-money laundering has been transformed.

The report also covers HMRC’s role in tackling money laundering and other financial crime, and work with other supervisors and law enforcement agencies.

Businesses registered with HMRC, in particular, will be interested in the overviews of each supervised sector.

May 5, 2018 in AML | Permalink | Comments (0)

Friday, May 4, 2018

Former Arkansas State Senator and Representative Pleads Guilty to Conspiracy and Bribery

Former Arkansas State Senator and State Representative Henry (Hank) Wilkins IV pleaded guilty today to conspiring to accept over $80,000 in bribes in exchange for influencing Arkansas state legislation and transactions, including steering approximately $245,000 in Arkansas General Improvement funds to his co-conspirators, and to devising a scheme to conceal the bribe payments as donations to St. James United Methodist Church in Pine Bluff, Arkansas, where Wilkins also served as a pastor.

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and U.S. Attorney Cody Hiland for the Eastern District of Arkansas made the announcement.

Wilkins, 64, of Pine Bluff, Arkansas, who represented Arkansas’s House District 17 as a state Representative from 1999 to 2001 and again from 2011to 2015, and District 5 in the Arkansas Senate from 2001 to 2011, pleaded guilty before Chief U.S. District Judge Brian S. Miller to an information charging him with one count of conspiracy to commit offenses against the United States.

“By misusing his elected office to line his own pockets, Henry Wilkins undermined the integrity of our political process and abused the public’s trust,” said Acting Assistant Attorney General Cronan. “The Criminal Division is committed to rooting out such corruption and holding those responsible accountable for their actions.”

“Public corruption destroys the trust that is necessary for our republic,” said U.S. Attorney Cody Hiland for the Eastern District of Arkansas. “In this case, the citizens of Arkansas were betrayed by Mr. Wilkins, and elected officials who abuse their position for personal gain must be held accountable for that violation of the public trust. Investigating and prosecuting individuals such as Mr. Wilkins is essential to restoring confidence in elected officials. This office will continue to relentlessly pursue anyone who tries to undermine our system of government.”

As part of his plea, Wilkins admitted that from 2010 to 2014, while serving in the Arkansas General Assembly, he accepted a series of bribes from lobbyists and non-profit organizations that were transmitted both in the form of cash and checks funneled from lobbying firms to a discretionary fund held in St. James’ name where Wilkins had access to the deposited funds.  In exchange for the cash and check bribes, Wilkins performed, and agreed to perform, official acts in his capacity as an Arkansas legislator including filing shell bills, sponsoring full bills, voting in favor of specific legislation, and steering approximately $245,000 in General Improvement funds to entities that funneled bribes to Wilkins through his church.

May 4, 2018 in AML | Permalink | Comments (0)

Wednesday, May 2, 2018

Honduran Man Indicted for Conspiring to Launder Over $1 Million in Bribes and Funds Misappropriated from The Honduran Social Security Agency

The Department of Justice filed  a civil forfeiture complaint seeking the forfeiture of nine properties worth approximately $1,528,000 that were allegedly purchased with funds traceable to a $2 million bribe paid by a Honduran information-technology company to the former Executive Director of the Honduran Institute of Social Security.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Polite, Jr. of the Eastern District of Louisiana and Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) made the announcement.

“Mario Zelaya was the director of Honduras’s social security agency, but instead of building a social safety net for his country’s citizens, he allegedly used his position of public trust to steal public money for himself,” said Assistant Attorney General Caldwell.  “Our action today highlights how the Criminal Division’s Kleptocracy Initiative, with our network of law enforcement partners around the globe, will trace and recover the ill-gotten gains of corrupt officials.  Criminals should make no mistake:  the United States is not a safe haven for the proceeds of your crimes.  If you hide or invest your stolen money here, we will use all the legal tools we have to find it and seize it.”

“The United States Attorney’s Office for the Eastern District of Louisiana is committed to working with our law enforcement partners, both domestically and internationally, to ensure that this district is not used to launder corruptly obtained funds, no matter the source of the corruption,” said U.S. Attorney Polite.

“ICE’s Homeland Security Investigations will continue to work in cooperation with our international law enforcement partners to ensure that our country is not used as a safe haven for corrupt foreign officials to hide their assets,” said HSI Executive Associate Director Edge.  

From 2010 to 2014, Dr. Mario Roberto Zelaya Rojas, 46, of Tegucigalpa, Honduras, served as the Executive Director of the Honduran Institute of Social Security (HISS), a Honduran Government agency that provides social security services, including workers’ compensation, retirement, maternity, and death benefits.  According to allegations in the forfeiture complaint, Zelaya solicited and accepted $2.08 million in bribes from Compania De Servicios Multiples, S. de R. L. (COSEM) in exchange for prioritizing and expediting payments owed to COSEM under a $19 million contract with HISS.  Zelaya also allegedly instructed COSEM to make bribe payments to two members of the Board of Directors of HISS charged with overseeing the COSEM contract.  To conceal the illicit payments, COSEM allegedly sent the bribes through its affiliate company, CA Technologies. 

As further alleged in the complaint, the bribe proceeds were then laundered into the United States and used by Zelaya and his brother, Carlos Alberto Zelaya Rojas, to acquire real estate in the New Orleans area.  Certain properties were titled in the name of companies nominally controlled by Zelaya’s brother in an effort to conceal the illicit source of the funds as well as the beneficial owner.  The current action seeks forfeiture of nine properties acquired with the proceeds of Zelaya’s alleged bribery scheme. 

The investigation was conducted by HSI’s New Orleans and Miami Field Offices.  The case is being handled by Trial Attorneys Stephen A. Gibbons and Marybeth Grunstra of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorney Daniel P. Friel of the Eastern District of Louisiana.  Substantial assistance was provided by the Public Ministry of the Republic of Honduras and the HSI Attaché Tegucigalpa.  The Criminal Division’s Office of Overseas Prosecutorial Development, Assistance and Training Resident Legal Advisor in Tegucigalpa also provided valuable assistance.

This case was brought under the Kleptocracy Asset Recovery Initiative.  Under that initiative, dedicated prosecutors in the Criminal Division’s Asset Forfeiture and Money Laundering Section work in partnership with U.S. Attorneys’ Offices and federal law enforcement agencies to forfeit the proceeds of foreign official corruption and, where possible and appropriate, put forfeited corruption proceeds to use for the benefit of the people of the country harmed by the abuse of public office.  Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov

Department of Justice Seeks Recovery of Approximately $1,528,000 in Bribes Paid to a Honduran Official

The Department of Justice previously on January 15, 2015, filed a civil forfeiture complaint seeking the forfeiture of nine properties worth approximately $1,528,000 that were allegedly purchased with funds traceable to a $2 million bribe paid by a Honduran information-technology company to the former Executive Director of the Honduran Institute of Social Security.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Polite, Jr. of the Eastern District of Louisiana and Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) made the announcement.

“Mario Zelaya was the director of Honduras’s social security agency, but instead of building a social safety net for his country’s citizens, he allegedly used his position of public trust to steal public money for himself,” said Assistant Attorney General Caldwell.  “Our action today highlights how the Criminal Division’s Kleptocracy Initiative, with our network of law enforcement partners around the globe, will trace and recover the ill-gotten gains of corrupt officials.  Criminals should make no mistake:  the United States is not a safe haven for the proceeds of your crimes.  If you hide or invest your stolen money here, we will use all the legal tools we have to find it and seize it.”

“The United States Attorney’s Office for the Eastern District of Louisiana is committed to working with our law enforcement partners, both domestically and internationally, to ensure that this district is not used to launder corruptly obtained funds, no matter the source of the corruption,” said U.S. Attorney Polite.

“ICE’s Homeland Security Investigations will continue to work in cooperation with our international law enforcement partners to ensure that our country is not used as a safe haven for corrupt foreign officials to hide their assets,” said HSI Executive Associate Director Edge.  

From 2010 to 2014, Dr. Mario Roberto Zelaya Rojas, 46, of Tegucigalpa, Honduras, served as the Executive Director of the Honduran Institute of Social Security (HISS), a Honduran Government agency that provides social security services, including workers’ compensation, retirement, maternity, and death benefits.  According to allegations in the forfeiture complaint, Zelaya solicited and accepted $2.08 million in bribes from Compania De Servicios Multiples, S. de R. L. (COSEM) in exchange for prioritizing and expediting payments owed to COSEM under a $19 million contract with HISS.  Zelaya also allegedly instructed COSEM to make bribe payments to two members of the Board of Directors of HISS charged with overseeing the COSEM contract.  To conceal the illicit payments, COSEM allegedly sent the bribes through its affiliate company, CA Technologies. 

As further alleged in the complaint, the bribe proceeds were then laundered into the United States and used by Zelaya and his brother, Carlos Alberto Zelaya Rojas, to acquire real estate in the New Orleans area.  Certain properties were titled in the name of companies nominally controlled by Zelaya’s brother in an effort to conceal the illicit source of the funds as well as the beneficial owner.  The current action seeks forfeiture of nine properties acquired with the proceeds of Zelaya’s alleged bribery scheme. 

The investigation was conducted by HSI’s New Orleans and Miami Field Offices.  The case is being handled by Trial Attorneys Stephen A. Gibbons and Marybeth Grunstra of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorney Daniel P. Friel of the Eastern District of Louisiana.  Substantial assistance was provided by the Public Ministry of the Republic of Honduras and the HSI Attaché Tegucigalpa.  The Criminal Division’s Office of Overseas Prosecutorial Development, Assistance and Training Resident Legal Advisor in Tegucigalpa also provided valuable assistance.

May 2, 2018 in AML | Permalink | Comments (0)

Tuesday, May 1, 2018

Panasonic Avionics Corporation Agrees to Pay $137 Million to Resolve Foreign Corrupt Practices Act Charges

Panasonic Avionics Corporation (PAC), a subsidiary of multinational electronics company Panasonic Corporation (Panasonic), has agreed to pay a $137.4 million criminal penalty to resolve charges arising out of a scheme to retain consultants for improper purposes and conceal payments to third-party sales agents, in violation of the accounting provisions of the Foreign Corrupt Practices Act (FCPA).

Acting Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division and Acting Assistant Director Christopher Hacker of the FBI’s Criminal Investigative Division made the announcement.

“When Panasonic Avionics Corporation caused its publicly-traded parent company to falsify its books and records, it distorted the information available to legitimate investors,” said Acting Assistant Attorney General Cronan.  “The Criminal Division will take all appropriate action to ensure that the investing public is able to trust the accuracy of the financial statements of companies that avail themselves of American securities exchanges.”

PAC, based in Lake Forest, California, designs and distributes in-flight entertainment systems and global communications services for airlines and airplane manufacturers.  According to admissions and court documents, PAC knowingly and willfully caused Panasonic to falsify its books and records with respect to PAC’s retention of consultants for improper purposes.  The consultants, which did little or no actual consulting work for PAC, were retained through a third-party service provider and were paid for out of a budget over which a senior PAC executive had complete control and discretion, without meaningful oversight by anyone at PAC or Panasonic.  One such individual was offered the consulting position by PAC at the time that he was employed by a state-owned airline and involved in negotiating a lucrative contract amendment on behalf of the airline with PAC.  According to court documents, that consultant was subsequently paid $875,000 by PAC over a six-year period and PAC earned over $92 million in profits from portions of the contract over which the consultant had some involvement or influence while employed with the airline.  PAC admitted that it mischaracterized these payments as “consultant payments” on its general ledger, which it knew caused Panasonic to incorrectly designate those payments as “selling and general administrative expenses” on Panasonic’s books, records, and accounts.

PAC also admitted that employees in its Asia region concealed PAC’s use of certain sales agents, which did not pass the Company’s internal diligence requirements.  According to admissions and court documents, PAC formally terminated its relationship with these sales agents, as required by its compliance policies, but PAC employees then secretly continued to use the agents by having them rehired as sub-agents of another company, which had passed PAC’s due diligence checks.  Through this process, PAC employees hid more than $7 million in payments to at least 13 sub-agents.

By mischaracterizing the payments made to consultants and sales agents and providing false or incomplete representations and Sarbanes-Oxley subcertifications to Panasonic about PAC’s financials and financial controls, PAC caused Panasonic to falsify its books, records, and accounts in violation of the FCPA.

PAC entered into a deferred prosecution agreement (DPA) in connection with a criminal information, filed today in the U.S. District Court for the District of Columbia, charging the company with one count of knowingly and willfully causing the falsification of the books, records, and accounts of its parent company Panasonic.  As part of the DPA, PAC will pay a total criminal penalty of $137,403,812.  PAC also agreed to continue to cooperate with the department’s investigation, enhance its compliance program, implement rigorous internal controls and retain an independent corporate compliance monitor for at least two years.

In a related proceeding, the U.S. Securities and Exchange Commission (SEC) filed a cease and desist order against Panasonic, whereby the company agreed to pay approximately $143 million in disgorgement to the SEC, including prejudgment interest.  Thus, the combined total amount of U.S. criminal and regulatory penalties to be paid by Panasonic and PAC is over $280 million.

The Criminal Division’s Fraud Section reached this resolution based on a number of factors, including the fact that PAC did not timely voluntarily self-disclose the conduct, but did cooperate with the department’s investigation after receiving a request for documents from the SEC.  PAC received a 20 percent discount off the low end of the U.S. Sentencing Guidelines fine range because of its cooperation and remediation, which, although untimely in certain respects, did include causing several senior executives who were either involved in or aware of the misconduct to be separated from PAC or Panasonic.  Because many of the company’s compliance enhancements were more recent, and therefore have not been tested, the DPA imposes an independent compliance monitor for a term of two years, followed by an additional year of self-reporting to the department.

The case is being investigated by the FBI’s International Corruption Squad in Los Angeles.  Fraud Section Trial Attorneys Dennis R. Kihm and Jeremy R. Sanders prosecuted the case.  The Fraud Section appreciates the significant cooperation and assistance provided by the SEC in this matter.  The Criminal Division’s Office of International Affairs also provided assistance during the investigation.

May 1, 2018 in AML | Permalink | Comments (0)

Sunday, April 29, 2018

ICIJ Reports on Frozen Mauritius Accounts of Angolan Sovereign Wealth Fund Manager

Read the investigative journalism of ICIJ laying out the entire, unfolding story:

  • Mauritian authorities have frozen 91 bank accounts linked to investor Jean-Claude Bastos, a key figure from the Paradise Papers with close connections to Angola’s former leaders. 
  • The Mauritius Supreme Court froze accounts in four judgements issued this month as part of probes involving Bastos and part of a $3 billion Angolan sovereign wealth fund investment, ...
  • Prosecutors later charged dos Santos with fraud relating to a $500 million transaction from the central bank. ....

 

April 29, 2018 in AML | Permalink | Comments (0)

Friday, April 27, 2018

Make a Good Living as a Professional Whistleblower: Compliance professional collects 3rd award

FCPA Blog reports that: A registered nurse and lawyer who served in compliance roles for healthcare providers was awarded $3.3 million in a False Claims Act settlement. She has now collected more than $6 million in three separate qui tam actions against former employers.

Read the entire story of how to make a living by being a professional whistleblower.

April 27, 2018 in AML | Permalink | Comments (0)

Wednesday, April 25, 2018

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)

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)