International Financial Law Prof Blog

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

Wednesday, April 12, 2017

Argentina says $116.8B Pesos (US$9.6B) Repatriated

Reuters reports: Argentina's government said on Tuesday $116.8 billion in assets were declared, mostly from abroad, in a record tax amnesty it hopes will help spur domestic investment and economic growth.  The government collected 148.6 billion pesos ($9.652 billion) in taxes and fees from the amnesty, revenue that will help the government meet its target for a fiscal deficit of 4.2 percent gross domestic product this year. read the full story here 

April 12, 2017 in GATCA | Permalink | Comments (0)

Tuesday, April 11, 2017

IRS Updates FATCA Q&A for Reporting Financial Institutions Missing U.S. Taxpayers SSN's or EINs

note: free download of 2017 edition expanded chapter of two-volume FATCA-CRS set

F15. We are a reporting Model 1 FFI.  We maintain preexisting accounts that are U.S. reportable accounts where we have been unsuccessful in obtaining a U.S. TIN from the account holder.  May we continue to use nine zeroes in place of a U.S. TIN when we report information in 2018 on that account with respect to the 2017 year?

No.  Prior to 2017, Article 3(4) of the Model 1 IGA provided that a reporting Model 1 FFI was not required to report a U.S. TIN for the account holder of a preexisting account if the FATCA image LexisTIN was not in the FFI’s records; instead, the FFI could report the account holder’s date of birth if the date of birth was in the FFI’s records. The IRS published an FAQ to explain how to report an account holder for which the FFI did not have a TIN (i.e., either entering nine zeros or omitting the TIN and receiving an error message that should be ignored).  See ICMM FAQ Q9 for updated rules for complying with Article 3(4) for reporting in 2017 with respect to the 2016 year.

Article 6(3)(b) of the Model 1 IGA provides that by January 1, 2017, the Model 1 jurisdiction commits to establish rules requiring reporting Model 1 FFIs to obtain U.S. TINs for preexisting accounts for reporting with respect to 2017 and later years.  Beginning January 2018, the IRS will update its record validation rules so that error notifications will be sent if a reporting Model 1 FFI reports nine zeros as the TIN for an account holder.  

If you have questions regarding the obligations under the IGA between the U.S. and your jurisdiction, or any domestic legislation passed to implement the provisions of the IGA, please contact the office of the Competent Authority in your jurisdiction.

Added:  04-11-2017

C25. In 2016, I submitted a new Form 8966, FATCA Report, using the XML Schema v1.1. In 2017, I need to amend or correct a record on that report using XML Schema v2.0. What version of the schema do I need to use to amend or correct the record?
Beginning January 16, 2017, FATCA Reporting will only support the XML schema v2.0. All new, nil, amended, corrected, and void reports should use version 2.0. The two versions of the FATCA XML schema are not backwards compatible and files submitted using schema version 1.1 will not validate against version 2.0. Example: In November 2016, a user submits Report2015 and receives a notification to correct record level errors within 120 days. In February 2017, the user should make all corrections using XML schema version 2.0.

Updated: 01-06-2017

C29. When may the AccountClosed element be used?
The AccountClosed element permits financial institutions to declare the account status as closed or transferred during the calendar year. Do not report the account closed if an account holder rolls over the amounts in one account into another account with the same FFI during the calendar year. Withholding agents should not complete this element.

The AccountClosed element is optional. The AccountClosed element should not be used for 2014 or 2015 tax years.

Added: 03-22-2017

C30. When may the AccountNumber element be used?
The AccountNumber element provides the account number assigned by the financial institution to uniquely identify the account holder. The account number can be any of the following:

  • A custodial account or depository account
  • Code related to a debt or equity interest, not held in a custody account.
  • Identification code of a cash value insurance contract or annuity contract.

Enter a “NANUM:

  • Enter a “NANUM” for the element if the financial institution does not have an account numbering system.
  • Enter a “NANUM” if the reporting FI is a withholding agent reporting a withholdable payment made to a payee that is not an account holder.
  • Enter a “NANUM” if the reporting FI is a Direct Reporting NFFE.

The AcctNumberType attribute allows financial institutions to declare the uniquely used account number format. The value of the AcctNumberType attribute should be from the list below:

Values Description of Account Number format
OECD601 IBAN International Bank Account Number used in some countries to uniquely identify a customer's bank account
OECD602 OBAN Other Bank Account Number
OECD603 ISIN International Securities Identification Number uniquely identifies securities, such as bonds, commercial paper, stocks and warrants.
OECD604 OSIN Other Securities Identification Number
OECD605 Other Any other type of unique identifier codes or account number, i.e. insurance contract.

The AcctNumberType attribute is optional and is not required for FATCA reporting. The AcctNumberType attribute should not be used for 2014 or 2015 tax years.

Added: 03-22-2017

F14.  I am filing a Form 8966 on behalf of a Passive NFFE.  As a NFFE, it does not have, and is not required to obtain, a US TIN.  How do I report a TIN for this entity if they don’t have one?
A Reporting FI that is not obligated to have a US TIN or GIIN should leave the Reporting FI TIN element blank.  This will cause a Record-Level Error Notification; however, because the absence of a TIN in this NFFE example is correct, the Notification does not require a Correction.  Do not substitute any other characters for the TIN in this case.

If the TIN element was left blank due to the transition rule for Model 1 IGA filers reporting on pre-existing accounts, please see IDES FAQ A17 for more information.

Added:  02-09-2017

note: free download of 2017 edition expanded chapter of two-volume FATCA-CRS set

 

April 11, 2017 in GATCA | Permalink | Comments (0)

Cayman Islands Introduces Beneficial Ownership Register Regime

Maples & Calder analyses the new Cayman Islands beneficial ownership law: Under recently passed legislation, certain Cayman Islands companies and Cayman Islands limited liability Caymanfinance_logo-1companies ("LLCs") will be required to maintain a beneficial ownership register that records details of the individuals who ultimately own or control more than 25% of the equity interests, voting rights or have rights to appoint or remove a majority of the company directors, or LLC managers, together with details of certain intermediate holding companies through which such interests are held (the "Regime").    

  • Download Cayman law ben owners  (A Bill For A Law To Amend The Companies Law (2016 Revision) In Order To Require Companies Incorporated In The Islands To Establish And Maintain Beneficial Ownership Registers Which May Be Searched By The Competent Authority; And For Incidental And Connected Matters)

The new Regime codifies a commitment agreed with the UK Government by way of an Exchange of Notes in April 2016 by the Cayman Islands, together with other Crown dependencies and overseas territories, to enhance existing robust arrangements on the exchange of beneficial ownership information to assist law enforcement agencies combat tax evasion and money laundering.

Each company or LLC that falls within the Regime's ambit (an "In-Scope Entity") will be required to complete and maintain a beneficial ownership register at its Cayman Islands registered office with a licensed corporate service provider. 

There are specified exceptions that will exempt certain types of companies and LLCs from the requirement to maintain a beneficial ownership register (notably those that are listed or subject to direct or indirect regulatory oversight). 

The register will not be public and the information will be accessible only by a specified Cayman Islands competent authority, principally on proper and lawful request made by UK law enforcement agencies.

The Maples & Calder update provides a general overview of the Regime and summarises the obligations and actions that In-Scope Entities need to take to comply with the Regime.

Cayman Finance writes: The proposals were first published in a consultation last year. A more detailed outline was issued on 2 December 2016, in a second consultation that closed on 9 December. The relevant draft legislation, the Companies (Amendment) Bill 2016, was published the following week, and the opportunity for public comment ended on 6 January 2017.

Historically, Cayman licenced corporate service providers (CSPs) have been required to collect and maintain beneficial ownership information only locally. The UK wanted Cayman (as well as other British overseas territories and crown dependencies) to develop fully public registers of ownership, but most overseas territories were reluctant to implement this. Instead, Cayman and other jurisdictions are developing a means of centralising this information so that it can be delivered to foreign authorities, especially London, rapidly in response to a request. The UK has stated that this is acceptable.

Accessing the register

Regulated entities incorporated in Cayman under the Companies Law and Limited Liability Company Law will still be obliged to maintain their local register at the company’s registered office address, and the register must be updated within one month of any changes. However, it will not have to be submitted immediately to the government. Instead, the separate registers will be accessed from a central point within the Cayman government when the need arises. They will not be open to the public unless and until that becomes an accepted and implemented international standard.

Harneys approves of this solution. The firm says it ‘strikes a sensible balance by enabling law enforcement authorities to have access to the information they need in cases where people abuse the corporate veil while continuing to protect the privacy of legitimate commercial interests and individuals’.

Exempted companies

Several types of company will be exempted from having to maintain a beneficial ownership register. These include stock exchange listed companies, regulated funds under the Mutual Funds Law, and special purpose companies, private equity or collective investment schemes or investment funds administered by a regulated firm based in an approved jurisdiction. There are also no proposals to extend the registers to cover beneficial ownership of limited partners in Cayman exempted limited partnerships.

‘The new regime should allow Cayman to reach closure with the United Kingdom on the beneficial ownership issue’, said Harneys. ‘It also reflects similar international initiatives, including the EU’s Fourth Anti-Money Laundering Directive, which is to be implemented by EU member states by June 2017.’

‘Challenging’ timetable

The Cayman government plans to introduce the registers and platform by 30 June 2017 in line with Cayman’s agreement with the UK. However, this timetable could be ‘challenging’ given the technical difficulties, says Harneys.

  • The move is the result of several years of pressure from the UK government, starting in 2013.

April 11, 2017 in AML | Permalink | Comments (0)

OECD releases new guidance for Automatic Exchange of Financial Account Information in Tax Matters

To further support the consistent implementation of the Common Reporting Standard (CRS), the OECD released:

Free download from the industry leading 2,000 page analysis of the FATCA and CRS compliance challenges,  78 chapters by FATCA and CRS contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2017 edition includes examples, charts, timelines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.  

April 11, 2017 in GATCA, OECD | Permalink | Comments (0)

Monday, April 10, 2017

Regulatory Relief For Accreditation

The Council for Higher Education Accreditation (CHEA) is a national, nongovernmental membership organization of 3,000 DeptOfEducation-Sealdegree-granting colleges and universities, the only organization with the sole purpose of providing national coordination of accreditation of higher education institutions and programs.

With the advent of a new Administration and Congress, regulatory relief has become a prominent topic of discussion. The purpose of this CHEA Position Paper is to offer proposals for the reduction of federal regulation as this applies to accreditation, whether in law, regulation or sub-regulatory guidance, acknowledging that the major challenge is at the regulatory/subregulatory levels. This reduction is not intended nor should result in reduced accountability for accreditation, but can provide a more effective and efficient regulatory framework for this important work.

CHEA sees this regulatory relief as central to achieving three major goals to move accreditation forward. These goals are doing more to: • Protect students: Strengthen accreditation rigor and provide expanded, readily understandable and accessible information about institutions and programs. • Advance innovation: Encourage fresh approaches to quality review of traditional providers and expand quality review to new providers and new credentialing. • Sustain the strengths of accreditation: Maintain and enhance the academic leadership of institutions and programs, peer review and the commitment to academic freedom. The federal government maintains an extensive scrutiny of accreditation, a process known as “recognition,” because accredited status is a requirement for institutions and programs to obtain and maintain eligibility for federal funds. At present, approximately $170 billion in student grants and loans, research and program funds go to institutions and programs annually.

Accreditation activity is governed by 10 pages of law, 27 pages of regulation and 88 pages of sub-regulation. Sub-regulation is augmented by “Dear Colleague” letters and “Guidance Letters” issued by USDE. There are more than 200 separate requirements that accrediting organizations must address in order to be considered federally recognized or to have emerged successfully from the USDE recognition review that they must undergo at least every five years.  

There is considerable evidence that enormous time and effort is involved in successfully navigating this regulatory regimen.  The recognition review requires, for all practical purposes, that an accreditor must attend to actual or expected demands of the federal government on an annual basis. Although accrediting organizations are nongovernmental bodies that are financed by higher education institutions and programs themselves, they are required to operate as if they were federal contractors.  The impact on these organizations, while assuring that they operate in a given way, is also deleterious.

The federal presence is disproportionate and distorts the accreditation enterprise. It seriously crowds available space for initiative and innovation. Especially in relation to the goals presented here, accreditors are forced to operate in a culture that, however unintentionally, discourages creativity and experimentation. Unless USDE agrees, accreditors are reluctant to act. They are not going to move forward with creative efforts and are inhibited with regard to risk-taking, anticipating that this could result in the loss of recognition.

Proposal One: Relief with Regard to Federal Regulation 1. Rethink the requirements for the extent of experience in order to become a recognized accreditor. 2. Streamline what is considered “substantive change” for an institution or program in order that fewer changes are subject to this process, including the establishment of branch campuses. 3. Remove the definition of credit hour. 4. Eliminate the requirement for confidentiality such that accreditors cannot inform institutions of investigations.

Proposal Two: Relief with Regard to Sub-Regulation: Dear Colleague Letters/Guidance Communications 1. Eliminate requirement for common definitions and terms. 2. Remove USDE final oversight in posting accreditor actions and decision letters. 3. Eliminate USDE oversight of differentiated review.

Proposal Three: Relief with Regard to Federal Law 1. Retain the Rule of Construction. Oppose legislation that would further expand excessive regulation such as the WarrenDurbin-Schatz Bill introduced in the 114th Congress. 2. Rethink the role of the National Advisory Committee on Institutional Quality and Integrity, including the creation of an alternative committee structure and operation. 3. Revise Negotiated Rulemaking to assure that it is a balanced, transparent and consultative process. 4. Require consultation with academics and accreditors for Dear Colleague Letters and Guidance Letters and clarify their role in federal oversight of accreditation.

April 10, 2017 in Education | Permalink | Comments (0)

Sunday, April 9, 2017

Western Union Returning $586 million to Victims of Fraud When Scammers Received Money Via Western Union

Western Union Admits Anti-Money Laundering Violations and Settles Consumer Fraud Charges, Forfeits $586 Million in Settlement with FTC and Justice Department

Company also agrees to implement anti-fraud program and enhanced compliance obligations in agreements with federal authorities

The FTC has updated victims of fraud who Western Union allowed to be targeted through its services (read the facts below).  Western Union will return the $586 million money to people who were tricked into wiring money to 1024px-US-FederalTradeCommission-Seal.svgscammers using Western Union. Those refunds are part of a global settlement with the Federal Trade Commission and the Department of Justice (DOJ), and DOJ is handling the refunds.

Update from the FTC on the Western Union refund process. 

  • DOJ will run the refunds process, and the process has not started. In fact, Western Union still has more time to pay all of the $586 million.
  • Once DOJ has all of the money – later this year – they’ll open up the process for people to make claims. They call it a “Petition for Remission” process.
  • If you sent money via Western Union between January 1, 2004 and January 19, 2017, and lost it to a scammer, you might be eligible for a refund.
  • DOJ will have to verify all the claims it gets before it can send out refunds. That might take at least a year.
  • All eligible claimants will get some money back, but how much depends on how much you lost, how many people ask for a refund, and how big the total losses are.

 

The Western Union Company (Western Union), a global money services business headquartered in Englewood, Colorado, has agreed to forfeit $586 million and enter into agreements with the Federal Trade Commission, the Justice Department, and the U.S. Attorneys’ Offices of the Middle District of Pennsylvania, the Central District of California, the Eastern District of Pennsylvania and the Southern District of Florida. In its agreement with the Justice Department, Western Union admits to criminal violations including willfully failing to maintain an effective anti-money laundering program and aiding and abetting wire fraud.

FTC Chairwoman Edith Ramirez; Acting Assistant Attorney General David Bitkower of the Justice Department’s Criminal Division; U.S. Attorney Bruce D. Brandler of the Middle District of Pennsylvania; U.S. Attorney Eileen M. Decker of the Central District of California; Acting U.S. Attorney Louis D. Lappen of the Eastern District of Pennsylvania; U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida; Inspector in Charge David W. Bosch of the U.S. Postal Inspection Service (USPIS) Philadelphia Division; Special Agent in Charge Deirdre Fike of the FBI’s Los Angeles Field Office; Chief Richard Weber of Internal Revenue Service-Criminal Investigation (IRS-CI); Special Agent in Charge Marlon V. Miller of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Philadelphia; and Special Agent in Charge Stephen Carroll of the Office of Inspector General for the Board of Governors of the Federal Reserve System and the Consumer Financial Protection Bureau (FRB-CFPB OIG) Eastern Region made the announcement.

“Western Union owes a responsibility to American consumers to guard against fraud, but instead the company looked the other way, and its system facilitated scammers and rip-offs,” said FTC Chairwoman Edith Ramirez. “The agreements we are announcing today will ensure Western Union changes the way it conducts its business and provides more than a half billion dollars for refunds to consumers who were harmed by the company’s unlawful behavior.”

“As this case shows, wiring money can be the fastest way to send it – directly into the pockets of criminals and scam artists,” said Acting Assistant Attorney General Bitkower. “Western Union is now paying the price for placing profits ahead of its own customers.  Together with our colleagues, the Criminal Division will both hold to account those who facilitate fraud and abuse of vulnerable populations, and also work to recoup losses and compensate victims.”

“The U.S. Attorney’s Office for the Middle District of Pennsylvania has a long history of prosecuting corrupt Western Union Agents,” said U.S. Attorney Brandler. “Since 2001 our office, in conjunction with the U.S. Postal Inspection Service, has charged and convicted 26 Western Union Agents in the United States and Canada who conspired with international fraudsters to defraud tens of thousands of U.S. residents via various forms of mass marketing schemes.  I am gratified that the deferred prosecution agreement reached today with Western Union ensures that $586 million will be available to compensate the many victims of these frauds.”

“Our investigation uncovered hundreds of millions of dollars being sent to China in structured transactions designed to avoid the reporting requirements of the Bank Secrecy Act, and much of the money was sent to China by illegal immigrants to pay their human smugglers,” said U.S. Attorney Decker. “In a case being prosecuted by my office, a Western Union agent has pleaded guilty to federal charges of structuring transactions – illegal conduct the company knew about for at least five years. Western Union documents indicate that its employees fought to keep this agent – as well as several other high-volume independent agents in New York City – working for Western Union because of the high volume of their activity. This action today will ensure that Western Union effectively controls its agents and prevents the use of its money transfer system for illegal purposes.”

“Western Union’s failure to comply with anti-money laundering laws provided fraudsters and other criminals with a means to transfer criminal proceeds and victimize innocent people,” said Acting U.S. Attorney Lappen. “Western Union has agreed to forfeit $586 million, the largest forfeiture ever imposed on a money services business, and has agreed to take specific steps to ensure that it complies with the law in the future.  This office will continue to vigorously enforce the anti-money laundering laws and regulations, which are necessary to prevent those engaged in fraud, terrorism, human trafficking, drug dealing and other crimes from using companies like Western Union to further their illegal activity.”

“Western Union, the largest money service business in the world, has admitted to a flawed corporate culture that failed to provide a checks and balances approach to combat criminal practices,” said U.S. Attorney Ferrer. “Western Union’s failure to implement proper controls and discipline agents that violated compliances policies enabled the proliferation of illegal gambling, money laundering and fraud-related schemes. Western Union’s conduct resulted in the processing of hundreds of millions of dollars in prohibited transactions. Today’s historic agreement, involving the largest financial forfeiture by a money service business, makes it clear that all corporations and their agents will be held accountable for conduct that circumvents compliance programs designed to prevent criminal conduct.”

“The U.S. Postal Inspection Service has been at the forefront of protecting consumers from fraud schemes for many years,” said Inspector in Charge Bosch. “When private businesses participate in the actions that Western Union was involved in, it makes it easier for criminals to victimize innocent citizens. Our commitment to bringing these criminals to justice will not waiver, and we look forward to facilitating compensation to victims.”

“Los Angeles-defendant Wang’s company was considered to be among the largest Western Union agents in the United States as over $310 million was sent to China in a span of five years, half of which was illegally structured and transmitted using false identification,” said Assistant Director in Charge Fike. “Rather than ensuring their high volume agents were operating above-board, Western Union rewarded them without regard to the blatant lack of compliance and illegal practices taking place. This settlement should go a long way in thwarting the proceeds of illicit transactions being sent to China to fund human smuggling or drug trafficking, as well as to interrupt the ease with which scam artists flout U.S. banking regulations in schemes devised to defraud vulnerable Americans.”

“As a major player in the money transmittal business, Western Union had an obligation to its customers to ensure they offered honest services, which include upholding the Bank Secrecy Act, as well as other U.S. laws,” said Chief Weber. “Western Union’s blatant disregard of their anti-money laundering compliance responsibilities was criminal and significant. IRS-CI special agents – working with their investigative agency partners – uncovered the massive financial fraud and is proud to be part of this historic criminal resolution.”

“Today’s announcement of this significant settlement highlights the positive result of HSI’s collaboration with our partner agencies to hold Western Union accountable for their failure to comply with Bank Secrecy laws that preserve the integrity of the financial system of the United States,” said Special Agent in Charge Miller. “As a result of this settlement, Western Union now answers for these violations. I thank the Federal Reserve Board’s Office of the Inspector General for their partnership in this investigation.”

Western Union agreed to settle charges by the FTC in a complaint filed today in the U.S. District Court for the Middle District of Pennsylvania, alleging that the company’s conduct violated the FTC Act. The complaint charges that for many years, fraudsters around the world have used Western Union’s money transfer system even though the company has long been aware of the problem, and that some Western Union agents have been complicit in fraud. The FTC’s complaint alleges that Western Union declined to put in place effective anti-fraud policies and procedures and has failed to act promptly against problem agents. Western Union has identified many of the problem agents but has profited from their actions by not promptly suspending and terminating them.

In resolving the FTC charges, Western Union agreed to a monetary judgment of $586 million and to implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.

The FTC order prohibits Western Union from transmitting a money transfer that it knows or reasonably should know is fraud-induced, and requires it to:

  • block money transfers sent to any person who is the subject of a fraud report;
  • provide clear and conspicuous consumer fraud warnings on its paper and electronic money transfer forms;
  • increase the availability of websites and telephone numbers that enable consumers to file fraud complaints; and
  • refund a fraudulently induced money transfer if the company failed to comply with its anti-fraud procedures in connection with that transaction.

In addition, consistent with the telemarketing sales rule, Western Union must not process a money transfer that it knows or should know is payment for a telemarketing transaction. The company’s compliance with the order will be monitored for three years by an independent compliance auditor.

According to admissions contained in the deferred prosecution agreement (DPA) with the Justice Department and the accompanying statement of facts, Western Union violated U.S. laws—the Bank Secrecy Act (BSA) and anti-fraud statutes—by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.

As part of the scheme, fraudsters contacted victims in the U.S. and falsely posed as family members in need or promised prizes or job opportunities. The fraudsters directed the victims to send money through Western Union to help their relative or claim their prize. Various Western Union agents were complicit in these fraud schemes, often processing the fraud payments for the fraudsters in return for a cut of the fraud proceeds.

Western Union knew of but failed to take corrective action against Western Union agents involved in or facilitating fraud-related transactions. Beginning in at least 2004, Western Union recorded customer complaints about fraudulently induced payments in what are known as consumer fraud reports (CFRs). In 2004, Western Union’s Corporate Security Department proposed global guidelines for discipline and suspension of Western Union agents that processed a materially elevated number of fraud transactions. In these guidelines, the Corporate Security Department effectively recommended automatically suspending any agent that paid 15 CFRs within 120 days. Had Western Union implemented these proposed guidelines, it would have prevented significant fraud losses to victims and would have resulted in corrective action against more than 2,000 agents worldwide between 2004 and 2012.

Court documents also show Western Union’s BSA failures spanned eight years and involved, among other things, the acquisition of a significant agent that Western Union knew prior to the acquisition had an ineffective AML program and had contracted with other agents that were facilitating significant levels of consumer fraud. Despite this knowledge, Western Union moved forward with the acquisition and did not remedy the AML failures or terminate the high-fraud agents.

Similarly, Western Union failed to terminate or discipline agents who repeatedly violated the BSA and Western Union policy through their structuring activity in the Central District of California and the Eastern District of Pennsylvania. The BSA requires financial institutions, including money services businesses such as Western Union, to file currency transaction reports (CTRs) for transactions in currency greater than $10,000 in a single day. To evade the filing of a CTR and identification requirements, criminals will often structure their currency transactions so that no single transaction exceeds the $10,000 threshold. Financial institutions are required to report suspected structuring where the aggregate number of transactions by or on behalf of any person exceeds more than $10,000 during one business day. Western Union knew that certain of its U.S. Agents were allowing or aiding and abetting structuring by their customers. Rather than taking corrective action to eliminate structuring at and by its agents, Western Union, among other things, allowed agents to continue sending transactions through Western Union’s system and paid agents bonuses. Despite repeated compliance review identifying suspicious or illegal behavior by its agents, Western Union almost never identified the suspicious activity those agents engaged in in its required reports to law enforcement

Finally, Western Union has been on notice since at least December 1997, that individuals use its money transfer system to send illegal gambling transactions from Florida to offshore sportsbooks. Western Union knew that gambling transactions presented a heightened risk of money laundering and that through at least 2012, certain procedures it implemented were not effective at limiting transactions with characteristics indicative of illegal gaming from the United States to other countries.

Western Union entered into a DPA in connection with a two-count felony criminal information filed today in the Middle District of Pennsylvania charging Western Union with willfully failing to maintain an effective AML program and aiding and abetting wire fraud. Pursuant to the DPA, Western Union has agreed to forfeit $586 million and also agreed to enhanced compliance obligations to prevent a repeat of the charged conduct, including creating policies and procedures:

  • for corrective action against agents that pose an unacceptable risk of money laundering or have demonstrated systemic, willful or repeated lapses in compliance;
  • that ensure that its agents around the world will adhere to U.S. regulatory and AML standards; and
  • that ensure that the company will report suspicious or illegal activity by its agents or related to consumer fraud reports.

Since 2001, the department has charged and convicted 29 owners or employees of Western Union agents for their roles in fraudulent and structured transactions. The U.S. Attorney’s Office of the Middle District of Pennsylvania has charged and convicted 26 Western Union agent owners and employees for fraud-related violations; the U.S. Attorney’s Office of the Central District of California has secured a guilty plea from one Western Union agent for BSA violations, and the U.S. Attorney’s Office for the Eastern District of Pennsylvania has secured guilty pleas for BSA violations of two other individuals associated with Western Union agents for BSA violations.

USPIS’s Philadelphia Division’s Harrisburg, Pennsylvania, Office; the FBI’s Los Angeles Field Office; IRS-CI; HSI; FRB-CFPB OIG; Department of Treasury OIG; the Orange County Regional Narcotics Suppression Program Task Force; the Broward County, Florida Sherriff’s Offices; and Department of Labor investigated the case. Trial Attorney Margaret A. Moeser of the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit, Assistant U.S. Attorney Kim Douglas Daniel of the Middle District of Pennsylvania, Assistant U.S. Attorney Gregory W. Staples of the Central District of California, Assistant U.S. Attorneys Judy Smith and Floyd Miller of the Eastern District of Pennsylvania and Assistant U.S. Attorney Randall D. Katz of the Southern District of Florida are prosecuting the case. Asset forfeiture attorneys in each U.S. Attorney’s Office and the Money Laundering and Asset Recovery Section provided significant assistance in this matter. The department appreciates the significant cooperation and assistance provided by the FTC in this matter.

Persons who believe they were victims of the fraud scheme should visit the Department of Justice’s victim website at https://www.justice.gov/criminal-afmls/remission for instructions on how to request compensation through the Victim Asset Recovery Program.

The Victim Compensation Program, operated by the Money Laundering and Asset Recovery Section, is composed of a team of experienced professionals, including attorneys, accountants, auditors and claims analysts. In hundreds of cases, the Victim Compensation Program has successfully used its specialized expertise to efficiently convert forfeited assets to victim recoveries.

The FTC’s case was investigated with the assistance of the Department of Justice, the U.S. Postal Inspection Service, the Federal Bureau of Investigation, the Toronto Police Service Financial Crimes Unit, the Canadian Anti-Fraud Centre, the Royal Canadian Mounted Police, the Spanish National Police, and the Offices of the Attorney General for Arizona, Minnesota, and Vermont.

April 9, 2017 in AML | Permalink | Comments (0)

Saturday, April 8, 2017

Personal Income by State 2016

State personal income grew on average 3.6 percent in 2016, after increasing 4.5 percent in 2015, according to estimates released today by the Bureau of Economic Analysis. Growth of state personal income—the sum of net earnings by place of residence, property income, and personal current transfer receipts—ranged from –1.7 percent in Wyoming to 5.9 percent in Nevada (table 1).

Personal Income: Percent Change, 2015-2016

Earnings. Earnings increased 4.1 percent in 2016 and was the leading contributor to growth in personal income in most states (table 2).

Earnings 2015-2016 (Percent Change)

Both personal income and earnings grew faster in Nevada than in any other state. Earnings growth in management; arts, entertainment, and recreation; and construction were the leading contributors to its 7.2 percent growth in total earnings (table 3).

Utah, Washington, Florida, and Oregon had the next fastest growth in total earnings.

In Utah, earnings growth in construction, and in health care and social assistance, were the leading contributors to the 6.4 percent growth in total earnings.

In Washington, earnings growth in information, and in retail trade, were the leading contributors to the 6.3 percent growth in total earnings.

In Florida, earnings growth in professional, scientific, and technical services, and in health care and social assistance, were the leading contributors to the 6.2 percent growth in total earnings.

In Oregon, earnings growth in health care and social assistance, and in construction, were the leading contributors to the 5.9 percent growth in total earnings.

For the nation, earnings grew in 22 of the 24 industries for which BEA prepares estimates (table 5). Earnings growth in health care and social assistance; professional, scientific, and technical services; and construction were the leading contributors to overall growth in total earnings.

Mining earnings fell 13.6 percent nationally in 2016, after falling 13.3 percent in 2015. Lower mining earnings was the leading contributor to declines in total earnings in Oklahoma, Alaska, North Dakota, and Wyoming, and to very slow earnings growth in Louisiana.

Property income. Property income (dividends, interest, and rent) grew 1.9 percent on average in 2016, slower than the 2.8 percent increase in 2015. Dividend income decreased 0.3 percent in 2016, after increasing 2.7 percent in 2015. Growth in rental income slowed to 6.9 percent in 2016, after increasing 8.8 percent in 2015. Growth in interest income, in contrast, accelerated slightly to 0.9 percent in 2016, up from 0.1 percent 2015. The growth in property income ranged from 0.9 percent in Wyoming to 2.8 percent in North Dakota.

Personal current transfer receipts. Personal current transfer receipts grew 3.6 percent on average in 2016, down from 5.4 percent in 2015. Medicare and Medicaid benefits grew 5.3 percent and 5.0 percent respectively, while Social Security benefits grew only 2.8 percent. The slow growth in Social Security benefits reflects no cost of living adjustment for beneficiaries in 2016. The growth in personal current transfer receipts ranged from -5.9 percent in Alaska to 7.1 percent in Nevada. Medicaid benefits in Nevada increased 14.1 percent, the third consecutive above average annual increase. The sharp decline in Alaska reflects smaller payments from the Alaska Permanent Fund.

Fourth quarter personal income. State personal income grew 0.9 percent on average in the fourth quarter of 2016, down from 1.1 percent growth in the third quarter. Growth rates ranged from -0.1 percent in Nevada to 1.4 percent in Utah and California (table 6). Earnings grew 1.0 percent nationally, and was the leading contributor to growth in personal income in most states (table 7).

Personal Income: Percent Change, 2016:Q3-2016:Q4

Growth in construction earnings was a leading contributor to overall earnings growth for the nation and in most of the fastest growing states (table 8). In Utah, and California, only professional, scientific, and technical services earnings made a larger contribution to overall earnings growth, and in Florida, only health care and social assistance earnings made a larger contribution. In four of the fast growing states—Washington, Louisiana, Oregon, and Montana—growth in construction earnings made the largest contribution to the growth in total earnings, while in Colorado, construction earnings and healthcare and social assistance earnings made equal contributions to its growth in total earnings.

Declining farm earnings was the leading contributor to the slow growth in total earnings in many of the slowest growing states, including South Dakota, Kansas, North Dakota, Nebraska, and Iowa. In Nevada, the only state with declining personal income in the fourth quarter, earnings were lower in arts, entertainment, and recreation; management; and professional, scientific, and technical services after large lump-sum payments were made in all three industries in the third quarter.

Updates to Personal Income. Today, BEA also released revised quarterly personal income estimates for 2016:Q1 to 2016:Q3. Updates were made to incorporate source data that are more complete and more detailed than previously available, and to align the states with revised national estimates. BEA also released revised quarterly estimates of population and per capita personal income for 2010:Q1-2016:Q3, and revised annual estimates of population and per capita personal income for 2010-2015.

April 8, 2017 in Economics | Permalink | Comments (0)

Friday, April 7, 2017

Gross Domestic Product and Corporate Profits: Fourth Quarter and Annual 2016

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2016 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the
third quarter of 2016, real GDP increased 3.5 percent.
The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 1.9 percent. With this third estimate for the fourth quarter, the general picture of economic growth remains largely the same; personal consumption expenditures (PCE) increased more than previously estimated (see "Updates to GDP" on page 2).
Real GDP: Percent Change from Preceding Quarter
Real gross domestic income (GDI) increased 1.0 percent in the fourth quarter, compared with an increase of 5.0 percent in the third. The average of real GDP and real GDI, a supplemental measure of
U.S. economic activity that equally weights GDP and GDI, increased 1.5 percent in the fourth quarter, compared with an increase of 4.3 percent in the third quarter (table 1).

The increase in real GDP in the fourth quarter reflected positive contributions from PCE, private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local
government spending that were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP in the fourth quarter reflected downturns in exports and in federal government spending, an acceleration in imports, and a deceleration in nonresidential fixed investment
that were partly offset by accelerations in private inventory investment and in PCE, and upturns in residential fixed investment and in state and local government spending.

Current-dollar GDP increased 4.2 percent, or $194.1 billion, in the fourth quarter to a level of $18,869.4 billion. In the third quarter, current-dollar GDP increased 5.0 percent, or $225.2 billion (table 1 and
table 3).

The price index for gross domestic purchases increased 2.0 percent in the fourth quarter, compared with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 2.0 percent,
compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 1.7 percent (appendix table A).


Updates to GDP

The upward revision to the percent change in real GDP primarily reflected upward revisions to PCE and to private inventory investment that were partly offset by downward revisions to nonresidential fixed
investment and to exports. Imports, which are a subtraction in the calculation of GDP, were revised upward. For more information, see the Technical Note. For information on updates to GDP, see the
"Additional Information" section that follows.

                                       Advance Estimate          Second Estimate            Third Estimate

                                                     (Percent change from preceding quarter)
Real GDP                                     1.9                       1.9                       2.1
Current-dollar GDP                           4.0                       3.9                       4.2
Real GDI                                     ---                       ---                       1.0
Average of Real GDP and Real GDI             ---                       ---                       1.5
Gross domestic purchases price index         2.0                       1.9                       2.0
PCE price index                              2.2                       1.9                       2.0


2016 GDP

Real GDP increased 1.6 percent in 2016 (that is, from the 2015 annual level to the 2016 annual level), compared with an increase of 2.6 percent in 2015 (table 1).

The increase in real GDP in 2016 reflected positive contributions from PCE, residential fixed investment, state and local government spending, exports, and federal government spending that were partly offset
by negative contributions from private inventory investment and nonresidential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

The deceleration in real GDP from 2015 to 2016 reflected downturns in private inventory investment and in nonresidential fixed investment and decelerations in PCE, in residential fixed investment, and in
state and local government spending that were partly offset by a deceleration in imports and accelerations in federal government spending and in exports.

Current-dollar GDP increased 3.0 percent, or $532.5 billion, in 2016 to a level of $18,569.1 billion, compared with an increase of 3.7 percent, or $643.5 billion, in 2015 (table 1 and table 3).

Real GDI increased 1.6 percent in 2016, compared with an increase of 2.5 percent in 2015 (table 1).

The price index for gross domestic purchases increased 1.0 percent in 2016, compared with an increase of 0.4 percent in 2015 (table 4).

During 2016 (that is, measured from the fourth quarter of 2015 to the fourth quarter of 2016), real GDP increased 2.0 percent, compared with an increase of 1.9 percent during 2015.  The price index for gross
domestic purchases increased 1.5 percent during 2016, compared with an increase of 0.4 percent during 2015.  Real GDI increased 1.9 percent during 2016, compared with an increase of 1.5 percent during
2015 (table 7).


Corporate Profits (table 12)

Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $11.2 billion in the fourth quarter of 2016, compared with an
increase of $117.8 billion in the third quarter.

Profits of domestic financial corporations increased $26.5 billion in the fourth quarter, compared with an increase of $50.1 billion in the third. Profits of domestic nonfinancial corporations decreased $60.4
billion, in contrast to an increase of $66.4 billion. The estimate of nonfinancial corporate profits in the fourth quarter was reduced by a $4.95 billion ($19.8 billion at an annual rate) settlement between a U.S.
subsidiary of Volkswagen and the federal and state governments. For more information, see the FAQ, "What are the effects of the Volkswagen buyback deal on GDP and the national accounts?”. The
rest-of-the-world component of profits increased $45.1 billion, compared with an increase of $1.3 billion. This measure is calculated as the difference between receipts from the rest of the world and payments to
the rest of the world. In the fourth quarter, receipts increased $9.1 billion, and payments decreased $36.0 billion.

In 2016, profits from current production decreased $2.3 billion, compared with a decrease of $64.0 billion in 2015. Profits of domestic financial corporations increased $20.5 billion, compared with an
increase of $8.5 billion. Profits of domestic nonfinancial corporations decreased $47.0 billion, compared with a decrease of $47.3 billion. The rest-of-the-world component of profits increased $24.3 billion, in
contrast to a decrease of $25.2 billion.

April 7, 2017 in Economics | Permalink | Comments (0)

Thursday, April 6, 2017

Technology offers critical solutions to prevent, identify and tackle tax evasion and tax fraud

 Technological solutions offer a clear path for dramatically reducing tax evasion and tax fraud, which cost governments billions in lost revenue annually, according to a new OECD Technology-tools-to-tackle-tax-evasion-and-tax-fraudreport.

Technology Tools to Tackle Tax Evasion and Tax Fraud demonstrates how technology is currently being used by tax administrations in countries worldwide to prevent, identify and tackle tax evasion and tax fraud. These solutions can offer a win-win: better detection of crime, higher revenue recovery, and synergies that can make tax compliance easier for business and tax administrations.

Drawing on the experience of 21 countries, the report provides real and readily-applicable examples of best practices in the effective use of technology in the fight against tax crimes:

  • In Rwanda, the introduction of point of sale technology to address electronic sales suppression resulted in a 20% increase in VAT collected on sales.
  • In the Canadian province of Quebec, similar technology was introduced in the restaurant sector, resulting in the recovery of approximately EUR 822 million in taxes.
  • In Hungary, electronic cash registers increased VAT revenue by 15% in the concerned sectors.

The report will be launched today during the 2017 OECD Global Anti-Corruption and Integrity Forum in Paris. The event brings together stakeholders from government, academia, business, trade and civil society to engage in dialogue on policy, best practices, and recent developments in the fields of integrity and anti-corruption.

Grace Perez-Navarro, Deputy Director of the OECD's Centre for Tax Policy and Administration will present the report during the Forum's session on "Restoring Trust in the Tax System: Ensuring Everyone Pays their Fair Share". This session will be broadcast live from 11:00-12:30 (CEST). Further details are available on the Forum website:
www.oecd.org/cleangovbiz/live-streaming-anti-corruption-integrity-forum-2017.htm

The report was prepared by the OECD's Task Force on Tax Crimes and Other Crimes, which works to further the Oslo Dialogue. Launched by the OECD in 2011, the Oslo Dialogue promotes a whole-of-government approach to tackling financial crimes by fostering inter-agency and international co-operation.

April 6, 2017 in Tax Compliance | Permalink | Comments (0)

Wednesday, April 5, 2017

The Financial Crimes Enforcement Network (FinCEN) today announced the renewal of existing Geographic

FINCEN 2 Targeting Orders (GTO) that temporarily require U.S. title insurance companies to identify the natural persons behind shell companies used to pay “all cash” for high-end residential real estate in six major metropolitan areas. FinCEN has found that about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in “all-cash” transactions.

“These GTOs are producing valuable data that is assisting law enforcement and is serving to inform our future efforts to address money laundering in the real estate sector,” said FinCEN Acting Director Jamal El-Hindi. “The subject of money laundering and illicit financial flows involving the real estate sector is something that we have been taking on in steps to ensure that we continue to build an efficient and effective regulatory approach.”

The GTOs renewed today include the following major U.S. geographic areas:  (1) all boroughs of New York City; (2) Miami-Dade County and the two counties immediately north (Broward and Palm Beach); (3) Los Angeles County; (4) three counties comprising part of the San Francisco area (San Francisco, San Mateo, and Santa Clara counties); (5) San Diego County; and (6) the county that includes San Antonio, Texas (Bexar County). The monetary thresholds for each geographic area can be found in this table. A sample GTO, which becomes effective for 180 days beginning on February 24, 2017, is available here.

FinCEN is covering title insurance companies because title insurance is a common feature in the vast majority of real estate transactions. Title insurance companies thus play a central role that can provide FinCEN with valuable information about real estate transactions of concern. The GTOs do not imply any derogatory finding by FinCEN with respect to the covered companies. To the contrary, FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.

Any questions about the Orders should be directed to the FinCEN Resource Center at 800-767-2825.

Frequently asked questions regarding these GTOs are available here.

Form 8300 Example

April 5, 2017 in AML | Permalink | Comments (0)

Tuesday, April 4, 2017

State Department Employee Arrested and Charged With Concealing Extensive Contacts With Foreign Agents

A federal complaint was unsealed today charging Candace Marie Claiborne, 60, of Washington, D.C., and an employee of the FBISeal (1)U.S. Department of State, with obstructing an official proceeding and making false statements to the FBI, both felony offenses, for allegedly concealing numerous contacts that she had over a period of years with foreign intelligence agents.

The charges were announced by Acting Assistant Attorney General Mary B. McCord for National Security, U.S. Attorney Channing D. Phillips of the District of Columbia and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office.

“Candace Marie Claiborne is a U.S. State Department employee who possesses a Top Secret security clearance and allegedly failed to report her contacts with Chinese foreign intelligence agents who provided her with thousands of dollars of gifts and benefits,” said Acting Assistant Attorney General McCord. “Claiborne used her position and her access to sensitive diplomatic data for personal profit. Pursuing those who imperil our national security for personal gain will remain a key priority of the National Security Division.”

“Candace Claiborne is charged with obstructing an official proceeding and making false statements in connection with her alleged concealment and failure to report her improper connections to foreign contacts along with the tens of thousands of dollars in gifts and benefits they provided,” said U.S. Attorney Phillips. “As a State Department employee with a Top Secret clearance, she received training and briefing about the need for caution and transparency. This case demonstrates that U.S. government employees will be held accountable for failing to honor the trust placed in them when they take on such sensitive assignments”

“Candace Claiborne is accused of violating her oath of office as a State Department employee, who was entrusted with Top Secret information when she purposefully mislead federal investigators about her significant and repeated interactions with foreign contacts," said Assistant Director in Charge Vale. "The FBI will continue to investigate individuals who, though required by law, fail to report foreign contacts, which is a key indicator of potential insider threats posed by those in positions of public trust.”

The FBI arrested Claiborne on March 28. She made her first appearance this afternoon in the U.S. District Court for the District of Columbia.

According to the affidavit in support of the complaint and arrest warrant, which was unsealed today, Claiborne began working as an Office Management Specialist for the Department of State in 1999. She has served overseas at a number of posts, including embassies and consulates in Baghdad, Iraq, Khartoum, Sudan, and Beijing and Shanghai, China. As a condition of her employment, Claiborne maintains a Top Secret security clearance. Claiborne also is required to report any contacts with persons suspected of affiliation with a foreign intelligence agency.

Despite such a requirement, the affidavit alleges, Claiborne failed to report repeated contacts with two intelligence agents of the People’s Republic of China (PRC), even though these agents provided tens of thousands of dollars in gifts and benefits to Claiborne and her family over five years. According to the affidavit, the gifts and benefits included cash wired to Claiborne’s USAA account, an Apple iPhone and laptop computer, Chinese New Year’s gifts, meals, international travel and vacations, tuition at a Chinese fashion school, a fully furnished apartment, and a monthly stipend. Some of these gifts and benefits were provided directly to Claiborne, the affidavit alleges, while others were provided through a co-conspirator.

According to the affidavit, Claiborne noted in her journal that she could “Generate 20k in 1 year” working with one of the PRC agents, who, shortly after wiring $2,480 to Claiborne, tasked her with providing internal U.S. Government analyses on a U.S.-Sino Strategic Economic Dialogue that had just concluded.

Claiborne, who allegedly confided to a co-conspirator that the PRC agents were “spies,” willfully misled State Department background investigators and FBI investigators about her contacts with those agents, the affidavit states. After the State Department and FBI investigators contacted her, Claiborne also instructed her co-conspirators to delete evidence connecting her to the PRC agents, the affidavit alleges.

Charges contained in a criminal complaint are merely allegations, and every defendant is presumed innocent until proven guilty beyond a reasonable doubt.

The maximum penalty for a person convicted of obstructing an official proceeding is 20 years in prison. The maximum penalty for making false statements to the FBI is five years in prison. The maximum statutory sentence is prescribed by Congress and is provided here for informational purposes. If convicted of any offense, the sentencing of the defendant will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

At her court appearance today, Claiborne pleaded not guilty before the Honorable Magistrate Judge Robin M. Meriweather. A preliminary hearing was set for April 18.

The FBI’s Washington Field Office is leading the investigation into this matter.

April 4, 2017 | Permalink | Comments (0)

Monday, April 3, 2017

May the Netherlands pry open the U.S.' offshore status as a secrecy jurisdiction? Netherlands Using IRS and U.S. Courts to Uncover Its Tax Cheats Hiding U.S. Accounts

May the Netherlands pry open the U.S.' offshore status as a secrecy jurisdiction?

The Netherlands Offshore Credit Card Pilot Study

The Netherlands’ request for information stems from the Netherlands Tax and Customs Administration’s (“NTCA”) Payment Card Project, in which information on the use of payment Belastingdienst cards (debit and credit cards) issued by foreign financial institutions are used to identify noncompliant Netherlands taxpayers.  The NTCA conducted a pilot project using data obtained from four acquirers/processors to identify Dutch taxpayers with undisclosed foreign bank accounts by analyzing payment transactions in the Netherlands with cards issued by financial institutions outside the Netherlands. The pilot project successfully identified the cardholders of approximately 75 percent of the cards and approximately two-thirds of the identified cardholders confessed to undisclosed offshore bank accounts linked to the payment cards in question, resulting in the NTCA’s collection of several million euros in additional tax, interest, and penalties from the noncompliant taxpayers.  

The pilot project analyzed transactional data related to a sample of 51 payment cards drawn from a pool of all cards used in the Netherlands more than 75 days from 2009 through 2011 issued by financial institutions outside the Netherlands deemed likely to shelter these accounts from disclosure to the Netherlands.  75 percent of the 51 cards owners were identified of which approximately 25 (two-thirds) of the card owners admitted to not disclosing the underlying foreign bank account from which the card is paid.  Some of the accounts held non-reported earnings on savings and some accounts held nonreported business income.

The Netherlands has advised the IRS that the NTCA has been unable to obtain transaction records pertaining to American Express Card products in the same manner as it did from four other acquirers/processors (i.e. using information sources in the Netherlands) because American Express has informed the NTCA that transactions are processed exclusively on computer systems maintained in the United States by American Express Travel Related Services Company, Inc.  The NTCA has informed the IRS that, in the absence of information sought from American Express, it will not be able to identify Dutch taxpayers using undisclosed foreign accounts to avoid tax.   Based upon the linking of these payment cards to accounts outside the Netherlands, without leaving an identifiable record of the transactions in those accounts, the Netherlands has reason to believe that the holders of the payment cards may have failed to report foreign financial accounts or income on the tax returns they were required to file under the revenue laws of the Netherlands.

Examples of Netherlands Non-Compliant Taxpayers Caught

Examples include a Dutch medic with a credit card linked to a €700,000 bank account in Luxembourg was discovered as undisclosed in the medic’s tax return.  In another case, a Dutch entrepreneur was found to have a credit card linked to an unreported bank account in Malta that held at least €60,000 not reported on the entrepreneur’s tax return.  The Netherlands has now expanded its Payment Card Project with an additional 1,000 cards currently under investigation. 

The John Doe Request on Behalf of Netherlands Revenue Authority

A federal court in Texas authorized the Internal Revenue Service (IRS) to serve a John Doe Summons on American Express Travel Related Services Company, the Justice Department announced.  The IRS John Doe summons seeks information about persons residing in the Netherlands that have American Express debit or credit cards linked to bank accounts located outside of the Netherlands. The summons is referred to as “John Doe” summonses because the IRS does not know the identity of the person being investigated.The IRS is in receipt of a request from the Kingdom of the Netherlands for information pursuant to Article 30 of the Convention Between the Government of the United States of America and the Kingdom of the Netherlands.

The request states that the information is to be used to determine the correct income tax liabilities of certain as-yet-unidentified taxpayers under the laws of the Netherlands.  This “John Doe” summons relates to the investigation of a particular person or ascertainable group or class of persons, that is, Dutch taxpayers, who at any time during the period January 1, 2009 through December 31, 2016, held an American Express payment card linked to a bank account located outside the Netherlands. There is a reasonable basis for believing that such person or group or class of persons may fail, or may have failed, to comply with one or more provisions of the internal revenue laws of the Netherlands. The information sought to be obtained from the examination of the records or testimony (and the identity of the person with respect to whose tax liability the summons has been issued) is not readily available from other sources.

 

Download American_express_ex_parte_petition_for_leave_to_serve_john_doe_summons

download for free the LexisNexis® Guide to FATCA & CRS Compliance (5th ed., 2017)  chapter 1: https://ssrn.com/abstract=2926119

April 3, 2017 in GATCA | Permalink | Comments (0)

Former Vice President of Finance at Publicly Traded Company Charged with Accounting and Securities Fraud Scheme

A former vice president of finance for Bankrate Inc., a publicly traded financial services and marketing company Postal_Inspectors-Seriesheadquartered in New York City, was charged in an indictment filed yesterday for his alleged participation in a complex accounting and securities fraud scheme.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Benjamin Greenberg of the Southern District of Florida and Chief Postal Inspector Guy J. Cottrell of the U.S. Postal Inspection Service (USPIS) made the announcement today.

Hyunjin Lerner, 48, of Martin County, Florida, was charged in an indictment filed in the Southern District of Florida with one count of conspiracy to commit wire fraud, falsify a public company’s books, records and accounts and make false statements to a public company’s accountants; three counts of wire fraud; one count of securities fraud; four counts of false entries in a public company’s books, records and accounts; and three counts of false statements to a public company’s accountants.  Lerner, who previously worked at Bankrate’s offices in Palm Beach Gardens, Florida, made his initial appearance earlier today before U.S. Magistrate Judge John J. O’Sullivan of the Southern District of Florida and was released on bond.

The indictment alleges that between 2011 and 2014, Lerner and his co-conspirators carried out a complex scheme to manipulate Bankrate’s financial statements and artificially inflate Bankrate’s earnings.  According to the indictment, Lerner and his co-conspirators allegedly engaged in “cookie jar” or “cushion” accounting, meaning  unsupported expense accruals were left on Bankrate’s books and then selectively reversed in later quarters to meet earnings goals.  In addition, Lerner and his co-conspirators allegedly: misrepresented certain company expenses as “deal costs” in order to artificially inflate publicly reported adjusted earnings metrics; booked hundreds of thousands of dollars in unsupported revenue to further inflate Bankrate’s reported revenue and earnings; and made materially false statements to conceal the improper accounting entries from Bankrate’s auditors, shareholders and the investing public.

An indictment is merely an allegation and the defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.  

The USPIS Washington, D.C., Division investigated the case.  Assistant Chief Henry Van Dyck and Trial Attorneys Rush Atkinson, Emily Scruggs and Somil Trivedi of the Criminal Division’s Fraud Section are prosecuting the case.  The Securities and Exchange Commission and the U.S. Attorney’s Office of the Southern District of Florida provided assistance in this matter.

April 3, 2017 in AML, Financial Regulation | Permalink | Comments (0)

Sunday, April 2, 2017

Tennessee General Sessions Judge Charged with Attempting to Obstruct Justice through Bribery and Witness Tampering

A general sessions judge was charged today in a federal criminal complaint with attempting to obstruct justice through bribery and witness tampering. 

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Jack Smith of the Middle District of Tennessee and Assistant FBISealSpecial Agent in Charge Matthew Espenshade of the FBI made the announcement.  

Cason “Casey” Moreland, 59, of Nashville, was charged with obstruction of justice and witness tampering in a complaint filed in the Middle District of Tennessee.  Moreland was arrested this morning and is expected to make his initial appearance later this afternoon.

“The court and criminal justice system function justly only if the public has confidence in their independence and impartiality.  Abuses of power like the one charged in this case erode that confidence,” said Acting Assistant Attorney General Blanco.  “Our prosecutors and law enforcement partners work diligently every day to root out corruption like that charged and to ensure the public can trust our public institutions.”

“The allegations set forth in the complaint are some of the most egregious abuses of power that I have ever seen,” said Acting U.S. Attorney Smith.  “Such an abuse of power undermines the credibility of and destroys the public’s trust in the court system and strikes at the very essence of our judicial branch of government.  Public corruption remains one of the highest priorities of the U.S. Attorney’s Office and the FBI and officials who engage in such behavior will always be thoroughly investigated and vigorously prosecuted.”
            
“Public corruption of this nature threatens the public's confidence in our judicial system and the administration of justice,” said Assistant Special Agent in Charge Espenshade.  “This is why public corruption is the FBI's top criminal investigative priority. The FBI and our partner law enforcement agencies will not allow these behaviors to shake the foundations of our society.”

According to the complaint, Moreland served as a general sessions judge in Davidson County, Tennessee, and allegedly violated federal anti-corruption statutes by soliciting, accepting and extorting things of value in return for performing official acts that benefitted those persons and their associates.  

 The criminal complaint alleges that Moreland in fact became aware of the FBI’s investigation on Feb. 1, 2017, when agents attempted to interview him.  The complaint alleges that Moreland knew that an individual was a material witness in this investigation and that the witness had made statements implicating his criminal conduct. 

The complaint alleges that beginning in approximately March 1, 2017, Moreland took steps to obstruct and interfere with the federal investigation by attempting to have the witness sign an affidavit recanting prior statements about Moreland.  

Specifically, the complaint alleges that Moreland devised a scheme to pay several thousand dollars to the witness in exchange for changing that witness’s statements about Moreland.  Moreland also conveyed his desire to orchestrate a traffic stop where the witness would be arrested for drugs that had been previously planted on the witness.  To conceal his involvement in the scheme, Moreland allegedly instructed another individual to use a burner phone purchased under a fictitious name and speak through an intermediary when corresponding with the witness.  

The complaint also alleges that on March 11, 2017, Moreland gave the other individual an affidavit, written as though the witness had authored it and paid the other individual $5,100 cash to insure that his fingerprints would not be on the affidavit.  During subsequent conversations, the other individual told Moreland that the witness had agreed to sign the affidavit for an additional $1,000, and Moreland allegedly provided an additional $1,000 cash to pay the witness.

Moreland Complaint

April 2, 2017 in AML | Permalink | Comments (0)

Saturday, April 1, 2017

Russian Citizen Pleads Guilty for Involvement in Global Botnet Conspiracy

A Russian citizen pleaded guilty today for his participation in a criminal enterprise that installed and exploited malicious computer software (malware) on tens of thousands of FBI DOJ logocomputer servers throughout the world to generate millions of dollars in fraudulent payments.  

Acting Assistant Attorney General Kenneth A. Blanco of the Department of Justice’s Criminal Division, Acting U.S. Attorney Gregory G. Brooker of the District of Minnesota and Assistant Director Scott Smith of the FBI’s Cyber Division made the announcement.

Maxim Senakh, 41, of Velikii Novgorod, Russia, pleaded guilty today to conspiracy to violate the Computer Fraud and Abuse Act and to commit wire fraud before U.S. District Judge Patrick J. Schlitz of the District of Minnesota.  Sentencing is set for Aug. 3, 2017.  Senakh was indicted on Jan. 13, 2015, and was subsequently arrested by Finnish authorities, who extradited him to the United States. 

According to admissions made in connection with the plea agreement, the malware, which is known as Ebury, harvested log-on credentials from infected computer servers, allowing Senakh and his co-conspirators to create and operate a botnet comprising tens of thousands of infected servers throughout the world, including thousands in the United States.  Senakh and his co-conspirators used the Ebury botnet to generate and redirect internet traffic in furtherance of various click-fraud and spam e-mail schemes, which fraudulently generated millions of dollars in revenue.  As part of the plea, Senakh admitted that he supported the criminal enterprise by creating accounts with domain registrars which helped build the Ebury botnet infrastructure and personally profited from traffic generated by the Ebury botnet. 

The FBI Minneapolis Field Office is investigating the case.  

April 1, 2017 in AML | Permalink | Comments (0)

Friday, March 31, 2017

Romanian Man Pleads Guilty to Participating in International Fraud Scheme Involving Online Marketplace Websites

A Romanian man pleaded guilty today to one count of conspiracy to commit bank and wire fraud for his participation in an international scheme involving fraudulent advertisements FBISealon online marketplaces that induced victims to send approximately $873,000 to conspirators for the purchase of various items that were not actually available for purchase, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Acting U.S. Attorney Jack Smith of the Middle District of Tennessee.

Vlad Diaconu, 36, of Bucharest, Romania, pleaded guilty before U.S. District Judge Marvin E. Aspen of the Northern District of Illinois, who sits by designation in the Middle District of Tennessee.  Diaconu was indicted in the Middle District of Tennessee in June 2015 for conspiracy to commit bank and wire fraud in connection with his participation in the online marketplace scheme.  Diaconu was extradited from Romania to the Middle District of Tennessee in August 2016.

In connection with his guilty plea, Diaconu admitted that his co-conspirators fraudulently listed vehicles for sale at online marketplaces such as eBay.  When victims expressed interest in purchasing the vehicles, the co-conspirators responded with emails directing the victims to wire payments to specified bank accounts.  These bank accounts were opened by members of the conspiracy, including Diaconu, who used false identities and fraudulent documents, including counterfeit passports.  Specifically, twelve victims sent a total of $184,900 to accounts that were opened by Diaconu under the belief that they were purchasing the advertised vehicles, and other victims sent additional funds to bank accounts opened by co-conspirators.  Diaconu and his co-conspirators subsequently sent the bulk of the victims’ funds to co-conspirators located overseas.  

The FBI and the Tennessee Bureau of Investigation investigated the case.  Senior Counsel Mysti Degani of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Byron M. Jones of the Middle District of Tennessee prosecuted the case.  The Criminal Division’s Office of International Affairs also provided substantial assistance.

March 31, 2017 in AML | Permalink | Comments (0)

Thursday, March 30, 2017

Former Texas Congressman Stephen Stockman and Staff Official Indicted on Conspiracy Charges, Assistant Pleads Guilty

A former U.S. Congressman and one of his associates were indicted today for their roles in orchestrating a scheme to steal hundreds of thousands of dollars from charitable FBISeal (1)foundations and the individuals who ran those foundations.  Some of the funds were allegedly used to illegally finance the politician’s campaigns for public office and to pay for his personal expenses and those of his associates.  

 Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Assistant Director in Charge Andrew W. Vale of the FBI's Washington Field Office and Special Agent in Charge D. Richard Goss of IRS Criminal Investigation’s (CI) Houston Field Office

Former U.S. Representative Stephen E. Stockman, 60, of Clear Lake, Texas, and the former director of special projects in Stockman’s congressional office, Jason Posey, 46, formerly of the Houston, Texas, area, were charged in a 28-count superseding indictment with mail and wire fraud, conspiracy, making false statements to the Federal Election Commission (FEC), making excessive campaign contributions and money laundering.  Stockman is also charged with filing a false tax return that concealed his receipt and personal use of the fraudulent proceeds, while Posey is charged with falsifying an affidavit in order to obstruct an FEC investigation.  Thomas Dodd, a former special assistant in Stockman’s congressional office, pleaded guilty to his involvement in the scheme on March 20, 2017.   
  
According to the superseding indictment, from May 2010 to October 2014, Stockman solicited approximately $1,250,000 in donations based on false pretenses.  Specifically, the indictment alleges that in 2010, Stockman diverted a significant portion of $285,000 donated to charitable causes to pay for his and Dodd’s own personal expenses and to further Stockman’s own interests.  The indictment further alleges that in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations, much of which Stockman used to finance his 2012 congressional campaign.  

Shortly after Stockman took office in the U.S. House of Representatives in 2013, he and Dodd allegedly used the name of a nonprofit entity to solicit and receive a $350,000 charitable donation.  Stockman allegedly used this donation for a variety of personal and campaign expenses, including illegal conduit campaign contributions, a covert surveillance project targeting a perceived political opponent and payments associated with Stockman’s U.S. Senate campaign in early 2014.  

The superseding indictment further alleges that, in connection with Stockman’s Senate campaign, Posey used a nonprofit entity to secure a $450,571 donation in order to fund a mass-mailing project attacking Stockman’s opponent.  Only approximately half of the donation was spent on the mail campaign, and Posey used a portion of the unspent balance to pay for expenses associated with Stockman’s Senate campaign and to fund personal expenses, according to the charges.

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

The FBI and IRS-CI conducted the investigation.  Trial Attorneys Ryan J. Ellersick and Robert J. Heberle of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Melissa Annis of the Southern District of Texas are prosecuting the case.  

March 30, 2017 in AML | Permalink | Comments (0)

Wednesday, March 29, 2017

Deutsche Bank Sentenced for Manipulation of LIBOR: $2.519 Billion in Fines, 3 year Monitoring

DB Group Services (UK) Limited (DBGS), a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), was sentenced today for its role in manipulating London Interbank Offered FBISeal Rates (LIBOR) for U.S. Dollar and several other currencies.  LIBOR is a leading benchmark used in financial products and transactions around the world.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew W. Vale of the FBI’s Washington Field Office made the announcement.

DBGS was sentenced by U.S. District Judge Stefan R. Underhill of the District of Connecticut. DBGS pleaded guilty on April 23, 2015, to one count of wire fraud for its role in manipulating LIBOR benchmark interest rates. DBGS signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $150 million fine, which the court accepted in imposing today’s sentence.  In addition, Deutsche Bank, the Frankfurt, Germany-based parent company of DBGS, entered into a deferred prosecution agreement (DPA) with the Justice Department requiring Deutsche Bank to pay an additional $625 million criminal penalty, to admit and accept responsibility for its misconduct and to continue cooperating with the Justice Department in its ongoing investigation.  The DPA also requires Deutsche Bank to retain a corporate monitor for three years.

Together with approximately $1.744 billion in regulatory penalties and disgorgement – $800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action – the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.

According to the plea agreement, from at least 2003 through early 2010, numerous Deutsche Bank derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts, many times in conjunction with other banks, to move these benchmark rates in a direction favorable to their trading positions.  Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than the accurate rates that complied with the definition of LIBOR.  Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.  Deutsche Bank admitted that its fraudulent LIBOR submissions did, in fact, affect the resulting LIBOR fix on multiple occasions.

The FBI’s Washington Field Office is conducting the investigation.  Trial Attorneys Alison Anderson and Richard Powers of the Criminal Division’s Fraud Section and Trial Attorney Michael Koenig of the Antitrust Division are prosecuting the case.  The Criminal Division’s Office of International Affairs has provided assistance in this matter.  

March 29, 2017 in Financial Regulation | Permalink | Comments (0)

Guidance for a Risk-Based Approach to Virtual Currencies

Virtual currencies have emerged and attracted investment in payment infrastructure built on their software protocols. These payment mechanisms seek to provide a new method for FATF logotransmitting value over the internet. At the same time, virtual currency payment products and services (VCPPS) present money laundering and terrorist financing (ML/TF) risks. FATF made a preliminary assessment of these ML/TF risks in the June 2014 virtual currencies report (key definitions and Potential AML/CFT Risks).

As part of a staged approach, the FATF has developed this Guidance focusing on the points of intersection that provide gateways to the regulated financial system, in particular convertible virtual currency exchangers. FATF will continue to monitor developments in VCPPS and emerging risks and mitigating factors to update this Guidance, to include, where appropriate, emerging best practices to address regulatory issues arising in respect of ML/TF risks associated with VCPPS.

This Guidance seeks to:

  • Show how specific FATF Recommendations should apply to convertible virtual currency exchangers in the context of VCPPS, identify AML/CFT measures that could be required, and provide examples; and
  • Identify obstacles to applying mitigating measures rooted in VCPPS’s technology and/or business models and in legacy legal frameworks.

Guidance for a Risk-based approach to virtual currencies

Download pdf ( 607kb)

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

March 29, 2017 in Financial Regulation | Permalink | Comments (0)

Tuesday, March 28, 2017

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

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

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

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

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

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

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

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

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

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

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

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