Monday, March 13, 2017

Draft Form 8975, Country-by-Country Report, and Schedules A, Tax Jurisdiction and Entity Financial Information for 2017 Filing

Some jurisdictions have adopted country-by-country (CbC) reporting requirements for annual accounting periods beginning on or after January 1, 2016, that would require a Irs_logoconstituent entity resident in the jurisdiction to report CbC information if the constituent entity is part of an MNE group with an ultimate parent entity resident in a jurisdiction that does not have a CbC reporting requirement (including pursuant to parent surrogate filing) for the same annual accounting period (local CbC filing). Consequently, constituent entities of a U.S. MNE group may be subject to local CbC filing for early reporting periods, unless the ultimate parent entity files a Form 8975, or reports CbC information to another jurisdiction that accepts surrogate filing, for such early reporting period. The preamble to the CbC reporting regulations indicated that the Treasury Department and the IRS would provide a procedure for ultimate parent entities of U.S. MNE groups to file Form 8975 for early reporting periods.

Thus, beginning on September 1, 2017, Form 8975 may be filed for an early reporting period with the income tax return or other return as provided in the Instructions to Form 8975 for the taxable year of the ultimate parent entity of the U.S. MNE group with or within which the early reporting period ends.

draft CbCR form 8975 here

draft Schedule A CbCR financial information 

draft instructions to complete Form 8975 and its Schedule A

An ultimate parent entity that files its return electronically must file the Form 8975 through the IRS Modernized e-File system in Extensible Markup Language (XML) format, not as a binary attachment (such as a PDF file). The IRS intends to provide specific electronic filing information on Form 8975 to the software industry in early 2017 so that developers will be able to make Form 8975 available in their software ahead of the September 1, 2017, implementation date. For filers of Form 8975 that are not eligible to use Modernized e-File to file their income tax return, a paper version of Form 8975 will be made available in advance of the September 1, 2017, implementation date.

Professor William Byrnes' Practical Guide to U.S. Transfer Pricing (LexisNexis) is a best-selling 3,000 page treatise updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Fifty co-authors contribute subject matter expertise on technical issues faced by tax and risk management counsel.  Free download of chapter 2 here

March 13, 2017 in BEPS | Permalink | Comments (0)

Sunday, March 12, 2017

White Collar Crime & the DOJ: Speech by DOJ to the American Bar's White Collar Crimes Institute

About the Criminal Division 

Today, I have the honor and the privilege of speaking with you as the Acting Assistant Attorney General for the Criminal Division of the U.S. Department of Justice.  For more than a Justice logodecade, I have served in the Criminal Division as a Deputy Assistant Attorney General with a portfolio that included, through the years, the Money Laundering and Asset Recovery Section, the Narcotic and Dangerous Drug Section, the Organized Crime and Gang Section, the Child Exploitation and Obscenity Section, and my portfolio also included responsibilities over matters in Colombia, Afghanistan, Mexico and Panama.    

Many of you in this room are well acquainted with the work of the Criminal Division and its roughly 600 attorneys spread across 17 sections and offices, mostly in Washington D.C., but some stationed in offices around the country and many stationed in offices overseas and around the world.  As you all know, the Criminal Division’s investigations and prosecutions run the gamut of white collar crime cases – fraud, bribery, public corruption, organized crime, trade secret theft, money laundering, securities fraud, government fraud, healthcare fraud and computer and internet fraud – to name a few.

You are also well aware that the already substantial international aspects of the Criminal Division’s white collar criminal enforcement efforts—and in particular its Foreign Corrupt Practices Act (FCPA), Bank Secrecy Act (BSA) and Kleptocracy efforts, to cite just three examples – are only becoming more pronounced with each passing year.  Whether uncovering a multinational bribery scheme or seeking to recover illegally derived assets associated with investment funds owned by a foreign government, or protecting our financial system from harm, many of our biggest investigations have an increasingly substantial international component, and they often involve multiple foreign jurisdictions.

As cross-border crime continues to proliferate – and it is most certainly proliferating – the department’s efforts to combat the most sophisticated white collar criminals require our prosecutors and the agents with whom they work to go all over the world to seek the evidence and witnesses necessary to build their cases, and to collaborate with our foreign counterparts.  Because crimes against the United States are more frequently being committed from beyond our U.S. borders, and overseas criminal actors are availing themselves of our financial system, we have to be nimble in order to coordinate quickly, effectively and fluently with our counterparts abroad.  This reality, which is probably not new to those of you attending this conference, requires the department to make frequent and effective use of the various mechanisms of international cooperation with our foreign partners that permit for evidence exchange and fugitive apprehension. 

Before I discuss some concrete examples of the ways in which the Criminal Division is working with our international partners to bring significant multi-jurisdictional cases, I wanted to provide as a backdrop to that discussion a recent notable development in the department’s – and indeed the entire U.S. government’s – efforts to combat transnational crime.  This past December, the Financial Action Task Force (FATF) – an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction – issued its mutual evaluation report on the United States.  I am proud to say that the headline of that report is that the United States has “a well-developed and robust anti-money laundering and counter-terrorist financing regime through which it is effectively investigating and prosecuting” transnational criminal actors and the money launderers who help them conceal their ill-gotten gains.  The report also noted the effectiveness of our efforts to work cooperatively with our international law enforcement partners.  Frankly, I think the United States has always been one of the leaders and trail blazers in this area. 

The report did raise concerns about the U.S. government’s continued work to prevent the abuse of legal entities – shell companies – to “obfuscate the source, ownership, and control of illegal proceeds,” essentially, continuing to look at and understand and get behind beneficial ownership.  We at the department – and in the Criminal Division in particular – remain sharply focused on understanding the ownership structure and the apparent ease with which criminal organizations and individuals use shell companies to move and ultimately conceal criminal proceeds.  This is a global problem requiring a vigorous response.  Piercing the corporate veil to determine the true owner of bank accounts and other valuable assets more often than not requires us to undertake a time-consuming and resource-intensive process.  Grand jury subpoenas, witness interviews, and even foreign legal assistance requests are sometimes required to get behind the outward facing structure of these shell companies. 

The department therefore views the customer due diligence final rule announced by the U.S. Treasury Department last May as a critical step toward greater transparency and a reporting system, which makes it harder for sophisticated criminals or kleptocrats to hide their identities and their illicit proceeds behind opaque corporate structures.  And we will be taking a hard look at compliance with this rule in the course of our future investigations.

The law enforcement benefits of gathering this information are substantial and, in my view, indisputable – especially in the kinds of large, international white collar investigations that the Criminal Division’s prosecutors are pursuing, and those being pursued by our international partners.  
Multi-Jurisdictional Prosecutions

In light of the increasingly international scope of the Criminal Division’s white collar enforcement efforts, that last point is critical.  To obtain timely and substantial beneficial ownership information or evidence that will lead to understanding these complex corporate structures requires international cooperation.  And just as we receive significant assistance from our foreign partners in our investigations and prosecutions, so too do we provide significant assistance to them.  This balanced model of reciprocity in information sharing is a vital tool in the modern prosecutor’s toolbox – whether the prosecutor is sitting in the United States, Europe, South America or elsewhere. 

This reality – reciprocal information sharing – is giving rise to a developing trend, especially as it relates to international enforcement of criminal laws in the white collar space.  And the emerging trend is this: due in part to the significant assistance we provide to our foreign partners, there has been an increase in multi-jurisdictional prosecutions of criminal conduct, particularly when that conduct is transnational in nature and when several countries have prosecutorial authority over it.  

This is no longer the future, it is the here and now of global criminal investigations.  Countries around the world have strengthened their domestic laws and central authorities, and prioritize white collar prosecutions.  This means – and many of you have likely already noticed this – a company operating in country X whose employees bribe a public official in violation of the FCPA, may be investigated and prosecuted by the United States, but also by several other countries with jurisdiction over the conduct that gave rise to the prosecution.  Indeed, and especially in the area of bribery of foreign officials, countries around the world are strengthening their laws, investigating and bringing impactful cases.  As part of our cooperation with our international partners, where appropriate, we seek to reach global resolutions that apportion penalties between the relevant jurisdictions so that companies seeking to accept responsibility for their prior misconduct are not unfairly penalized for the same conduct by multiple agencies. 

I spent the first part of this week meeting with counterparts in Bogota, Colombia.  Last week, I met with our Mexican counterparts, spoke with the Dominicans for over an hour via phone, and before that, with the Panamanians just a few weeks ago.  At the end of this month, I am hosting our Argentine counterparts in Washington D.C. to collaborate and coordinate on financial crime and corruption matters.  All these meetings are at the highest levels of government, and at all levels of government.  Meetings such as these – among an international community of prosecutors, investigators, public security personal and government financial investigative and regulatory institutions – are not rare anymore; at least not with us.  Generally, prosecutors in much of the world understand that investigating and prosecuting transnational crime necessitates transnational cooperation.  Indeed, just as crime is increasingly transnational, so must be its enforcement.  And just as criminals seek to exploit geographical boundaries to protect themselves and their illegally derived assets, so must the mechanisms of international cooperation serve to disrupt their ability to do so.

In the area of evidence gathering the past several years, I have witnessed the significant increase in incoming requests for legal assistance from our foreign partners.  Countries are making more and more efforts to affirmatively prosecute international corruption in their own countries.  

Of course, formal assistance pursuant to bilateral or multilateral treaties are not our only tools.  The United States and countries around the world also share evidence and information with one another pursuant to the principle of reciprocity, or through various informal mechanisms.  Indeed, the Department of Justice and its investigative agencies post attachés in embassies all over the world.  One of the primary goals of the attachés is to provide and receive information related to ongoing investigations and prosecutions.  Such information may provide significant leads to us or our counterparts.  The department recognizes that communicating with these foreign counterparts must keep pace in the age of instantaneous communication.   

Just as your client’s businesses span the globe, the Criminal Division’s approach to large, complex transnational and white collar investigations is truly global in nature and the results that we have obtained demonstrate and reinforce the importance of working with and maintaining true partnerships with our counterparts aboard.



Other Examples 

Additionally, in our prosecution of Rolls Royce, the UK-based company paid the United States about $170 million as part of an $800 million global resolution of anti-corruption-related investigations in three countries – the United States, United Kingdom and Brazil.  Rolls Royce entered into a deferred prosecution agreement (DPA) in the United States, as well as a DPA in the United Kingdom, the first time the U.S. and UK’s Serious Fraud Office (SFO) entered into such a coordinated resolution.  

In our prosecution of Netherlands-based VimpelCom, one of the largest telecom companies in the world, a global $800 million resolution was reached to resolve $114 million dollars of illegal bribe payments.  That resolution, which involved a guilty plea by VimpelCom’s Uzbek subsidiary and DPA with VimpelCom, also included settlements with the Public Prosecution Service of the Netherlands, as well as the Securities and Exchange Commission (SEC).  As you can see, the trend is a global effort to prosecute corruption, and that trend is not slowing down.

I want to underscore the extent of our international cooperation in white collar enforcement by noting that, in kleptocracy cases, one of our goals is to return the proceeds of the kleptocrat’s crimes to those harmed by their criminal conduct.  Just last year, for example, the department returned $1.5 million to Taiwan that constituted proceeds from the sale of a forfeited New York condominium and a Virginia residence that the United States alleged were purchased with bribe money paid to the family of Taiwan’s former President Chen Shui-Bian.  Our ability to identify and forfeit those properties was the result of extensive cooperation with the Taiwan Supreme Prosecutor’s Office, and it is our hope that the return of the funds to the Taiwanese people sends a strong message about our commitment to vigorous and effective cooperation in international criminal enforcement.


Before I conclude, I would be remiss if I did not comment on the Fraud Section’s “Pilot Program.”  Last year, the Fraud Section implemented a one-year “Pilot Program” for FCPA cases, to provide more transparency and consistency for our corporate resolutions.  The “Pilot Program” provides our prosecutors, companies and the public clear metrics for what constitutes voluntary self-disclosure, full cooperation and full remediation.  It also outlines the benefits that are accorded a voluntary self-disclosure of wrongdoing, full cooperation and remediation.  The one-year pilot period ends on April 5.  At that time, we will begin the process of evaluating the utility and efficacy of the “Pilot Program,” whether to extend it, and what revisions, if any, we should make to it.  The program will continue in full force until we reach a final decision on those issues.

In closing, let me just say a few things:

It is clear that global investigations of corruption are on the rise.  We are seeing that often within a close temporal proximity of our prosecutions, other countries are also taking action.  It is no longer just us and a few other countries. 

Something is happening in the world today; you can feel it.  It is a global movement, getting stronger and stronger each day with every case we make.  Countries, all the ones I mentioned earlier, and many others, are all moving in the same direction, more together than ever, pursuing corruption.

The Criminal Division remains committed to doing its part by vigorously investigating and prosecuting international crime when it violates U.S. laws, and by remaining committed to international collaboration in our nations’ shared struggle to safeguard our citizens, our markets and financial systems, and our networks. 

As I said last year at a corruption and white collar crime forum in Bogota, Colombia, the current trend of international cooperation among our counterparts who are all fighting transnational financial corruption and other white collar crimes reminds me of the 1960s song made popular by the singing group Martha and the Vandellas – the lyrics of which are the appropriate message for all the corrupt officials and bad actors, foreign and domestic: Nowhere to run baby, Nowhere to hide. 

Acting Assistant Attorney General Kenneth A. Blanco Speaks at the American Bar Association National Institute on White Collar Crime

March 12, 2017 | Permalink | Comments (0)

Saturday, March 11, 2017

Iranian Member of International Cybercrime Conspiracy Sentenced to 10 Years in Prison for Selling Stolen Credit Card Information Online

An Iranian man was sentenced today to 120 months in federal prison for access device fraud and 60 months in federal prison for conspiracy to commit identity theft and access device FBI DOJ logofraud, to be served concurrently, in connection with an international scheme to sell credit card information online. He was further ordered to pay $36.6 million in restitution. 

Milad Kalantari, 32, an Iranian citizen, was sentenced by U.S. District Judge Louis Guirola Jr. of the Southern District of Mississippi. Kalantari was arrested in December 2015, when he entered the United States at John F. Kennedy International Airport in New York City. On Oct. 6, 2016, Kalantari pleaded guilty to one count of conspiracy to commit identity theft and access device fraud and one count of substantive access device fraud.

As part of the plea, Kalantari admitted that he was a member of a financial fraud conspiracy that owned and operated numerous websites, in Kalantari’s name, dedicated to the distribution and sale of stolen credit and debit card information belonging to victims all over the world – including citizens and banks located throughout the United States. As part of the scheme, Kalantari sold approximately 2.5 million stolen credit cards on his websites, with an intended loss amount valued at over $1.2 billion. More than $35 million in actual losses have been confirmed with U.S. companies including more than $26 million in losses to Discover Card and almost $5 million in losses to American Express. 

Senior Counsel Peter Roman of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Mary Helen Wall of the Southern District of Mississippi prosecuted the case, which was investigated by HSI’s Gulfport Regional Office.

March 11, 2017 | Permalink | Comments (0)

Friday, March 10, 2017

ZTE Corporation of China Agrees to Plead Guilty and Pay Penalty of $1.19 Billion for Iran Sanction Busting

ZTE Corporation has agreed to enter a guilty plea and to pay a $430,488,798 penalty to the U.S. for conspiring to violate the International Emergency Economic Powers Act (IEEPA) OFACby illegally shipping U.S.-origin items to Iran, obstructing justice and making a material false statement. ZTE simultaneously reached settlement agreements with the U.S. Department of Commerce’s Bureau of Industry and Security (BIS) and the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC). In total ZTE has agreed to pay the U.S. Government $892,360,064. The BIS has suspended an additional $300,000,000, which ZTE will pay if it violates its settlement agreement with the BIS.

Attorney General of the United States Jeff Sessions, Acting Assistant Attorney General for National Security Mary B. McCord, U.S. Attorney John R. Parker for the Northern District of Texas and FBI Assistant Director Bill Priestap for the Counterintelligence Division made the announcement today.

“ZTE Corporation not only violated export controls that keep sensitive American technology out of the hands of hostile regimes like Iran’s – they lied to federal investigators and even deceived their own counsel and internal investigators about their illegal acts,” said Attorney General Sessions. “This plea agreement holds them accountable, and makes clear that our government will use every tool we have to punish companies who would violate our laws, obstruct justice and jeopardize our national security. I am grateful to the Justice Department’s National Security Division, the U.S. Attorney’s Office for the Northern District of Texas and the FBI for their outstanding work on this investigation.”

“ZTE engaged in an elaborate scheme to acquire U.S.-origin items, send the items to Iran and mask its involvement in those exports. The plea agreement, which is pending before the Court, alleges that the highest levels of management within the company approved the scheme. ZTE then repeatedly lied to and misled federal investigators, its own attorneys and internal investigators. Its actions were egregious and warranted a significant penalty,” said Acting Assistant Attorney General McCord. “The enforcement of U.S. export control and sanctions laws is a major component of the National Security Division’s commitment to protecting the national security of the United States. Companies that violate these laws – including foreign companies – will be investigated and held to answer for their actions.”

“ZTE Corporation not only violated our export control laws but, once caught, shockingly resumed illegal shipments to Iran during the course of our investigation,” said U.S. Attorney Parker. “ZTE Corporation then went to great lengths to devise elaborate, corporate-wide schemes to hide its illegal conduct, including lying to its own lawyers.” 

"The plea agreement in this case shows ZTE repeatedly violated export controls and illegally shipped U.S. technology to Iran," said Assistant Director Priestap. "The company also took extensive measures to hide what it was doing from U.S. authorities. This case is an excellent example of cooperation among multiple U.S. agencies to uncover illegal technology transfers and make those responsible pay for their actions."

The plea agreement, which is contingent on the court’s approval, also requires ZTE to submit to a three-year period of corporate probation, during which time an independent corporate compliance monitor will review and report on ZTE’s export compliance program. ZTE is also required to cooperate fully with the Department of Justice (DOJ) regarding any criminal investigation by U.S. law enforcement authorities. The plea agreement ends a five-year joint investigation into ZTE’s export practices, which was handled by the DOJ’s National Security Division, the U.S. Attorney’s Office for the Northern District of Texas, the FBI, the BIS and the Department of Homeland Security, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations.

A criminal information was filed today in federal court in the Northern District of Texas charging ZTE with one count of knowingly and willfully conspiring to violate the IEEPA, one count of obstruction of justice and one count of making a material false statement. ZTE waived the requirement of being charged by way of federal indictment, agreed to the filing of the information and has accepted responsibility for its criminal conduct by entering into a plea agreement with the government. The plea agreement, which is contingent on the court’s approval, requires that ZTE pay a fine in the amount of $286,992,532 and a criminal forfeiture in the amount of $143,496,266.  The criminal fine represents the largest criminal fine in connection with an IEEPA prosecution.

Summary of the Criminal Conduct

According to documents filed today, for a period of almost six years, ZTE obtained U.S.-origin items – including controlled dual-use goods on the Department of Commerce’s Commerce Control List (CCL) – incorporated some of those items into ZTE equipment and shipped the ZTE equipment and U.S.-origin items to customers in Iran. ZTE engaged in this conduct knowing that such shipments to Iran were illegal. ZTE further lied to federal investigators during the course of the investigation when it insisted, through outside and in-house counsel, that the company had stopped sending U.S.-origin items to Iran. In fact, while the investigation was ongoing, ZTE resumed its business with Iran and shipped millions of dollars’ worth of U.S. items there.

ZTE also created an elaborate scheme to hide the data related to these transactions from a forensic accounting firm hired by defense counsel to conduct a review of ZTE’s transactions with sanctioned countries. It did so knowing that the information provided to the forensic accounting firm would be reported to the U.S. government by outside counsel. Outside counsel was not aware of this scheme and indeed was wholly unaware that ZTE had resumed business with Iran. After ZTE informed its counsel of the scheme, counsel reported – with permission from ZTE – the conduct to the U.S. government.

The Iran Business

According to court documents, between January 2010 and January 2016, ZTE, either directly or indirectly through a third company, shipped approximately $32,000,000 of U.S.-origin items to Iran without obtaining the proper export licenses from the U.S. government. In early 2010, ZTE began bidding on two different Iranian projects. The projects involved installing cellular and landline network infrastructure. Each contract was worth hundreds of millions of U.S. Dollars and required U.S. components for the final products.

In December 2010, ZTE finalized the contracts with Iranian customers. The contracts were signed by four parties: the Iranian customer, ZTE, Beijing 8 Star and ZTE Parsian. Court documents explain that ZTE identified Beijing 8 Star (8S) as a possible vehicle for hiding its illegal shipments of U.S. items to Iran. It intended to use 8S to export U.S.-origin items from China to ZTE customers in Iran. As part of this plan, ZTE supplied 8S with necessary capital and took over control of the company.

Under the terms of the Iran contracts, ZTE agreed to supply the “self-developed equipment,” collect payments for the projects and manage the whole network. ZTE Parsian was to provide locally purchased materials and all services. 8S was responsible for “relevant third-party equipment,” which primarily meant parts that would be subject to U.S. export laws. ZTE intended for 8S to be an “isolation company,” that is, ZTE intended for 8S (rather than ZTE) to purchase the embargoed equipment from suppliers and provide that equipment under the contract in an effort to distance ZTE from U.S. export-controlled products and insulate ZTE from U.S. export violations. However, 8S had no purchasing or shipping history and no real business reputation.

Ultimately, although 8S was a party to the contracts, ZTE itself purchased and shipped the embargoed goods under the contract. In its shipping containers, it packaged the U.S. items with its own self-manufactured items to hide the U.S.-origin goods. ZTE did not include the U.S. items on the customs declaration forms, though it did include the U.S.-origin items on the packing lists included inside of the shipments.

In early 2011, when ZTE determined that the use of 8S was insufficient to hide ZTE’s connection to the illegal export of U.S.-origin goods to Iran, senior management of ZTE ordered that a company-level export control project team study, handle and respond to the company’s export control risks. In September 2011, four senior managers signed an Executive Memo, which proposed that the company identify and establish new “isolation companies” that would be responsible for supplying U.S. component parts necessary for projects in embargoed countries. The isolation companies would conceal ZTE’s role in the transshipment scheme and would insulate ZTE from export control risks.

In March 2012, Reuters published an article regarding ZTE’s sale of equipment to Iran. In response, ZTE made a decision to temporarily cease sending new U.S. equipment to Iran. By November 2013, however, ZTE had resumed its business with Iran. Beginning in July 2014, ZTE began shipping U.S.-origin equipment to Iran once again without the necessary licenses.

Instead of using 8S, however, ZTE identified a new isolation company. ZTE signed a contract with the new isolation company, which in turn signed contracts with the two Iranian customers. According to the new scheme, ZTE purchased and manufactured all relevant equipment – both U.S.-origin and ZTE-manufactured – and prepared them for pick-up at its warehouse by the new isolation company. The new isolation company then shipped all items to the Iranian customers. Shipments to Iran continued from January 2014 through January 2016.

The Obstruction and False Statement

According to court documents, despite its knowledge of an ongoing grand jury investigation into its Iran exports, ZTE took several steps to conceal relevant information from the U.S. government. It further took affirmative steps to mislead the U.S. government. In the summer of 2012, ZTE asked each of the employees who were involved in the Iran sales to sign nondisclosure agreements in which the employees agreed to keep confidential all information related to the company’s U.S. exports to Iran.

During meetings throughout late 2014, late 2015 and early 2016, outside counsel for ZTE, unaware that the statements ZTE had given to counsel for communication to the government were false, represented to the DOJ and federal law enforcement agents that ZTE had stopped doing business with Iran and therefore was no longer violating U.S. export laws. Similarly, on July 8, 2015, in-house counsel for ZTE accompanied outside counsel in a meeting with the DOJ and federal law enforcement agents and reported that ZTE was abiding by U.S. laws. That statement was also false.

ZTE also hid data related to its resumed illegal sales to Iran from a forensic accounting firm hired by defense counsel to conduct an internal investigation into the company’s Iran sales. ZTE knew the forensic accounting firm was reviewing its systems and knew that the analysis was being reported to the DOJ and U.S. law enforcement. To avoid detection of its 2013-2016 resumed illegal sales to Iran, ZTE formed the “contract data induction team” (“CDIT”). The CDIT was comprised of approximately 13 people whose job it was to “sanitize the databases” of all information related to the 2013-2016 Iran business. The team identified and removed from the databases all data related to those sales. ZTE also established an auto-delete function for the email accounts of those 13 individuals on the CDIT, so their emails were deleted every night – a departure from its normal practices – to ensure there were no communications related to the hiding of the data.

The case is being prosecuted by Deputy Chief Elizabeth Cannon of the National Security Division’s Counterintelligence and Export Control Sections and Assistant U.S. Attorney Mark Penley of the Northern District of Texas.

ZTE Information

ZTE Plea Agreement Supplement

ZTE Plea Agreement

ZTE Factual Resume

March 10, 2017 | Permalink | Comments (0)

Thursday, March 9, 2017

Foreign Recipients of U.S. Income, 2013 rose to $697.6 billion, 88% exempt from withholding tax

U.S.-source income payments to foreign persons, as reported on Form 1042-S, Foreign Person’s U.S.-Source Income Subject to Withholding, rose to $697.6 billion for Calendar Year Irs_logo2013. This represents an increase of 3.7 percent from 2012.

U.S.-source income payments subject to withholding tax rose by 24.5 percent from 2012, which fueled an increase in withholding taxes of 31.2 percent. Despite these increases, nearly 88 percent of all U.S.-source income paid to foreign persons remained exempt from withholding tax. The residual U.S.-source income subject to tax was withheld at an average rate of 16.8 percent.

Related Link: Foreign Recipients of U.S. Income

March 9, 2017 | Permalink | Comments (0)

Former Arkansas State Senator and a College President Charged with Bribery and Fraud Scheme

A former Arkansas state senator, a college president and a consultant were charged in an indictment filed for perpetrating a bribery and fraud scheme involving tens of thousands of FBISeal (1)dollars in bribes provided to the senator and another legislator in exchange for directing approximately $600,000 in government funds to two non-profit entities, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and U.S. Attorney Kenneth Elser of the Western District of Arkansas.  

Jonathan E. Woods, 39, of Springdale, Arkansas, was charged with 11 counts of honest services wire fraud, one count of honest services mail fraud and one count of money laundering.  Oren Paris III, 49, also of Springdale, and Randell G. Shelton Jr., 37, of Alma, Arkansas, were each charged with nine counts of honest services wire fraud and one count of honest services mail fraud.  The defendants’ arraignments will be scheduled at a later date.

As alleged in the indictment, Woods served as an Arkansas state senator from 2013 to 2017.  Between approximately 2013 and approximately 2015, Woods used his official position as a senator to appropriate and direct government money, known as General Improvement Funds (GIF), to two non-profit entities by, among other things, directly authorizing GIF disbursements and advising other Arkansas legislators – including former state representative Micah Neal – to contribute GIF to the non-profits.  Specifically, Woods and Neal authorized and directed the Northwest Arkansas Economic Development District, which was responsible for disbursing the GIF, to award a total of approximately $600,000 in GIF money to the two non-profit entities.  The indictment further alleges that Woods and Neal received bribes from officials at both non-profits, including Paris, who was the president of a college.  The indictment alleges that Woods initially facilitated $200,000 of GIF money to the college and later, together with Neal, directed another $200,000 to the college, all in exchange for kickbacks.  To pay and conceal the kickbacks to Woods and Neal, Paris paid a portion of the GIF to Shelton’s consulting company.  According to the indictment, Shelton then kept a portion of the money and paid the other portion to Woods and Neal.  Paris also bribed Woods, the indictment alleges, by hiring Woods’s friend to an administrative position at the college.   

For his part in the scheme, Neal pleaded guilty on Jan. 4, 2017, before U.S. District Judge Timothy L. Brooks of the Western District of Arkansas to one count of conspiracy to commit honest services fraud.  Sentencing will be scheduled at a later date. 

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

The FBI and the Internal Revenue Service investigated the case.  Trial Attorney Sean Mulryne of the Criminal Division’s Public Integrity Section and U.S. Attorney Elser and Assistant U.S. Attorneys Kyra Jenner and Ben Wulff of the Western District of Arkansas are prosecuting the case.  

Any information regarding public corruption can be provided to the FBI in Little Rock through their public corruption hotline, which is 501-221-8200. 

Woods Indictment

March 9, 2017 | Permalink | Comments (0)

Wednesday, March 8, 2017

IRS Has Refunds Totaling $1 Billion for People Who Have Not Filed a 2013 Federal Income Tax Return

The Internal Revenue Service announced today that unclaimed federal income tax refunds totaling more than $1 billion may be waiting for an estimated 1 million taxpayers who did Irs_logonot file a 2013 federal income tax return.

To collect the money, taxpayers must file a 2013 tax return with the IRS no later than this year's tax deadline, Tuesday, April 18.

"We’re trying to connect a million people with their share of 1 billion dollars in unclaimed refunds for the 2013 tax year,” said IRS Commissioner John Koskinen. “People across the nation haven’t filed tax returns to claim these refunds, and their window of opportunity is closing soon. Students and many others may not realize they’re due a tax refund. Remember, there’s no penalty for filing a late return if you’re due a refund.”

The IRS estimates the midpoint for potential refunds for 2013 to be $763; half of the refunds are more than $763 and half are less.

In cases where a tax return was not filed, the law provides most taxpayers with a three-year window of opportunity for claiming a refund. If they do not file a return within three years, the money becomes the property of the U.S. Treasury. For 2013 tax returns, the window closes April 18, 2017. The law requires taxpayers to properly address mail and postmark the tax return by that date.

The IRS reminds taxpayers seeking a 2013 refund that their checks may be held if they have not filed tax returns for 2014 and 2015. In addition, the refund will be applied to any amounts still owed to the IRS, or a state tax agency, and may be used to offset unpaid child support or past due federal debts, such as student loans.

By failing to file a tax return, people stand to lose more than just their refund of taxes withheld or paid during 2013. Many low-and-moderate income workers may have been eligible for the Earned Income Tax Credit (EITC). For 2013, the credit was worth as much as $6,044. The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2013 were:

  • $46,227 ($51,567 if married filing jointly) for those with three or more qualifying children;
  • $43,038 ($48,378 if married filing jointly) for people with two qualifying children;
  • $37,870 ($43,210 if married filing jointly) for those with one qualifying child, and;
  • $14,340 ($19,680 if married filing jointly) for people without qualifying children.

Current and prior year tax forms (such as the Tax Year 2013 Form 1040, 1040A and 1040EZ) and instructions are available on the Forms and Publications page or by calling toll-free: 800- TAX-FORM (800-829-3676). Taxpayers who are missing Forms W-2, 1098, 1099 or 5498 for the years 2013, 2014 or 2015 should request copies from their employer, bank or other payer.

Taxpayers who are unable to get missing forms from their employer or other payer should go to and use the “Get Transcript Online” tool to obtain a Wage and Income transcript.  Taxpayers can also file Form 4506-T to request a transcript of their 2013 income. A Wage and Income transcript shows data from information returns we receive such as Forms W-2, 1099, 1098 and Form 5498, IRA Contribution Information. Taxpayers can use the information on the transcript to file their tax return.

State-by-state estimates of individuals who may be due 2013 tax refunds: 

State or District


Number of








































District of Columbia




















































































New Hampshire




New Jersey




New Mexico




New York




North Carolina




North Dakota




















Rhode Island




South Carolina




South Dakota




























West Virginia
















 * Excluding the Earned Income Tax Credit and other credits. 

March 8, 2017 in Tax Compliance | Permalink | Comments (0)

Tuesday, March 7, 2017

How much revenue has FATCA raised and at what offsetting compliance costs?

The Foreign Account Tax Compliance Act, referred to as FATCA, does not operate in a global tax vacuum. It is nearly impossible to comprehend fully its impact unless its highly technical procedural provisions are viewed in context. This introductory chapter will provide the context necessary to understand FATCA, its offspring like the OECD's CRS, and the impact of these initiatives. download the 130 page PDF chapter from SSRN here.

FATCA's ostensible purpose was to act as an additional tax revenue source to offset additional spending in the HIRE Act of 2010. FATCA was passed on the unsubstantiated basis that Treasury-Dept.-Seal-of-the-IRS“each year, the United States loses an estimated $100 billion in tax revenue due to offshore tax abuses.” However, the total amount of the offset revenue from FATCA was only projected to $8.714 billion for the ten year period of 2010 to 2020. This chapter explores the revenue raised until 2017 and the offsetting compliance costs. download the 130 page PDF chapter from SSRN here.

This chapter also explores various tax pundits allegation that the United States operates as the largest tax haven in the world for individual wealth and that U.S. tax policy for individuals is directed to encourage capital inflow and discourage capital outflow. Support for this allegation includes that approximately 88% of income paid to non-residents did not attract withholding in 2013. U.S. states do not collect beneficial ownership information of U.S. companies. The U.S. has not agreed to globally exchange information pursuant to the OECD's CRS.

download the 130 page PDF chapter from SSRN here

March 7, 2017 | Permalink | Comments (0)

Singapore to collect beneficial ownership information for registry

The Ministry of Finance (MOF) and the Accounting and Corporate Regulatory Authority (ACRA) have reviewed feedback received from two rounds of public consultation[1] on Singapore Financeproposed changes to the Companies Act, Limited Liability Partnerships Act and related amendments to the Accountants Act. The changes aim to reduce the regulatory burden on business entities, enhance the transparency of business entities and introduce an inward re-domiciliation regime in Singapore. The proposed legislative amendments will be incorporated into a Companies (Amendment) Bill and a Limited Liability Partnerships (Amendment) Bill. Both bills will be tabled in Parliament this month.

Key legislative revisions following the public consultations

2.         Respondents generally supported the proposed amendments. Most respondents gave suggestions or sought clarifications on the drafting, implementation and application of the proposed amendments. Based on the feedback received, MOF and ACRA have made some revisions to the proposed amendments. The key changes are as follows:

Proposed amendments

Key changes following the public consultations

(a)For companies and limited liability partnerships (LLPs) to maintain registers of controllers

  • Expand the list of exemptions from public companies listed on SGX and companies that are Singapore financial institutions[2]to include:

-companies that are wholly owned by the Government and statutory boards

-companies that are wholly owned subsidiaries of exempted companies

-companies that are listed on overseas securities exchanges and subject to regulatory disclosure requirements on transparency of beneficial ownership

  • Give companies, which were not required to maintain registers of controllers but are subsequently required to do so, 60 days to maintain their registers of controllers
  • Penalise companies for failure to send out notices to anyone: (i) whom they know or have reasonable grounds to believe are controller; or (ii) who knows the identity of the controllers or is likely to have that knowledge
  • Reduce penalty for non-compliance with the new regime from $25,000 to $5000
  • Apply relevant parts of section 7 of the Companies Act on interest in shares to the new regime
  • Apply similar changes to LLPs

(b)New inward re-domiciliation regime

  • Empower the Minister to issue regulations to waive any requirement for transfer of registration
  • Provide that a breach of any of the conditions imposed on transfer of registration shall be grounds for winding up the company instead of striking off the company
  • Give foreign corporate entity more time (from 30 days to 60 days) to submit evidence of de-registration

(c)Annual general meetings (AGMs) and annual returns

  • Allow companies to change their financial year end (FYE) for the current and immediate preceding financial years, before deadlines for holding AGM, filing annual returns and sending financial statements expire
  • Require a company, which is exempted from holding AGMs and has filed its annual return, to inform the Registrar when its AGM (as requested by a member) is held

(d)Common seals

  • Draft the amendments to focus on the alternatives to using a common seal
  • Introduce a third alternative for signing of documents and deeds by a director in the presence of a witness who attests the signature, besides the two alternatives of signing by: (i) a director and a secretary; or (ii) two directors
  • Apply similar changes to LLPs




3.         A summary of the feedback received and MOF/ ACRA’s responses for both rounds of public consultation are at Annexes 1 to 3. In the course of the public consultations, feedback on areas not under the scope of review by MOF/ ACRA were received. These have been forwarded to the respective agencies for their consideration.


4.         MOF and ACRA would like to thank all respondents for their comments. The key features of the bills, which incorporate the legislative revisions, are laid out in Annex 4.


5.         MOF and ACRA will implement the approved Bills in phases. The first phase, which will involve changes to improve the transparency of companies and LLPs, and the amendment to the Accountants Act, will be implemented by the first half of 2017.The exact effective date will be announced at a later date.


24 February 2017


Annex 1: Summary of feedback and MOF/ ACRA’s responses on proposed amendments for companies and LLPs to maintain registers of controllers, and other FATF-related amendments

Annex 2: Summary of feedback and MOF/ ACRA’s responses on proposed amendments to introduce an inward re-domiciliation regime in Singapore

Annex 3: Summary of feedback and MOF/ ACRA’s responses on proposed amendments on AGMs, annual returns and common seals

Annex 4: Key features of the Companies (Amendment) Bill 2017 and the Limited Liability Partnerships (Amendment) Bill 2017

March 7, 2017 | Permalink | Comments (0)

Monday, March 6, 2017

FinCEN Renews Real Estate “Geographic Targeting Orders” to Identify High-End Cash Buyers in Six Major Metropolitan Areas

The Financial Crimes Enforcement Network (FinCEN) today announced the renewal of existing Geographic Targeting Orders (GTO) that temporarily require U.S. title insurance FinCEN-logo-shieldcompanies 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

March 6, 2017 | Permalink | Comments (0)

Sunday, March 5, 2017

Government of Canada Efforts to Crack Down on Tax Cheats

Canadians work hard for their money and the majority pay their taxes, but some wealthy individuals participate in complex tax schemes to evade paying their fair share. The Government of Canada is working hard to crack down on offshore tax evasion and aggressive tax avoidance in order to ensure a tax system that is more responsive and fair for all Canadians.

The Honourable Diane Lebouthillier, Minister of National Revenue, this week tabled the Government of Canada’s response to the House of Commons Standing Committee on Government_of_Canada_signature.svgFinance’s report entitled: The Canada Revenue Agency, Tax Avoidance and Tax Evasion: Recommended Actions. In doing so, Minister Lebouthilier accepted all the recommendations in the report, and reiterated the Government’s commitment to combat tax cheating at home and abroad and to keep Canadians apprised of these efforts.

With the Government of Canada’s investment of $444 million in the Canada Revenue Agency (CRA), the Agency is delivering concrete results.The Agency has already started the work to reassure hard working Canadians that wealthy taxpayers can’t buy their way out of paying their fair share:

  • The CRA is on track to recover over $13 billion this fiscal year alone from audit efforts.
  • The CRA has increased the number of teams focused on large multinational corporations and increased the number of auditors assigned to detect offshore non-compliance.
  • The CRA has set up a team to focus exclusively on promoters of offensive tax schemes.
  • Audits of the highest risk taxpayers for four offshore jurisdictions are underway. The first two jurisdictions targeted were the Isle of Man and Guernsey. Two other jurisdictions of concern cannot be named at the moment, in order to avoid compromising these audits. So far, a total of 41,000 international financial transactions, equaling over $12 billion, have been analyzed.

This announcement reinforces the Government of Canada’s commitment to continue to build its capacity to crack down on tax evasion and aggressive tax avoidance. The Government has the tools to correct non-compliant behaviors as well as when appropriate, impose serious penalties; and, communicate transparently its activities and results to Canadians.



"The Government of Canada is taking action to crack down on tax cheats. When some choose not to pay their share, it places an unfair burden on the tax system. We are sending another strong signal to tax cheats: that this behaviour will not be tolerated and they will face the full force of the law. Our Government will continue to update Canadians on these important actions to ensure a tax system that is responsive, fair and meets the needs of all Canadians." 

-The Honourable Diane Lebouthillier, Minister of National Revenue

Quick Facts

  • In April 2016, the Offshore Compliance Advisory Committee (OCAC) – an independent committee composed of experts with significant legal and tax administration experience – was created to advise the Minister and the CRA on strategies to combat offshore tax evasion and avoidance. On December 5, 2016, the Minister of National Revenue received the OCAC’s report on the Voluntary Disclosures Program (VDP), which contains recommendations to enhance the VDP and improve it for the benefit of Canadians. The insight provided by the OCAC will help inform the CRA’s next steps to ensure that the VDP is delivered in a fair and effective manner. The OCAC’s report is available on the CRA website.‎
  • In June 2016, the CRA published a first conceptual study on the tax gap. The CRA will build on this report and has committed to publishing a series of additional papers on other aspects of the tax gap over the next two to three years.
  • The Agency has been tracking international electronic funds transfers (EFT) of over $10,000. Based on the information collected, the Agency is currently reviewing over 41,000 transactions, worth over $12 billion, in four jurisdictions of concern. Four additional jurisdictions will now be reviewed every year and every EFT of over $10,000 will be analyzed to identify high risk taxpayers.
  • Between April 1, 2011 and March 31, 2016, the CRA convicted 42 taxpayers with offshore links of tax evasion, involving $34 million in federal taxes evaded, court fines of $12 million, and 734 months of jail time.
  • Overall, the CRA is currently conducting audits of over 820 taxpayers and criminally investigating 20 cases of tax evasion related to offshore accounts.

Associated Links

March 5, 2017 in GATCA, Tax Compliance | Permalink | Comments (0)

Saturday, March 4, 2017

GDP Growth of 1.6% in 2016

Real gross domestic product (GDP) increased at an annual rate of 1.9 percent in the fourth quarter of Commerce Data logo
2016 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the
third quarter, real GDP increased 3.5 percent.

The GDP estimate released today is based on more complete source data than were available for the
"advance" estimate issued last month.  In the advance estimate, the increase in real GDP was also 1.9
percent. With the second estimate for the fourth quarter, the general picture of economic growth
remains the same; the increase in personal consumption expenditures was larger and increases in state
and local government spending and in nonresidential fixed investment were smaller than previously
estimated (see "Updates to GDP" on page 2).
Real GDP: Percent Change from Preceding Quarter
The increase in real GDP in the fourth quarter reflected positive contributions from personal
consumption expenditures (PCE), private inventory investment, residential fixed investment,
nonresidential fixed investment, and state and local government spending. These increases 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 primarily reflected a downturn in exports, an
acceleration in imports, and a downturn in federal government spending that were partly offset by an
upturn in residential fixed investment, an acceleration in private inventory investment, and an upturn in
state and local government spending.

Current-dollar GDP increased 3.9 percent, or $180.2 billion, in the fourth quarter to a level of $18,855.5
billion. In the third quarter, current-dollar GDP increased 5.0 percent, or $225.2 billion (table 1 and table

The price index for gross domestic purchases increased 1.9 percent in the fourth quarter, compared
with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 1.9 percent,
compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index
increased 1.2 percent, compared with an increase of 1.7 percent (appendix table A).

Updates to GDP

The percent change in real GDP was the same as previously estimated. An upward revision to PCE was
offset by downward revisions to state and local government spending and to nonresidential fixed
investment. For more information, see the Technical Note. For information on updates to GDP, see the
“Additional Information” section that follows.

                                         Advance Estimate  Second Estimate

                                      (Percent change from preceding quarter)
Real GDP                                       1.9              1.9
Current-dollar GDP                             4.0              3.9
Gross domestic purchases price index           2.0              1.9
PCE price index                                2.2              1.9

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). Revisions to 2016 real GDP from the
advance estimate did not affect the 1.6 percent rate of increase.

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 2.9 percent, or $529.0 billion, in 2016 to a level of $18,565.6 billion,
compared with an increase of 3.7 percent, or $643.5 billion, in 2015 (table 1 and table 3).

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 1.9 percent, the same rate as during 2015.  The price index for gross domestic purchases
increased 1.4 percent during 2016, compared with an increase of 0.4 percent during 2015 (table 7).

March 4, 2017 in Economics | Permalink | Comments (0)

Friday, March 3, 2017

IRS Criminal Investigation Releases Fiscal Year 2016 Annual Report

The Internal Revenue Service today announced the release of its IRS Criminal Investigation (CI) annual report, reflecting the significant accomplishments and criminal enforcement IRS CIDactions taken in fiscal year 2016. 

IRS CI initiated 3,395 cases in FY 2016 that focused on tax-related identity theft, money laundering, public corruption, cybercrime and terrorist financing.

“The IRS continues to work to ensure that everyone is playing by the same rules and paying their fair share,” said IRS Commissioner John Koskinen. “The IRS is committed to fairly administering and enforcing the tax code, and our criminal investigators play a critical role in that effort.”

The CI report is released each year for the purpose of highlighting the agency’s successes while providing a historical snapshot of the make-up and priorities of the organization. The very first Chief of IRS CI, Elmer Lincoln Irey, served from 1919 to 1946 and envisioned releasing such a document each year to showcase the agency’s investigative work.

“I could not be more proud of all that our special agents and professional staff have accomplished in spite of our budget challenges,” said Richard Weber, Chief, IRS Criminal Investigation Division. “Though the total number of cases has dropped for the third consecutive year due to fewer agents and professional staff, we have continued to find ways to become even more efficient and the quality of our cases has never been greater.”

CI is the only federal law enforcement agency with jurisdiction over federal tax crimes. This year, CI again boasted a conviction rate rivaling all of federal law enforcement at 92.1 percent. That conviction rate speaks to the thoroughness of the investigations. CI is routinely called upon by prosecutors across the country to lead financial investigations on a wide variety of financial crimes including international tax evasion, identity theft, terrorist financing and transnational organized crime.

CI investigates potential criminal violations of the Internal Revenue Code and related financial crimes in a manner to foster confidence in the tax system and compliance with the law. The 50-page report summarizes a wide variety of IRS CI activity throughout the fiscal year and includes case examples on a range of tax crimes, money laundering, public corruption, terrorist financing and narcotics trafficking financial crimes.

“I’m proud of IRS-CI and the reputation that this agency has as the best financial investigators in the world,” Weber said. “Regardless of our budget challenges over the past several years, I am proud that we have not lost sight of our impact or mission and that the quality of our cases remains high.”

Annual Report:

March 3, 2017 | Permalink | Comments (0)

FDIC-Insured Institutions Earn $171.3 Billion in 2016

  • Quarterly Industry Net Income is 7.7 Percent Higher Than a Year Earlier
  • Full-Year 2016 Industry Earnings Rise to $171.3 Billion
  • Community Bank Revenue and Loan Growth Outpace Industry
  • Total Loan Balances Rise 5.3 Percent During 2016

“The banking industry had another largely positive quarter. Nevertheless, the industry continues to face challenges.”
-- FDIC Chairman Martin J. Gruenberg

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $43.7 billion in the fourth quarter of 2016, 800px-FdicLogoup $3.1 billion (7.7 percent) from a year earlier. The increase in earnings was mainly attributable to an $8.4 billion (7.6 percent) increase in net interest income. Financial results for the fourth quarter of 2016 are included in the FDIC's latest Quarterly Banking Profile released today.

Of the 5,913 insured institutions reporting fourth quarter financial results, 59 percent reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the fourth quarter fell to 8.1 percent from 9.6 percent a year earlier.

Quarterly Net Income, 2010 - 2016

“Revenue and net income were higher, loan balances grew, asset quality improved, and the number of unprofitable banks and ‘problem banks’ continued to fall,” Gruenberg said. “Community banks also reported solid results for the quarter and year with strong net income, revenue, and loan growth.

“Nevertheless, the operating environment for banks remains challenging. Low interest rates for an extended period have led some institutions to reach for yield, which has increased their exposure to interest-rate risk, liquidity risk, and credit risk. Banks must manage risks prudently to ensure that industry growth is on a long-run, sustainable path.”

Highlights from the Fourth Quarter 2016 Quarterly Banking Profile

Quarterly Industry Net Income is $3.1 Billion Higher Than a Year Earlier: Quarterly earnings were 7.7 percent higher than in the fourth quarter of 2015, as the average return on assets rose to 1.04 percent from 1.02 percent a year earlier. Revenue growth helped propel quarterly earnings. Net operating revenue – the sum of net interest income and total noninterest income – was $181.8 billion, an increase of $7.9 billion (4.6 percent) from a year earlier.

Full-Year 2016 Earnings Rise to $171.3 Billion: Full-year earnings for the banking industry rose $8 billion (4.9 percent) compared to full-year 2015. Net operating revenue was $29 billion (4.2 percent) higher than in the previous year, while itemized litigation expenses at a few large banks were almost $3 billion lower than in 2015. Loan-loss provisions rose to $47.8 billion in 2016, an increase of $10.7 billion (28.8 percent) from 2015.

Community Bank Revenue and Loan Growth Outpace Industry: The 5,461 insured institutions identified as community banks reported a $508 million (10.5 percent) increase in net income in the fourth quarter. Total loan and lease balances at community banks rose $22.4 billion during the fourth quarter. During the past 12 months, loans and leases at community banks rose $115.7 billion (8.3 percent). Net operating revenue of $23 billion at community banks was $1.6 billion (7.6 percent) higher than in the fourth quarter of 2015.

Total Loan Balances Rise 5.3 Percent During 2016: Total loan and lease balances increased $72.3 billion (0.8 percent) during the fourth quarter. Credit card balances increased $38.2 billion (5 percent) during the quarter, reflecting seasonal holiday spending, while real estate loans secured by nonfarm nonresidential real estate properties rose $22.8 billion (1.7 percent), and real estate construction and development loans increased $10.1 billion (3.3 percent). Loans to commercial and industrial borrowers declined for the first time in 26 quarters, falling by $7.7 billion (0.4 percent). For the 12 months ended December 31, loans and leases increased $466 billion (5.3 percent).

“Problem Bank List” Shows Further Improvement: The number of banks on the FDIC’s Problem Bank List fell from 132 to 123 during the fourth quarter. This is the smallest number of problem banks in more than seven years and is down significantly from the peak of 888 in the first quarter of 2011. Total assets of problem banks rose slightly from $24.9 billion to $27.6 billion during the fourth quarter.

Deposit Insurance Fund’s Reserve Ratio Rises to 1.20 Percent: The DIF increased $2.5 billion during the fourth quarter to $83.2 billion at the end of December, largely driven by assessment income. The DIF reserve ratio rose from 1.18 percent to 1.20 percent during the quarter. Estimated insured deposits increased 1.4 percent in the fourth quarter. For all of 2016, estimated insured deposits increased 6 percent.

# # #

Quarterly Banking Profile Home Page (includes previous reports and press conference webcast videos)

Insured Institution Performance, Fourth Quarter 2016

Community Bank Performance, Fourth Quarter 2016

Deposit Insurance Fund Trends, Fourth Quarter 2016

Chairman Gruenberg’s Press Statement

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

Thursday, March 2, 2017

A Brief Definition of Insurance (Guest Post by F. Hale Stewart, JD. LL.M.)

Once again, the IRS has placed “certain” captive insurance structures on their Dirty Dozen list.  This latest inclusion argues that certain structures “… lack many of the attributes of Hale stewartgenuine insurance.  It therefore seems appropriate to briefly explain the common law definition of insurance.  What follows is a brief summation of the primary components of insurance as developed over approximately 150 years of common law.  For a more detailed treatment, please contact F. Hale Stewart at 832.330.4101 or 

I.) The Legal Definition of Insurance

Essentially, insurance is a contract by which one party (the insurer), for a consideration that usually is paid in money, either in a lump sum or at different times during the continuance of the risk, promises to make a certain payment, usually of money, upon the destruction or injury of “something” in which the other party (the insured) has an interest.[1]

In addition to all contractual elements that must be present, a valid insurance contract must also contain an insurable interest,[2] a definable risk,[3] risk shifting and risk distribution.[4]  While the basic elements of a contract are beyond the scope of this article, the four additional elements required for a valid insurance contract will be explained in the order previously presented.

a.) Insurable Interest

     The historical roots of this policy date back to England when maritime insurance was sold to an insured whether or not he had a personal or financial interest in the ship or cargo. This sales practice “caused many pernicious practices, whereby great numbers of ships with their cargoes, [were] either … fraudulently lost or destroyed.”[5]  The second root of the insurable interest doctrine is judicial policy to prevent using insurance for gambling or wagering.[6]  During the 1800s, people purchased life insurance on famous elderly persons as a way to speculate on the time of their death.[7]  This practice displaces the primary purpose of insurance -- to protect the purchaser against unforeseen losses that directly impact his personal or financial interests.[8]  The third root of the insurable interest doctrine is the prevention of waste[9] by preventing non-essential insurance policies (such as those previously mentioned) from being written.

     A person has an insurable interest in property “when he or she will derive a pecuniary benefit or advantage from its preservation or will suffer a pecuniary loss or damage from its destruction, termination or injury by the happening of the event insured against.”[10]  The interest can exist in law or equity[11] and can be found in a legal interest that is slight,[12] contingent or beneficial.[13]  In fact, outright ownership or title of ownership is not relevant to the inquiry.[14]  Obviously, courts construe the interest very liberally.[15]  The amount of insurance purchased cannot be disproportionate to the insurable interest or the court will rule the insurance policy is a wagering contract and therefore void against public policy.[16]

b.) Risk of Loss

     The primary purpose of an insurance contract is to transfer risk, which is an unforeseen and uncertain event that is a “disadvantage to the party insured.”[17]  The insured can’t prevent the risk from occurring;[18] it must be accidental[19]  or “fortuitous,” also defined as

‘…an event which so far as the parties to the contract are aware, is dependent on chance.  It must be beyond the power of any human being to bring the event to pass; it may be within the control of third persons; it may even be a past event, such as the loss of a vessel, provided that the fact is unknown to the parties.’[20]

Fortuitous should not be confused with natural degradation or depreciation – which is foreseeable but whose timing is predictable.  In contrast, a fortuitous event is unforeseen and its timing is unknown, thereby impacting the insured when he is less prepared to mitigate the damages.[21]  The unknown or unforeseen element of the fortuity definition is best explained by the three primary fortuity-related defenses insurers offer to challenge an insured’s claim, the first of which is the “known loss” defense, where an insurer will argue the loss had “already occurred or [the insured should have known] the loss already occurred at the time the policy was written.”[22]  The second fortuity related loss defense is the “known risk” defense, where the insured knew the probability of loss was so high as to warrant some type of advance preparation or attempt to avoid the event on the part of the insured.[23]  “Loss in progress” is the third defense, which the insurer will argue when the loss was preceding at the time the insured purchased the insurance contract.[24]  The one common element to all of these defenses is actual or legally impugned knowledge on the part of the insured of the risk actually occurring or having a statistically significant possibility of occurring when he purchases the policy.

c.) Risk Shifting and Risk Distribution

     The concept of risk shifting and risk distribution was originally advanced in the case Helvering v. LeGierse[25] where an 80-year old woman purchased an annuity and life insurance contract from the Connecticut General Life Insurance Company.[26]  The woman paid $4,179.00 for the annuity – which paid $589.80 per year for woman’s life -- and $22,946 for a $25,000 life insurance policy making her total consideration $27,125.[27]  The woman did not have to take a physical for the life insurance policy nor answer any typical questions associated with similar transactions.[28]  The difference between the total consideration paid and the life insurance face value was $2,125.00, which means the insurance company received 3.6 years of annuity payments as consideration for the annuity contract.  Given the woman’s advanced age, the fact no physical was required, and the high premium amount, it seems likely the parties were well aware the woman would soon die, which she did a month after purchasing the contracts.[29]  The daughter did not include the life insurance receipts in her gross income, while the Commissioner argued the receipts were income.[30]

     The court noted that insurance involves “risk shifting and risk distribution;” that insurance shifts the risk of loss from those who would be harmed and distributes the loss of premature death among other, similar risks to limit the losses impact.”[31]  Next, the court stated the transactions should be analyzed together, as the insurance company would not sell one without the other.[32]  Finally, the court noted the transaction was not insurance, because

The total consideration was prepaid and exceeded the face value of the insurance policy.  The excess financed loading and other incidental charges.  Any risk that prepayment would earn less than the amount paid to respondent as an annuity was an investment risk similar to the risk assumed by a bank; it was not an insurance risk.[33]

The Helvering decision does not offer more in the way of definition or guidance as to the specifics of risk shifting or risk distribution.  Thankfully, these terms have a rich history.  Perhaps the best definition of risk shifting is found in a Private Letter Ruling:

Risk shifting occurs when a person facing the possibility of economic loss transfers some or all of the financial consequences of the potential loss to the insurer….If the insured has shifted its risk to the insurer, then a loss by the insured does not affect the insured because the loss is offset by the insurance payment.[34]

In other words, when an unforeseen risk occurs to the insured, he is made whole by the payment from the insurer.  Risk shifting is seen from the insured’s perspective, whereas risk distribution is seen from the insurer’s perspective.

      Risk distribution utilizes the law of large numbers, which is best explained with an example.  Suppose an insurance company only insures single, male drivers aged 30-40.  Assume further that 5% of the entire population of these drivers has an accident every year.  The larger the population of male drivers aged 30-40 that the insurer can insure, the closer the insurers loss experience will come to that of the entire population of these drivers.  Or put another way, “[t]he basic idea of the law of large numbers is that we can be more certain about the future experience of large groups in the aggregate than we can be about the future experience of any particular individuals in that group.”[35]

Distributing risk allows the insurer to reduce the possibility that a single costly claim will exceed the amount taken in as a premium and set aside for the payment of such a claim. Insuring many independent risks in return for numerous premiums serves to distribute risk. By assuming numerous relatively small, independent risks that occur randomly over time, the insurer smoothes out losses to match more closely its receipt of premiums. [citation omitted] Risk distribution necessarily entails a pooling of premiums, so a potential insured is not in significant part paying for its own risks. [citation omitted].[36]


[1] 1 Couch on Insurance Section 1:6

[2] 1A Couch on Insurance Section 17:1

[3]  Id

[4]  Helvering v. LeGierse,  312 U.S. 531, 540 (1941)

[5] Robert H. Jerry II, New Appleman on Insurance Law Library Edition, © 2009 Matthew Bender and Co. Section 1.05

[6] 44 Am. Jur. 2d Insurance Section 934

[7] Appleman, Section 1.05

[8] Id

[9] Id

[10] 44 C.J.S. Insurance Section 318

[11] Id

[12] Id

[13] 44 Am. Jur. 2d Insurance Section 932

[14] Id

[15] 44 C.J.S. Insurance Section 319

[16] 3 Couch on Ins. Section 41:2

[17] 1A Couch on Insurance Section 17.7

[18] Id

[19] Appleman, Section 1.05[2][a]

[20] Appleman, section 1.05[2][b]

[21] Id

[22] Id

[23] Id

[24] Id

[25] Helvering v. LeGierse, 312 U.S. 531 (1941)

[26] Id at 532

[27] Id

[28] Id

[29] Id

[30] Id

[31] Id at 541

[32] Id

[33] Id at 542

[34] PLR 200518010, January 21, 2005

[35] Tom Baker , Insurance Law and Policy, © 2008 Aspen Publishers, page 3

[36] PLR 200518010, January 21, 2005

March 2, 2017 in Tax Compliance | Permalink | Comments (0)

19 People Indicted Following Investigations Into International Fraud and Money Laundering Rings

Federal indictments were unsealed today in the District of Columbia charging 19 people with taking part in various international fraud and money laundering conspiracies that led to Interpolmore than $13 million in losses, including one scheme in which mid-level corporate employees were tricked into wiring millions of dollars to bank accounts under control of those in the criminal enterprise.

            The charges were announced by U.S. Attorney Channing D. Phillips; Assistant Director in Charge Andrew Vale of the FBI’s Washington Field Office; Assistant Inspector General for Investigations John L. Phillips of the U.S. Department of the Treasury; Special Agent in Charge Clark E. Settles of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C.; Assistant Director Joseph Trigg of INTERPOL Washington (U.S. National Central Bureau); Director Vaughn Ary of the Justice Department’s Office of International Affairs; Acting Director Christian Schurman of the U.S. Department of State’s Diplomatic Security Service (DSS), and Special Agent in Charge Brian J. Ebert, Washington Field Office, U.S. Secret Service.

            Sixteen of the 19 defendants were arrested overnight and today in a law enforcement operation coordinated by the FBI. Another was previously arrested, and two remain at large. The arrests took place in New York and Los Angeles, as well as Hungary, Bulgaria, Germany, and Israel. The arrests were conducted by more than 50 law enforcement agents.

            The arrests followed a multi-year investigative effort by federal and international law enforcement agencies to target multimillion-dollar fraud and money laundering schemes perpetrated by a transnational organized crime network.

            “These indictments and today’s arrests followed an international investigation into an interconnected web of money launderers, fraudsters and individuals that aided and abetted their criminal activities,” said U.S. Attorney Phillips. “The defendants in the cases being unsealed today are accused of taking part in schemes in the United States and abroad, costing victims millions of dollars. The investigation demonstrates the importance of international cooperation amongst law enforcement in combatting fraud and money laundering on a global basis.”

            “Members of the transnational organized crime group who carried out these schemes were sophisticated, well connected and continually honed their techniques to exploit their victims,” said Assistant Director in Charge Vale. “In total, they stole more than $13 million from over 170 victims, primarily in the United States. Because of the dedication and perseverance by our law enforcement partners in the United States and abroad, the FBI’s multi-year investigation into these schemes and this international criminal network, has yielded the disruption or return of more than $56 million in victim funds.”

            “I would like to commend our law enforcement partners, the FBI, HSI and our international partners for the outstanding joint investigation that has led us to the arrests reported today,” said Assistant Inspector General Phillips. “Treasury OIG is committed to continuing to work with our law enforcement partners to protect the Treasury and the nation’s financial infrastructure from Transnational criminal organizations that attempt to exploit financial institutions and money service businesses and their anti-money laundering programs by moving illicit funds obtained in various scams perpetrated against businesses and citizens across the United States and the world that use the financial infrastructure of the United States to launder their illicit proceeds.”

            A total of four indictments were unsealed today in these alleged schemes:

            Online Vehicle Fraud: Participants in this scheme used the Internet to falsely advertise cars for sale that they did not own, the indictment alleges. Operating out of Europe, the participants marketed the cars on popular websites aiming to attract buyers in the United States. They offered prices that were lower than those offered by legitimate sellers. Prospective buyers were directed to deposit money into fraudulently created bank accounts via wire transfers. The funds were then immediately withdrawn and the expectant buyers never received any vehicles.

            The indictment alleges that the criminal activities took place from November 2010 until April 2013 in the District of Columbia and elsewhere. According to the indictment, the co-conspirators induced at least 170 victims, located primarily in the United States, collectively to transfer at least $4 million to bank accounts controlled by those in the conspiracy, and the co-conspirators were able to withdraw approximately $3.2 million from the fraudulently opened accounts in the United States.

            Eight defendants have been arrested and are charged with conspiracy to commit bank and mail fraud, conspiracy to commit a travel act violation, and conspiracy to commit money laundering. They include Alex Almasi, 35; Ferenc Gajdos, 33; Laszlo Hesz,, 41; Attila Kartaly, 35; Zoltan Koszegi, 41; Alfred Kuttenberg, 34; Attila Molnar, 37, and Gabor Pataki, 35, all of Hungary. Gajdos and Kuttenberg also are charged with one count each of bank fraud.

            Business Email Compromise (BEC): This scheme was an outgrowth of the vehicle fraud scheme, according to the indictment. The defendants allegedly used the Internet and primarily U.S.-based electronic communications to target mid-sized and large companies and impersonate executive-level employees in e-mail communications with mid-level employees. These mid-level employees were led to believe they were being entrusted to handle a large financial transaction, such as a “secret” corporate acquisition, the indictment alleges. The employees were instructed to initiate wire transfers from the company’s corporate bank accounts to bank accounts controlled by members of the criminal enterprise. Once the funds were transferred, the money was quickly wire transferred out of the reach of the target corporation into accounts located in the People’s Republic of China and elsewhere, with the funds ultimately being delivered to co-conspirators located in Europe and elsewhere.

            The indictment alleges that this scheme took place from approximately January 2014 through March 2015. The indictment details over $10 million in transactions involving six companies from Germany, Spain, Finland, and Portugal.

            Four defendants are charged with conspiracy to commit wire fraud. Those arrested include: Harry Meir Mimoun Amar aka “Harry Amar,” or “Ari Amar,” 38, a resident of Israel and a citizen of Morocco and Israel; Sabina Selimovic, a resident of Germany and citizen of Serbia; and Cristian Flamanzeanu aka “Christiano Flamanzeano,” 32, a resident and citizen of Romania. A fourth defendant remains at large.

            Unlicensed Money Transmitting Network: While investigating the fraud schemes and the co-conspirators’ related efforts to launder the fraud proceeds, law enforcement uncovered an unlicensed money transmitting network (“hawala”) operating in the United States, Europe, and Israel. This indictment reflects the FBI’s efforts to expose and identify certain “hawala” co-conspirators by transmitting FBI undercover funds through the “hawala” network in separate transactions in New York, Los Angeles, and Washington, D.C. The activities charged in the indictment took place from June 2015 through April 2016.

            Six defendants were arrested and are charged with conspiracy to operate an unlicensed money transmitting business. Those arrested include Ori Saadon, 53, born in Israel and a resident of Israel; Itzhak Salama, 40, born in Israel and a resident of Los Angeles; Golan Chkechkov, 39, born in Israel and a resident of New York, New York.; Michael Admon, 50, born in Israel and a resident of New York, New York, and Haviv Arazi, 27, a citizen of Israel and a resident of New York, N.Y. A sixth defendant remains at large.

            International Money Laundering Conspiracy: This indictment alleges that Stanislav Nazarov, an Israeli citizen, generated hundreds of thousands of dollars in proceeds from various fraudulent schemes and engaged in international money laundering. Nazarov was arrested and is charged with three money laundering offenses during December 2016.

            An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and every defendant is presumed innocent until, and unless, proven guilty.

            This investigation is being conducted by the FBI’s Washington Field Office and the Office of the Inspector General of the U.S. Department of Treasury with assistance from HSI Washington, D.C.; the Department of Justice’s Office of International Affairs, the U.S. Secret Service Washington Field Office, and the DSS. Assistance was provided by the Israeli National Police; the Hungarian National Bureau of Investigation, Rapid Response and Special Police Services; Federal Criminal Police Office of Germany; Warsaw Metropolitan Police, and the Polish National Police, Police of the Czech Republic; the Slovak National Police; the General Inspectorate of Romanian Police, and Bulgaria's Ministry of Interior, Sofia Interpol, as well as INTERPOL Washington, the U.S. National Central Bureau. The FBI Legal Attaches in Warsaw, Tel Aviv, Budapest, Bucharest, Prague, and Berlin also provided assistance.

            This case is being prosecuted by Assistant U.S. Attorney Diane Lucas of the Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys Michael J. Marando and David Kent of the Fraud and Public Corruption Section of the U.S. Attorney’s Office for the District of Columbia. Assistance was provided by former Assistant U.S. Attorneys Michael Atkinson and David Last, former Paralegal Specialists Taryn McLaughlin and Angela Lawrence, Supervisory Paralegal Specialist Tasha Harris, Paralegal Specialists C. Rosalind Pressley, Brittany Phillips and Christopher Toms, and Litigation Technology Specialist Jeanie Latimore-Brown.

Business Email Compromise Timeline
Hawala System

March 2, 2017 | Permalink | Comments (0)

Wednesday, March 1, 2017

Inaugural International Law Weekend-South Kicks Off at Texas A&M Law

This Thursday, 25 international law experts, policy officials, and faculty will convene at Texas A&M University School of Law for the inaugural International Law Weekend-South.

This initial conference brings together leadership from Halliburton, the World Intellectual Property Organization (WIPO), and legal academics to examine key aspects of international trade, including:

  • resource management and development,
  • intellectual property impacts,
  • the potential renegotiation of NAFTA,
  • international corruption, and,
  • regional and international agreements, and the role of judges in enforcement of same.

International Law Weekend-South was established in cooperation with the American Branch of the International Law Association (ABILA) and is co-sponsored by the American Society TAMU-Law-lockup-stack-SQUARE (1) of International Law. ABILA President and Georgetown Visiting Professor of Law David Stewart has already named International Law Weekend-South the Association's official South Regional conference.

"This conference is going to provide a first-rate forum for exploring some of the most challenging questions of international law and practice facing the profession today, and – just as important – a terrific opportunity to engage students in thinking about cutting edge issues as well as career opportunities they may not have considered," Stewart said.

"From cross border trade to sustainable development to democratic transition, international law developments have been of utmost importance to this globalized world," said Professor Peter Yu, co-director of the school's Center for Law and Intellectual Property, and also Co-Director of Studies for ABILA. "With the many new policies that the U.S. administration is now rolling out, there cannot be a better time to closely examine these developments."

For more information about International Law Weekend-South, visit

March 1, 2017 in Academia | Permalink | Comments (0)

Building Contractor Company Executive Sentenced to 68 Months in Prison for Theft from Labor Union, Making Unlawful Labor Payments, Fraud and Money Laundering

The owner and CEO of a Greenbelt, Maryland building contracting company was sentenced to 68 months in prison for stealing more than $1.7 million from Local 657 of the Laborers Justice logoUnion of North America (LIUNA) and other related offenses.

Gary Amoes Cooper, 57, of Kettering, Maryland, the owner and CEO of STS General Contracting, was sentenced today by U.S. District Judge Amit P. Mehta of the District of Columbia, who also ordered Cooper to pay $1.632 million in restitution to Local 657 and to forfeit $1.734 million of criminally-derived proceeds.

Evidence presented at trial demonstrated that Cooper and his co-defendant, Christopher Andrew Kwegan, conspired with Anthony Wendel Frederick Sr., the former business manager of Local 657 of LIUNA, to convert for personal use $1.7 million in funds stolen from Local 657.   LIUNA’s Local 657, now merged into LIUNA Local 11, represents construction laborers in Washington, D.C., and five adjacent counties.  

According to the evidence at trial, from May 2013 to June 2014, Frederick directed more than $1.7 million in Local 657 funds to STS General Contracting for an unauthorized construction project and other work which STS General Contracting did not intend to perform.  Cooper and Kwegan then made a number of financial payments to Frederick with the funds stolen from Local 657, including a down payment of $225,000 on a home Frederick purchased and directed more than $600,000 to a corporation owned in part by Frederick’s wife. 

Frederick, 51, of Upper Marlboro, Maryland, previously pleaded guilty to the same offenses and was sentenced to 48 months in prison and ordered to pay $1.632 million in restitution to Local 657 and to forfeit $1.734 million on Feb. 7.  Kwegan, 58, of Randallstown, Maryland, also previously pleaded guilty to the same offenses and was sentenced on Feb. 8.  Both Frederick and Kwegan were sentenced by Judge Mehta.

March 1, 2017 | Permalink | Comments (0)

Tuesday, February 28, 2017

FTC to Explore Charitable Solicitations

Americans are among the most generous people in the world, contributing more than $373 billion to charity in 2015, according to The Giving Institute. We’re all familiar with phone calls, mailers, and TV and radio spots seeking donations, but the times are changing. Evolving marketing practices and new technologies have introduced new ways to solicit contributions and donate.

That’s just one of the reasons the FTC and the National Association of State Charities Officials (NASCO) are hosting a workshop on March 21, 2017 in Washington, DC.

The event, Give & Take: Consumers, Contributions, and Charity, will bring together regulators, researchers, charity watchdogs, donor advocates, and members of the nonprofit sector. Discussions will focus on how people evaluate and respond to various charitable solicitation practices and the role of consumer protection. For more information, please visit the workshop page.

In the meantime, consider these tips when asked to give: 

  • Donate to charities you know and trust and that have a proven track record.
  • Don’t assume that charity messages posted on social media are legitimate. Research the organization yourself.
  • When texting to donate, confirm the number with the source before you donate. The charge will show up on your mobile phone bill, but donations are not immediate. It can take as long as 90 days for the charity to receive the funds.

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

Monday, February 27, 2017

Outcomes of the Plenary meeting of the FATF, Paris, France, 20–24 February 2017

Under the Spanish Presidency of Mr. Juan Manuel Vega-Serrano, the second Plenary meeting of Plenary year FATF-XXVIII was held. 

Mr. Michel Sapin, French Minister of Finance and Public Accounts, addressed the Plenary to emphasize FATF’s important role in ensuring the integrity of the international global system from threats such as terrorist financing, and his country’s commitment to increase the traction capacity of the FATF even further. 

The main issues dealt with by this Plenary meeting were:


In the margins of the Plenary meeting, the FATF organised a Fintech and Regtech Roundtable. This first meeting involved representatives from the banking sector, engaged in Fintech activities. The discussions will feed into future events with representatives from the Fintech and Regtech communities. FATF aims to develop a constructive dialogue with both communities, in order to support a more effective implementation of the FATF Standards and innovation in financial services.

February 27, 2017 | Permalink | Comments (0)