International Financial Law Prof Blog

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

Thursday, April 30, 2015

American Express Anti-Trust Decision Rendered Against AMEX

Court Decision: "For the avoidance of doubt, American Express shall not prohibit, prevent, or 256px-American_Express_logo.svgrestrain a Merchant from engaging in any of the protected practices enumerated in Section III.A of this Permanent Injunction on the grounds that American Express believes or asserts that one or more of such practices “disparages,” “mischaracterizes,” or “harms” its business or Brand."

AMEX will certainly appeal.  Stay tuned..... Documents below.

Trial Materials

Judgment (April 30, 2015)

Memorandum (April 30, 2015)

Order Entering Permanent Injunction as to the American Express Defendants (April 30, 2015)


Plaintiffs' Memorandum in Reply to Non-Party Filings Regarding Remedy (April 17, 2015)

Plaintiffs' Reply Memorandum in Support of Proposed Final Judgment and Remedial Order as to the American Express Defendants (April 1, 2015)

Memorandum in Support of Proposed Final Judgment and Remedial Order as to the American Express Defendants (March 23, 2015)

Joint Submission as to Remedy (March 23, 2015)

Scheduling Order (February 19, 2015)

Decision (February 19, 2015)

Plaintiffs’ Proposed Findings of Fact ( Redacted Public Version) (October 16, 2014)

United States’ Closing Argument Presentation (Public Version) (October 9, 2014)

Plaintiffs’ Post-Trial Memorandum (Public Version) (September 26, 2014)

Plaintiff’s Proposed Conclusions of Law (September 18, 2014)

United States’ Opening Statement (Public Version) (July 7, 2014)

Pretrial Submissions

Plaintiffs' Pre-Trial Memorandum (Public Version) (June 26, 2014)

Memorandum of Law in Opposition to Defendants’ Motion Regarding Procedures for the Treatment of Confidential Information at Trial (June 9, 2014)

Memorandum & Order (May 7, 2014)

Plaintiffs’ Memorandum of Law in Opposition to Defendants’ Motion for Summary Judgment (February 20, 2014)

Plaintiffs’ Sur-Reply Memorandum of Law in Further Opposition to Defendant’s Motion for Summary Judgment (February 12, 2014)

Memorandum & Order (February 11, 2014)

Memorandum of Law in Opposition to Defendants' Motion to Consolidate for the Purpose of Trial (November 21, 2013)

Final Judgment as to Defendants MasterCard International Incorporated and Visa Inc. (July 20, 2011)

Memorandum & Order (July 20, 2011)

Letter Regarding PreMotion Conference on Entry of Proposed Final Judgment (July 14, 2011)

Response of Plaintiff United States to Public Comments on the Proposed Final Judgment (June 14, 2011)

Amended Complaint for Equitable Relief for Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 (December 21, 2010)

Stipulation Regarding Additional Parties to Proposed Final Judgment (December 20, 2010)

Competitive Impact Statement (October 4, 2010)

[Proposed] Final Judgment as to Defendants Mastercard International Incorporated and Visa, Inc. (October 4, 2010)

Stipulation (October 4, 2010)

Plaintiff's Notice of the Applicability of the Antitrust Procedures and Penalties Act to the Proposed Final Judgment (October 4, 2010)

Complaint for Equitable Relief for Violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 (October 4, 2010)

April 30, 2015 | Permalink | Comments (0)

OECD's Release of BEPS Action 8 Cost Contribution Arrangements & Transfer Pricing

Logooecd_enPublic comments are invited on a discussion draft which deals with work in relation to Action 8 of the Action Plan on Base Erosion and Profit Shifting (BEPS).

Action 8 ("Assure that transfer pricing outcomes are in line with value creation: Intangibles") requires the development of "rules to prevent BEPS by moving intangibles among group members" and involves updating the guidance on cost contribution arrangements. The discussion draft sets out a proposed revision to Chapter VIII of the Transfer Pricing Guidelines and is intended to align the guidance in that chapter with the other elements of Action 8 already addressed in the Guidance on Transfer Pricing Aspects of Intangibles released in September 2014.

Interested parties are invited to submit written comments by 29 May 2015 (no extension will be granted) and should be sent by email to in both PDF and Word format. They should be addressed to Andrew Hickman, Head of Transfer Pricing Unit, Centre for Tax Policy and Administration.

Check out International Financial Law Prof Blogger William Byrnes' Lexis’ Practical Guide to U.S. Transfer Pricing, available within LexisNexis, which is updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international Book Covernorms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators and tax professionals, 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. Chapter 13 covers Cost Sharing Arrangements.

April 30, 2015 | Permalink | Comments (0)

Use of Asset Forfeiture in Structuring Offenses Restricted by New DOJ Policy

DOJ-U-S-ATTORNEYS-OFFICEPolicy Limits Seizing Cash Deposited in a Way to Avoid Triggering Bank Reports to Most Serious Cases

As part of the Department of Justice’s comprehensive, ongoing review of the asset forfeiture program, Attorney General Eric Holder today issued a policy focusing the use of asset forfeiture authorities on the most serious illegal banking transactions, restricting civil or criminal forfeiture seizures for structuring until after a defendant has been criminally charged or has been found to have engaged in additional criminal activity, in most cases.

Structuring generally occurs when, instead of conducting a single transaction in currency in an amount that would require a report to be filed or record made by a domestic financial institution, the violator conducts a series of currency transactions, willfully keeping each individual transaction at an amount below applicable thresholds to evade reporting or recording.  In addition to being a stand-alone offense, structuring is a crime that often occurs in connection with other criminal activity.

Under the new policy, in the absence of criminal charges, judicially authorized warrants to seize bank accounts involved in structuring can only be obtained if the prosecutor first develops probable cause of additional federal criminal activity and that determination is approved by a supervisor.  Otherwise, a prosecutor may ask a judge to issue a seizure warrant only if either the U.S. Attorney or the Chief of the Criminal Division’s Asset Forfeiture and Money Laundering Section personally determines that seizure would serve a compelling law enforcement interest.

In addition, the new policy imposes important protections after a seizure has taken place.  The policy requires a prosecutor to promptly direct a seizing agency to return funds if the prosecutor determines that there is insufficient admissible evidence to prevail in a criminal or civil trial.  The policy also imposes a 150-day deadline to file a criminal indictment or civil complaint against the seized funds, or otherwise directs a return of the full amount of the seized funds.  Finally, the policy requires a formal, written settlement agreement vetted by a federal prosecutor for settlements of structuring offenses.

This new policy is the most recent result of the department’s ongoing review of the Asset Forfeiture Program to ensure that asset forfeiture – a critical law enforcement tool – can continue to be used to appropriately take the profits out of crime and return assets to victims, all while safeguarding civil liberties. 

The policy was developed by the Asset Forfeiture and Money Laundering Section of the Criminal Division and the Attorney General’s Advisory Committee of U.S. Attorneys.  The policy applies to all Department of Justice attorneys.

Attorney General's Memorandum and the Structuring Policy Directive 

April 30, 2015 | Permalink | Comments (0)

Fiscalidad Internacional: las obligaciones FATCA - 8 Mayo (Viernes) en Madrid

Viernes 8 de mayo a las 19.00 horas  Date: Friday, May 8th at 19:00
CEF.- Paseo General Martínez Campos, 5, Madrid  
Professor William H. Byrnes (Texas A&M University School of Law)
RSVP Required:


  1. Summary of FATCA Obligations
  2. Determine Status of Foreign Entity
  3. Withholdable Payments
  4. Documentation and Due Diligence
  5. Withholding
  6. Reporting
  7. IGA Update and Global Information Exchange

Cuando el Congreso de EE UU promulgó la Ley Fatca, dijo que fue el resultado de la necesidad de ingresos adicionales para costear la ley de empleo.  La mayoría de la gente sabe que EE UU incurrió en déficit año por año, pero, en Derecho, técnicamente, hay un precepto conforme al cual todas las normas que implican un gasto deben tener una disposición correspondiente que genere el ingreso tributario para financiarlo. El Congreso manifestó, expresamente, que esta Ley FATCA aumentaría el recaudo tributario en 150 billones de dólares por año.

La norma era necesaria para financiar una ley de empleo, que incluía beneficios para afrontar el desempleo, problema que surgió como consecuencia de esa crisis financiera. Sin embargo, las cifras actuales de recaudo tributario adicional que se han producido después de la ley están entre 300 y 500 millones de dólares por año. Parece mucho dinero, pero, en realidad, solo es el 0,003 % de la previsión de 150 billones de dólares.

Además, la Ley FATCA va a significar el aumento del recaudo en un solo momento, porque si se tienen 100.000 evasores, cuando estos se vuelvan cumplidores de la ley tributaria, a raíz de la Fatca, se va a registrar un aumento del recaudo, pero no de ahí en adelante con relación a esas mismas personas. Estadísticamente, es un hecho que no hay muchos contribuyentes estadounidenses que estén evadiendo tributos mediante otros países. El número de evasores, aunque uno nunca puede estar totalmente seguro, está entre 100.000 y 150.000. Pero es más probable que sean 100.000. Sin embargo, solamente en el 2014, se entregaron 150 millones de declaraciones tributarias en EE UU por parte de individuos. O sea que no estamos hablando, ni siquiera, del 1%. 

La evasión fiscal es mala, aunque también lo es el homicidio y nunca vamos a poder evitar todos los homicidios, ni toda la evasión tributaria. De manera que la pregunta de política pública que se debe formular es, desde la perspectiva del contribuyente, ¿cómo vamos a utilizar los recursos limitados para atacar o limitar al máximo la evasión tributaria? La peor forma de lograr el cumplimiento tributario y de la ley, en general, es la amenaza con la sanción. No se puede eliminar la sanción de la ley, pero la mejor forma de promover su cumplimiento es mediante incentivos acordes con lo que la sociedad acepta. 

April 30, 2015 | Permalink | Comments (0)

Wednesday, April 29, 2015

Fulbright Opportunities Deadline August 1

Iie-logoApplication Deadline for U.S. Scholars: August 1, 2014. For more information about awards, visit the 2015-2016 Catalog of Awards or email

Institute of International Education (IIE)
Council for International Exchange of Scholars (CIES)
1400 K Street NW, Suite 700
Washington, DC 20005

April 29, 2015 | Permalink | Comments (0)

Tuesday, April 28, 2015

SEC Announces Million-Dollar Whistleblower Award to Compliance Officer

SECThe Securities and Exchange Commission announced an award of more than a million dollars to a compliance professional who provided information that assisted the SEC in an enforcement action against the whistleblower’s company. 

 The award involves a compliance officer who had a reasonable basis to believe that disclosure to the SEC was necessary to prevent imminent misconduct from causing substantial financial harm to the company or investors. 

 “When investors or the market could suffer substantial financial harm, our rules permit compliance officers to receive an award for reporting misconduct to the SEC,” said Andrew Ceresney, Director of the SEC’s Division of Enforcement.  “This compliance officer reported misconduct after responsible management at the entity became aware of potentially impending harm to investors and failed to take steps to prevent it.”

 The whistleblower in this matter will receive between $1.4 million and $1.6 million.  Whistleblower awards can range from 10 percent to 30 percent of the money collected in a successful enforcement action with sanctions exceeding $1 million.  By law, the SEC must protect the confidentiality of whistleblowers and cannot disclose information that might directly or indirectly reveal their identities.

ComplianceX reports that since its inception in 2011, the SEC’s whistleblower program has paid more than $50 million to 16 whistleblowers who provided the SEC with unique and useful information that contributed to a successful enforcement action. The program is catching on, the SEC received over 3,500 tips in 2014 and awarded a $30 million payout to a whistle blower.  This the second award the SEC has made to an employee with internal audit or compliance responsibilities.

"Compliance personnel are allowed to participate. According to Sean McKessy, Chief of the SEC’s Office of the Whistle blower, “Individuals who perform internal audit compliance and legal functions for companies are on the front lines in the battle against fraud and corruption. They are often privy to the very kinds of specific, timely, and credible information that can prevent an imminent fraud or stop an ongoing one.”  McKessy added, “These individuals may be eligible for an SEC whistle blower award if their companies fail to take appropriate, timely action…”  Unlike other employees, Compliance professionals face certain limitations but can participate if at least 120 days have passed since they submitted the information internally."

April 28, 2015 | Permalink | Comments (0)

Monday, April 27, 2015

Byrnes and Perryman April FATCA GIIN Update


April’s global GIIN registrations, like March, were unimpressive.  

Financial institution GIIN total registrations ticked up from an unimpressive 2,479 additional ones in March to 3,734 in April, bringing the ultimate GIIN count to ... read the full William Byrnes and Haydon Perryman analysis at Kluwer Tax Blog 

April 27, 2015 | Permalink | Comments (0)

Deutsche Bank Misled Regulators and Continued Manipulation During LIBOR Investigation

FCA UKThe Financial Conduct Authority (FCA) has handed Deutsche Bank AG (Deutsche Bank) a £227 million ($340 million) fine, its largest ever for LIBOR and EURIBOR-related (collectively known as IBOR) misconduct. The fine is so large because Deutsche Bank also misled the regulator, which could have hampered its investigation.

Georgina Philippou, acting director of enforcement and market oversight, said:

“This case stands out for the seriousness and duration of the breaches by Deutsche Bank – something reflected in the size of today’s fine. One division at Deutsche Bank had a culture of generating profits without proper regard to the integrity of the market. This wasn’t limited to a few individuals but, on certain desks, it appeared deeply ingrained.”   

“Deutsche Bank’s failings were compounded by them repeatedly misleading us.  The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems and controls.”

April 27, 2015 | Permalink | Comments (0)

Sunday, April 26, 2015

Justice Department Returned Over $4 Billion to Victims of Crime Through the Asset Forfeiture Program Between 2002 and 2015

Justice logoMarking National Crime Victims’ Rights Week this week, Attorney General Eric Holder and Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division announced that the Justice Department’s Asset Forfeiture Program has returned more than $4 billion in civilly and criminally forfeited funds to crime victims since fiscal year 2002, with $723 million paid to over 150,000 crime victims in the last three years alone.  The funds were distributed through the victim compensation program managed by the Criminal Division’s Asset Forfeiture and Money Laundering Section (AFMLS).

“The Justice Department’s victim compensation program is an integral part of the asset forfeiture program and our efforts to take the profits out of crime, to restore assets to their rightful owners, and to provide real and meaningful justice to the victims of wrongdoing,” said Attorney General Holder.  “The scale and scope of the returns made to victims under the program in recent years have been especially impressive.  And going forward, as we continue our ongoing review of our asset forfeiture practices, we are committed to taking all appropriate measures to use this tool fairly, effectively, and with the greatest possible benefit to the American people.”

“The return of forfeited funds to crime victims is a priority of the civil and criminal forfeiture actions brought under the Asset Forfeiture Program,” said Assistant Attorney General Caldwell.  “Success such as this would not be achievable without the efforts of prosecutors in the Criminal Division and U.S. Attorneys’ Offices around the country, as well as the many federal, state and local law enforcement agents contributing time and resources to these investigations.  Make no mistake: forfeiture not only takes the money out of crime, but it’s among our most powerful tools to make victims whole.”

AFMLS partners with U.S. Attorneys’ Offices, federal law enforcement agencies, federal regulatory agencies, court-appointed receivers, private claim administrators, and private class action attorneys to return forfeited assets to crime victims. 

Recent noteworthy cases in which victims were compensated for their losses with forfeited assets include:

$62.2 Million to Victims of MoneyGram Fraud

United States v. MoneyGram International Inc. (Middle District of Pennsylvania)

On Nov. 9, 2012, MoneyGram International Inc., a global money services business, entered into a deferred prosecution agreement (DPA) with the Justice Department.  In doing so, MoneyGram admitted that corrupt MoneyGram agents across the country engaged in various consumer fraud schemes, including “grandparent” schemes in which a caller pretended to be the victim’s grandchild requesting money, and “advance fee” schemes requiring payment of fees to receive purported lottery winnings.  These schemes resulted in victims sending over $100 million via MoneyGram to the criminals, and that amount was administratively forfeited as part of the DPA by the U.S. Postal Inspection Service.  Over 22,000 victims who were fraudulently enticed to send money through corrupt agents have received a total of $62.2 million and been fully compensated for their losses.

$25.5 Million to Victims of Scott W. Rothstein

United States v. Scott W. Rothstein (Southern District of Florida)

From 2005 through 2009, attorney Scott W. Rothstein operated a massive Ponzi scheme through his now-defunct Fort Lauderdale law firm.  Over 400 victims attempted to invest more than $1 billion in purported confidential civil settlement agreements upon Rothstein’s promise of substantial future payouts.  In reality, the settlement agreements did not exist, but were part of an elaborate scam in which Rothstein either retained the funds or used them to pay earlier investors.  Prosecutors forfeited more than $28 million in bank accounts, real property, vehicles, jewelry and investment accounts as proceeds of the fraud.  Through a combination of the forfeiture proceeds, and other legal efforts, qualifying victims have received over $500 million in recoveries to date.

$14.6 Million to Victims of Allen Hilly

United States v. $7,599,358.09 (District of New Jersey)

In 2007, Allen Hilly was indicted on charges that he fraudulently obtained more than $18 million in federal tax and workers’ compensation withholdings.  When Hilly died before his case could proceed to trial, prosecutors initiated civil forfeiture proceedings to pursue the fraud proceeds.  As a result of the successful civil forfeiture, in 2014, over $14.6 million was returned to nine victims, including the Internal Revenue Service and the Illinois Department of Insurance, which paid out claims to injured employees who otherwise would not have received payments due to Hilly’s fraud. 

$11.7 Million to the Centers for Medicare and Medicaid Services

United States v. One Helicopter and United States v. One Parcel (Southern District of Florida)

Brothers Luis, Carlos and Jose Benitez were indicted in May 2008 for their alleged involvement in a $110 million scheme to defraud Medicare through the use of 11 South Florida clinics they owned and operated.  According to papers filed in court, the Benitez Brothers filed false claims and caused others to pay kickbacks to Medicare recipients who fraudulently claimed they received HIV infusion services at the clinics in order to obtain Medicare benefits in excess of $84 million.  After being charged with health care fraud and money laundering, the brothers fled to Cuba and remain fugitives.  The department filed three civil forfeiture actions that, to date, have resulted in the recovery of property, including a helicopter, hotel, a water park, 30 vehicles, a car rental agency, houses, condos, and apartments.  Thus far, $11.7 million is available to return to Medicare as compensation for losses resulting from the fraud.

$10 Million to Victims of Traders International Return Network Fraud

United States v. David Merrick (Middle District of Florida)

Between 2008 and 2009, David Merrick operated a Panamanian-based corporation called Traders International Return Network (TIRN), which claimed to be a legitimate private investment club with offices located in Dubai, Kuala Lumpur, Malaysia and Switzerland.  Court filings detail how Merrick created shell corporations, disseminated false monthly dividend reports, and recruited investors through a website and in person.  Over 770 victims suffered $12 million in losses as a result of Merrick’s scheme.  Approximately $10 million in forfeited funds have been returned to date to the victims.

$9.2 Million to the City of Dixon, Illinois

United States v. Rita A. Crundwell (Northern District of Illinois); United States v. Have Faith in Money, et al. (Northern District of Illinois)

For over 20 years, Rita Crundwell used her position as comptroller for the City of Dixon, Illinois to embezzle more than $53 million from the city.  An investigation revealed that Crundwell used the embezzled funds to pay for numerous personal and business expenses, including the establishment of a large horse farming and showing operation.  Crundwell was convicted of wire fraud and forfeited over 500 assets, including more than 300 horses and associated show items.  The U.S. Marshals Service assumed responsibility for the care of the horses seized in 13 states, which included overseeing the births of more than 80 foals.  Ultimately, liquidation of the forfeited assets generated $9.2 million, which has been paid to the City of Dixon.

$8.8 Million to Victims of Zaveri Oil and Gas Fraud

United States v. Ashvin Zaveri (Western District of New York)

Ashvin Zaveri was charged with orchestrating a Ponzi scheme that enticed investors to invest in sham oil and natural gas explorations in Tennessee and Kentucky.   Due to his untimely death, the criminal case against Zaveri was dismissed.  However, the U.S. Attorney’s Office commenced a civil forfeiture action against the proceeds of Zaveri’s life insurance policy.  Approximately $8.8 million obtained through civil forfeiture was returned to more than 100 victims of the scheme.

$4.5 Million to Victims of Xybernaut Fraud

United States v. Zev Saltsman (Eastern District New York)

Xybernaut Corporation, headquartered in Northern Virginia, was a provider of wearable mobile computing hardware, software and services.  In October 2007, Xybernaut’s founders were indicted for securities fraud and money laundering in connection with a kickback scheme.  Hundreds of millions of Xybernaut shares were issued at below market prices to several purchasers in exchange for kickbacks paid to the founders.  Approximately $4.5 million in assets forfeited from various defendants has been distributed to over 12,000 victims.

$4.5 Million to South Dakota Health Care Provider

United States v. Gerald Lloyd Larson (District of South Dakota)

Gerald Larson was convicted of embezzling funds from his employer, a South Dakota health care provider.  During the course of his scheme, he embezzled almost $5 million.  Shortly after his conviction in January 2015, the U.S. Attorney for the District of South Dakota requested a transfer of approximately $4.5 million in forfeited assets to the Clerk of Court to compensate the victim.

Priceless Artifact Returned to Harvard

United States v. One Qing Dynasty Jadeite Lobed Censer & Cover (District of Massachusetts)

In 1979, an 18th Century Qing Dynasty jade incense holder was stolen from the Harvard Art Museums.  In 2009, the artifact resurfaced at a Hong Kong auction house, which ran a search in the Art Loss Register database and discovered that the jade censer being offered for sale matched the censer stolen from Harvard.  The Art Loss Register then notified U.S. Immigration and Customs Enforcement officials of the censer’s reappearance.  Thereafter, the U.S. Attorney’s Office commenced a civil forfeiture action and obtained a civil warrant to seize the artifact.  After successful civil proceedings, the United States returned the stolen artifact to the Harvard Art Museums in January 2014, over 30 years after the original theft.

For additional information about the Department of Justice’s victim compensation program, please visit

April 26, 2015 | Permalink | Comments (0)

Saturday, April 25, 2015

Financing SMEs and Entrepreneurs 2015

Oecd sme bookThis fourth edition monitors SMEs’ and entrepreneurs’ access to finance in 34 countries over the period 2007-13, across an expanded array of indicators, including debt, equity, asset-based finance and framework conditions.


April 25, 2015 | Permalink | Comments (0)

Fulbright Grant Opportunities for Law Studies Abroad

Iie-logoWith over 80 Fulbright awards  available in countries around the globe for U.S. law professors, researchers and professionals, now is the time to refresh your thinking, and learn about law in a context other than that of the United States.

Highlighted Country and Regional Law Awards 

For further award highlights and examples of successfully funded past projects, visit our new Fulbright Opportunities in Law webpage or check out our latest webinar

Only U.S. citizens are eligible to apply. Click here to read the full eligibility guidelines.  

To apply, click hereDeadline:  August 3, 2015.

April 25, 2015 | Permalink | Comments (0)

Friday, April 24, 2015

Christian Bittar, One of Deutsche Bank's LIBOR Manipulators, Earned $136 million bonus in 2008

Christian Bittar, named as "Trader Three" by the DOJ, according to Bloomberg Business:

"Deutsche Bank’s most profitable derivatives trader, earning a bonus of almost 90 million pounds ($136 million) in 2008 alone. He was responsible for the majority of the requests for skewed Euribor submissions, the U.S. Commodity Futures Trading Commission said Thursday."

comment: The UK Financial Conduct Authority is seeking a mere 10 million sterling fine against Christian Bittar, representing just 10% of that 2008 annual bonus.  His earnings on that bonus since then can pay that off.  LIBOR manipulation pays, and it pays super well.  

NYSDFSNew York Department Financial Services

Deutsche Bank Employee: This "is a corrupt fixing and DB is part of it!"

Deutsche Bank Employee Seeking to Obtain Lower Rate: "I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…"

Benjamin M. Lawsky, Superintendent of Financial Services, announced today that Deutsche Bank will pay $2.5 billion, terminate and ban individual employees who engaged in misconduct, and install an independent monitor for New York Banking Law violations in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank ("LIBOR"), the Euro Interbank Offered Rate ("EURIBOR") and Euroyen Tokyo Interbank Offered Rate ("TIBOR") (collectively, "IBOR").

The overall $2.5 billion penalty Deutsche Bank will pay includes $600 million to the New York State Department of Financial Services (NYDFS), $800 million to the Commodities Futures Trading Commission (CFTC), $775 million to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA).

Superintendent Lawsky said: "Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain. While a number of the employees involved in misconduct have already left the bank, those that remain are being terminated or banned from the New York banking system. We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals."

The London Interbank Offered Rate ("LIBOR") is a benchmark interest rate used in financial markets around the world.  It is the primary benchmark for short term interest rates globally, written into standard derivative and loan documentation, used for a range of retail products, such as mortgages and student loans, and the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges.  It is also used as a barometer to measure the health of the banking system and as a gauge of market expectation for future central bank interest rates.

From approximately 2005 through 2009, certain Deutsche Bank traders frequently requested that certain submitters submit rate contributions that would benefit the traders’ trading positions, rather than the rates that complied with the IBOR definitions.

For example, on February 21, 2005, a trader requested of another trader who performed submitter duties on a back-up basis, "can we have a high 6mth libor today pls gezzer?"  The trader/submitter agreed, "sure dude, where wld you like it mate ?"  The trader replied, "think it shud be 095?"  The trader/submitter replied, "cool, was going 9, so 9.5 it is."  The trader joked, "super – don’t get that level of flexibility when [the usual submitter] is in the chair fyg!" Similarly, on December 29, 2006, a trader wrote to a submitter, "Come on 32 on 1. Mth… Cu my frd."  The submitter agreed, "ok will try to give you a belated Christmas present…!"

Deutsche Bank also communicated and coordinated with employees of other banks and financial institutions regarding their respective rate contributions in advance of an IBOR submission. On September 7, 2006, a London desk head attempted to obtain a low EURIBOR submission from an external banker at Barclays, "I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…"  The external banker replied, "I told them 1 m up is that right?"  The London desk head continued, "please pal, insist as much as you can… my treasury is taking it to the sky… we have to counter balance it… I’m beggin u… can u beg the [a panel bank] guy as well?"   The external banker agreed, "ok, I’m telling him."

As a bank’s IBOR rates are intended to correspond to the cost at which the bank concludes it can borrow funds, the rates are an indicator of a bank’s financial health.  If a bank’s submission is high, it suggests that the bank is, or would, pay a high amount to borrow funds.  This could indicate a liquidity problem and, thus, that the bank is experiencing financial difficulty.

Traders and submitters at Deutsche Bank were aware that the IBOR rates did not accurately reflect their definitions.  On August 21, 2008, a vice president wrote to an external banker employed at Merrill Lynch, "tibor going down or not?"  The external banker replied, "tibor will go down slightly but not much… euroyen tibor isn’t really reflective of actual money market condition in japan… people just randomly make those numbers up… pretty much like libors tho!"

On July 16, 2009, a managing director and the Head of the London Money Market Derivatives desk discussed the strength and accuracy of the Euro LIBOR panel in comparison to the EURIBOR panel.  The managing director asked, "u think the quality of the euro-libor panel is 4.5bps better than euribor?"  The Head of the London Money Market Derivatives desk responded yes, and the managing director replied, "not so sure, i have a hard time to believe if so many banks say they can better than the market while they are a part of it."  The Head of the London Money Market Derivatives desk stated, "theyre all lying anyway."  The managing director replied, "there is a philosophical saying: ‘one greek says: "all greeks are lying" who do u trust?"

On September 4, 2009, a vice president wrote to a trader regarding LIBOR and TIBOR, stating, "am purring 34 for 3m libor and I think am far too high… JPM [JP Morgan Chase] is putting 41 for tibor… I do not understand how come we can have 3m tibor/cash at 56 at DB… DB is the among the lowest libor contribution in all ccys… UBS is corrup/manipulator in tibor fixing… i think putting such a high tibor damage the reputation of deutsche bank… Second, It is not because all the tibors setters are corrupt/manipulators that deutsche bank has to be aswell… It is not because the japanese banks are manipulating the tibor fixing that DB has to do it as well… Tibor is a corrupt fixing and DB is part of it!"

From approximately 2007 through 2009, a number of large international banks were receiving negative press coverage concerning their high and potentially inaccurate LIBOR submissions.  Certain articles questioned particular banks’ liquidity position regarding the high LIBOR submissions and, as a result, the banks’ share prices fell.  Various Deutsche Bank senior managers circulated and discussed these articles.

On October 4, 2007, the Head of Short Term Interest Rate Trading in Australia and New Zealand forwarded an article, which reported a rumor that a large European bank was struggling for financing, including to senior management, commenting on the instability of the market, specifically in regards to bank illiquidity, and commented, "This market has the feel that we are about to have another run and panic on funding in my opinion just a gut feeling looking at the behavior of LIBORS if we look at the 3mth fix over the lst few days since we have gone over the TURN of the year there has been a bit of pressure… this feels like the period where we were edging up ever so slight back in early august where we fixed at 5.36 for months on end and then started edging up before the panic set in." Later that day, a group head within the Global Finance and Foreign Exchange Unit forwarded the email to  a London desk head, directing, "Make sure our libors are on the low side for all ccys."

Terminations and Bans of Individual Deutsche Bank Employees

As a result of the investigation, numerous employees that were involved in the wrongful conduct discussed in this Order, including those in management positions, have been terminated, disciplined or are otherwise no longer employed by the Bank, as a result of their misconduct.

However, certain employees involved in the wrongful conduct remain employed at the Bank.  The Department orders the Bank to take all steps necessary to terminate seven employees, who played a role in the misconduct but who remain employed by the Bank: one London-based Managing Director, four London-based Directors, one London-based Vice President, and one Frankfurt-based Vice President.

Additionally, ten of the individuals centrally involved in the misconduct were previously terminated as a result of the investigation.  Four of these employees were reinstated pursuant to a German Labour Court determination, and two of them remain at the Bank. Those employees that were reinstated due to the German Labour Court decision who remain at the Bank shall not be allowed to hold or assume any duties, responsibilities, or activities involving compliance, IBOR submissions, or any matter relating to U.S. or U.S. Dollar operations.

Superintendent Lawsky thanks the U.S. Department of Justice, the Commodities Futures Trading Commission, and the U.K. Financial Conduct Authority for their work and cooperation in this investigation.

To view a copy of the NYDFS order regarding Deutsche Bank, please visit, link.

April 24, 2015 | Permalink | Comments (0)

Taxpayer Advocate Recommendations Changing FBAR Penalties, One Reporting Form

Irs_logoFOREIGN ACCOUNT REPORTING: Legislative Recommendations to Reduce the Burden of Filing a Report of Foreign Bank and Financial Accounts (FBAR) and Improve the Civil Penalty Structure

excerpts below...

A U.S. citizen or resident with foreign accounts exceeding $10,000 can be subject to disproportionate civil penalties for failure to report the accounts on a Report of Foreign Bank and Financial Accounts (or FBAR) by June 30 of the following year.  Another penalty may apply if the accounts exceed $50,000 and the person does not report them on Form 8938, Statement of Specified Foreign Financial Assets, which is part of the tax return.

Even those who inadvertently failed to file an FBAR (i.e., “benign actors”) are afraid they could be hit with the elevated penalties applicable to willful violations because the government may rely on circum­stantial evidence of willfulness or willful blindness. Such fears have prompted some to enter the IRS’s offshore voluntary disclosure (OVD) programs and agree to pay penalties of such severity that they appear to have been designed for bad actors. The median penalty applied to taxpayers with the smallest ac­counts (i.e., those in the 10th percentile with accounts of $17,368 or less) under the 2011 OVD program, is more than eight times the unreported tax—over ten times the 75 percent penalty for civil tax fraud.

In June 2014, the IRS reduced the amount it requires certain benign actors to pay under its settlement programs. However, it did not allow those who have already signed closing agreements to receive the same, more reasonable program terms, in effect punishing them for addressing the problem quickly. Unexpected and disproportionate FBAR penalties may violate a taxpayer’s rights to be informed and to a fair and just tax system.  Because they cause some people to agree to excessive OVD settlements, they may also erode the rights to pay no more than the correct amount of tax, challenge the IRS’s position and be heard, and appeal an IRS decision in an independent forum, as discussed in prior reports.

For small accounts, the maximum penalty may be an even greater percentage. For example, someone with a total of $10,000 in five different foreign accounts ($2,000 in each) could be subject to a non-willful FBAR penalty of $300,000 (six years times five accounts times $10,000) or 30 times the account balance. If the IRS deems the violation willful, the penalty could rise to $3 million (six years times five accounts times $100,000) or 300 times the account balance.

Other information reporting penalties are more proportionate than FBAR penalties. For example, there is no penalty for failing to file a U.S. income tax return if there is no unpaid tax. The penalty for failure to file most information returns and payee statements is generally $100 per return, rising to 10 percent of the unreported amount for intentional violations. By contrast, the FBAR penalty may apply even if the FBAR is one day late and even if the taxpayer has no net underreported tax (e.g., because of foreign tax credits) as a result of underreporting income from the account.


To address the disproportionality of the civil FBAR penalty, the National Taxpayer Advocate recommends legislation to:

Cap the civil FBAR penalty at the lesser of 

(a) Ten percent of the unreported account balance or five percent for non-willful violations (similar to the IRS’s mitigation guidelines), and

(b) Forty percent of the portion of any underpayment attributable to the improperly undis­closed accounts (similar to the penalty for undisclosed foreign financial assets (e.g., assets not reported on Form 8938) under IRC § 6662(j)).

Eliminate or waive the civil penalty for failure to report an account on an FBAR if there is no evidence the account was used in connection with a crime and: 

a. The account information was already provided to the IRS, for example, on a Form 8938, Statement of Specified Foreign Financial Assets, or by a third party (e.g., a financial institution or government);

b. The amount of unreported income from the account does not create a substantial under­statement under IRC § 6662(d); or

c. The taxpayer resides in the same jurisdiction as the account.

One form would be better than two, if confidentiality concerns are addressed.

If it aligns the FBAR and Form 8938 thresholds and deadlines, Congress should also consider consolidat­ing the reporting requirements. Indeed, between 1970 and 1977, the Treasury Department only required taxpayers to report foreign accounts under the BSA on tax returns using Form 4683, U.S. Information Return on Foreign Bank, Securities & Other Financial Accounts.

In 1977, after taxpayer privacy laws were expanded under IRC § 6103, the IRS required people to report these accounts on a different form—not part of the return—so it could share the information with other federal agencies such as FinCEN.79 Therefore, if Congress requires the Treasury Department to combine these forms, it may also want to clarify that certain information on the combined form is not deemed part of the tax return and is not subject to IRC § 6103.

In connection with any such change, however, Congress should require the IRS to limit and prominently identify on the form, any information that may be disclosed to FinCEN.80 Without transparency and specificity, some taxpayers might withhold other information from the IRS based on a concern that it could be disclosed to other agencies. Foreign account information may be distinguished from other tax-related information because it is already required to be reported to FinCEN.

April 24, 2015 | Permalink | Comments (1)

DOJ Speaks Out On Deutsche Bank's Long Term Manipulation of Libor and $2.5 Billion of Penalties

DOJ-U-S-ATTORNEYS-OFFICEAssistant Attorney General Leslie R. Caldwell Delivers Remarks for the Deutsche Bank Manipulation of Libor Conference Call - 

Today we announce the latest law enforcement action in our ongoing criminal investigation of the manipulation of LIBOR, the London Interbank Offered Rate, which is a critical benchmark interest rate used throughout the world.  I am pleased to be joined on this call by my colleague and friend, Assistant Attorney General Bill Baer of the Antitrust Division.

Today’s resolution of the LIBOR investigation with Deutsche Bank is in some respects the most significant one yet.  Deutsche Bank’s London subsidiary has agreed to plead guilty to wire fraud in connection with its role in manipulating LIBOR.  And the parent-level bank is entering into a deferred prosecution agreement that requires a corporate monitor.  This is the first LIBOR resolution that imposes a monitor.  Deutsche Bank is paying to DOJ the largest criminal penalty imposed yet in the LIBOR resolutions, a total of $775 million.

Today’s guilty plea, significant financial penalty, deferred prosecution agreement and corporate monitor reflect the department’s consideration of several factors, including the seriousness of Deutsche Bank’s misconduct and the level of cooperation Deutsche Bank provided in the government’s investigation.  Deutsche Bank’s cooperation at the outset of the government’s investigation was not full and complete, but it improved over time, and today’s resolution takes that fact into account.

Deutsche Bank’s manipulation of LIBOR and EURIBOR, the Euro inter-bank offered rate, was long term and pervasive.  As part of the resolution, Deutsche Bank has agreed to a detailed statement of facts that sets forth its criminal conduct.  From at least 2003 through January 2011, dozens of the bank’s traders requested that the bank’s LIBOR and EURIBOR submitters contribute rates that would benefit the traders’ trading positions.  And in brazen conflicts of interest, certain traders were also LIBOR submitters for the currency they were trading.  So the very traders who had an interest in the LIBOR fix were the ones submitting the rates on behalf of the bank.  Deutsche Bank structured its trading group in another way that benefitted the traders at the expense of submitting fair and accurate rates: certain LIBOR submitters were supervised by traders of that currency who stood to benefit from LIBOR fixes that were favorable to their trading positions.  Deutsche Bank’s manipulation involved every major benchmark currency: U.S. Dollar LIBOR, Yen LIBOR, Swiss Franc LIBOR, Sterling LIBOR and EURIBOR. 

As a result, Deutsche Bank’s U.K. subsidiary, DB Group Services (U.K.) Ltd, which employed many of the individuals who engaged in the scheme, has agreed to plead guilty to wire fraud.  And Deutsche Bank AG has entered into a parent-level, three-year deferred prosecution agreement, with a corporate monitor, to resolve wire fraud and antitrust charges in connection with LIBOR manipulation. 

Together with penalties that Deutsche Bank is paying to our regulatory partners at the U.K. Financial Conduct Authority, the CFTC and the New York State Department of Financial Services, Deutsche Bank is paying approximately $2.5 billion in total.

The important resolution we are announcing today is just the latest action in our ongoing and active investigation.  We have charged 12 individuals to date, and three of those have already pleaded guilty.  The other charges are pending and the defendants are presumed innocent.  We have also resolved the LIBOR investigation with five other banks – six including Deutsche Bank.  These actions reflect the department’s continued commitment to investigating and prosecuting financial fraud and protecting U.S. markets.  And our LIBOR investigation is far from over.  We have more work to do – and we’re doing it.  Today’s resolution does not provide coverage against any individuals, and Deutsche Bank has agreed to continue cooperating in our investigation. 

Together with our law enforcement partners at the FBI and our regulatory partners here and abroad, we will continue to gather evidence of LIBOR manipulation and bring the accountable institutions and individuals to justice. 

I would like to thank the team of prosecutors and paralegals from the Criminal Division’s Fraud Section and the Antitrust Division who have worked tirelessly on this matter, as well as the many agents, accountants and financial analysts at the FBI for their excellent work.  I am also grateful to the Criminal Division’s Office of International Affairs for their help, and I would like to thank the CFTC, the U.K. Financial Conduct Authority, the Securities and Exchange Commission and the U.K. Serious Fraud Office for their assistance as well.

Assistant Attorney General Leslie R. Caldwell Delivers Remarks for the Deutsche Bank Manipulation of Libor Conference Call

April 24, 2015 | Permalink | Comments (0)

David Petraeus Receives Favorable Probation Sentence Instead of Jail for Releasing Classified Information To Lover

FBISealNY Times reports that DOJ and FBI angry that David Petraeus Receives Favorable Probation Sentence Instead of Jail for Releasing Classified Information To Lover ...

"A federal judge on Thursday sentenced David H. Petraeus, a former C.I.A. director and the highest profile general from the wars in Iraq and Afghanistan, to two years’ probation for providing classified information to a woman with whom he was having an affair. ...

F.B.I. officials were particularly angry over what they viewed as Mr. Holder’s not backing up their agents and allowing Mr. Petraeus to get away with lying to them."

April 24, 2015 | Permalink | Comments (0)

Thursday, April 23, 2015

$4 billion in CFTC Fines for LIBOR and Euribor Manipulation: Deutsche Bank, Rabo, Citibank, RBS, JP Morgan, UBS, Barclays, HSBC

720px-US-CFTC-Seal.svgDeutsche Bank’s misconduct occurred even after the CFTC’s Division of Enforcement requested in April 2010, that Deutsche Bank conduct an internal investigation of its U.S. Dollar LIBOR submission practices. Deutsche Bank did not make meaningful improvements in its internal controls until mid-2011, and did not formalize a policy about conflicts of interest among traders and submitters relating to benchmark submissions until February 2013.

The Fine Imposed on Deutsche Bank Represents the Largest Fine in CFTC’s History.  With Today’s Action, the CFTC Has Imposed over $4 Billion in Penalties against 13 Banks and Brokers to Address LIBOR and FX Benchmark Abuses.

With this Order, the CFTC has now imposed penalties of nearly $2.7 billion on six financial institutions and two interdealer brokers for LIBOR, Euribor, and other interest rate benchmark abuses. In addition, for similar misconduct relating to foreign exchange benchmarks, the CFTC recently imposed $1.4 billion on five financial institutions, for a total of over $4.1 billion in penalties in the CFTC’s enforcement program focused on ensuring the integrity of global financial benchmarks. The fine imposed on Deutsche Bank represents the largest fine in the CFTC’s history.

Interest Rate Benchmark Cases

• In re UBS AG and UBS Securities Japan Co., Ltd., CFTC Docket No. 13-09) (December 19, 2012) ($700 Million penalty) (CFTC Press Release 6472-12);

• In re Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank), CFTC Docket No. 14-02, (October 29, 2013) ($475 Million penalty) (CFTC Press Release 6752-13);

• In re The Royal Bank of Scotland plc and RBS Securities Japan Limited, CFTC Docket No. 13-14 (February 6, 2013) ($325 Million penalty) (CFTC Press Release 6510-13);

• In re Barclays PLC, Barclays Bank PLC, and Barclays Capital Inc., CFTC Docket No. 12-25 (June 27, 2012) ($200 Million penalty) (CFTC Press Release 6289-12); and

• In re Lloyds Banking Group plc and Lloyds Bank plc, CFTC Docket No. 14-18 (July 28, 2014) ($105 Million penalty), (CFTC Press Release 6966-14).

• In re ICAP Europe Limited, CFTC Docket No. 13-38 (September 25, 2013) ($65 Million penalty) (CFTC Press Release 6708-13);

• In re RP Martin Holdings Limited and Martin Brokers (UK) Ltd., CFTC Docket No. 14-16 (May 15, 2014) ($1.2 Million penalty) (CFTC Press Release 6930-14)

Foreign Exchange Benchmark Cases

• In re Citibank, N.A., CFTC Docket No. 15-03) (November 11, 2014) ($310 Million penalty) (CFTC Press Release 7056-14);

• In re JPMorgan Chase Bank, N.A., CFTC Docket No. 15-04) (November 11, 2014) ($310 Million penalty) (CFTC Press Release 7056-14);

• In re The Royal Bank of Scotland plc, CFTC Docket No. 15-05) (November 11, 2014) ($290 Million penalty) (CFTC Press Release 7056-14);

• In re UBS AG, CFTC Docket No. 15-06) (November 11, 2014) ($290 Million penalty) (CFTC Press Release 7056-14);

• In re HSBC Bank plc, CFTC Docket No. 15-07) (November 11, 2014) ($275 Million penalty) (CFTC Press Release 7056-14)

In these actions, the CFTC ordered each institution to undertake specific steps to ensure the integrity and reliability of the benchmarks.

The U.S. Commodity Futures Trading Commission (CFTC) today issued an Order against Deutsche Bank AG (Deutsche Bank) bringing and settling charges that Deutsche Bank routinely engaged in acts of false reporting and attempted manipulation and, at times, succeeded in manipulating the London Interbank Offered Rate (LIBOR) for U.S. Dollar, Yen, Sterling, and Swiss Franc, and the Euro Interbank Offered Rate (Euribor), interest rate benchmarks critical to the U.S. and global financial markets. Deutsche Bank is also charged with aiding and abetting, at times, the attempts of traders at other banks to manipulate Yen LIBOR and Euribor. The CFTC Order finds that Deutsche Bank, through its traders and benchmark submitters, engaged in this manipulative conduct to benefit cash and derivatives trading positions that were priced off of LIBOR or Euribor.

This Order requires Deutsche Bank to pay a civil monetary penalty of $800 million, cease and desist from its violations of the Commodity Exchange Act, and adhere to specific undertakings to ensure the integrity of its LIBOR and Euribor and other benchmark interest rate submissions in the future.

Aitan Goelman, CFTC Director of Enforcement, commented: “Today’s action against Deutsche Bank reflects the CFTC’s unwavering commitment to protect the integrity of critical, global financial benchmarks from profit-driven traders willing to falsify market information to gain an edge over others. As reflected in the CFTC’s findings and the $800 million penalty imposed, Deutsche Bank’s culture allowed such egregious and pervasive misconduct to thrive. We will be relentless in continuing to investigate and bring benchmark manipulation cases until such time as those involved in setting these benchmarks get the message that manipulation will not be tolerated, and the public can be confident in the integrity of these benchmarks.”

The CFTC Order specifically finds that over a more than six-year period, from at least 2005 through early 2011 (the relevant period), and across currencies, Deutsche Bank’s submitters routinely took into account other Deutsche Bank traders’ derivatives trading positions, as well as their own cash and derivatives trading positions, when making the bank’s LIBOR and Euribor submissions. The conduct of Deutsche Bank’s submitters, traders, desk managers, and at least one senior manager was systemic and pervasive, occurring across multiple trading desks and offices located in London, Frankfurt, New York, Tokyo (a subsidiary of Deutsche Bank), and Singapore.

According to the Order, the cash and derivatives trading on the desks responsible for Deutsche Bank’s misconduct increased throughout the relevant period and the desks generated significant revenues for Deutsche Bank, particularly during the global financial crisis of 2007 through 2009.

The Order further finds that Deutsche Bank allowed submitters and traders to prioritize profit motives over appropriate submission considerations, permitted a culture of trader self-interest to exist, and created conflicts of interest, which allowed the misconduct to occur. For example, certain managers encouraged continual information sharing between derivatives traders, money market traders, and submitters for the various benchmarks, even restructuring business lines such that derivatives traders and submitters sat together in the London office.

In this environment, traders often shouted their requests for beneficial submissions across the trading floor to the submitters. A senior manager regularly sat with the traders and encouraged them and their counterparts in other offices to communicate and exchange trading positions, so submitters became clearly aware of the submissions that were most favorable to the various desks’ trading positions. Senior desk managers in London, Frankfurt, New York, and the Tokyo subsidiary of Deutsche Bank also made requests to benefit their own trading positions, facilitated their traders’ requests for beneficial submissions, and promoted the profit-driven submission practices to help the traders increase profits and minimize losses on their and the desk’s trading positions.

Despite the obvious conflict of interest, Deutsche Bank allowed at times its traders who primarily traded derivatives, such as its Yen derivatives trader, to be responsible for the Bank’s submissions, thus making it easy to skew the bank’s submissions to benefit their own positions and to accommodate the requests of their fellow derivatives traders. These practices continued even after the British Bankers’ Association, the trade association responsible for the issuance of LIBOR, clarified in June 2008 that submissions should not be made by persons responsible for a bank’s derivatives trading book, but rather should be made by persons responsible for the management of the bank’s cash. Deutsche Bank’s Yen derivatives trader used his dual role as trader and submitter to assist the senior yen trader at UBS in his massive scheme to manipulate Yen LIBOR over the same relevant period.

The Order finds that Deutsche Bank lacked internal controls, procedures, and policies concerning its LIBOR and Euribor submission processes, and failed to adequately supervise its trading desks and traders to ensure that Deutsche Bank’s LIBOR and Euribor submissions reflected an honest assessment of the costs of borrowing unsecured funds in the interbank markets. These failures amplified the potential for misconduct and permitted the misconduct to continue for a number of years.

Deutsche Bank’s misconduct occurred even after the CFTC’s Division of Enforcement requested in April 2010, that Deutsche Bank conduct an internal investigation of its U.S. Dollar LIBOR submission practices. Deutsche Bank did not make meaningful improvements in its internal controls until mid-2011, and did not formalize a policy about conflicts of interest among traders and submitters relating to benchmark submissions until February 2013.

In accepting Deutsche Bank’s Offer, the Commission recognized the Bank’s cooperation with the Division of Enforcement’s investigation of this matter, but noted that at the outset of the investigation in April 2010 and continuing until mid-2011, Deutsche Bank’s cooperation was not sufficient, which affected, in part, a timely resolution of this matter. After mid-2011, Deutsche Bank provided significant cooperation and assistance to the Division of Enforcement.

In related actions by the U.S. Department of Justice (DOJ), DB Group Services UK Limited, a subsidiary of Deutsche Bank AG, agreed to plead guilty to a criminal charge of wire fraud; Deutsche Bank AG entered into a deferred prosecution agreement whereby it would continue to cooperate with the U.S. Department of Justice in exchange for the deferral of criminal wire fraud and antitrust charges; and Deutsche Bank collectively accepted a penalty of $775 million.  In addition, the United Kingdom Financial Conduct Authority (FCA) issued a Final Notice regarding its enforcement action against Deutsche Bank AG and imposed a penalty of £226.8 million (approximately $340 million), and the New York State Department of Financial Services announced that Deutsche Bank AG will pay a $600 million penalty, terminate individual employees who engaged in misconduct, and install a monitor for violations of New York law.

The CFTC acknowledges the valuable assistance of the DOJ, the Washington Field Office of the Federal Bureau of Investigation, the FCA, the Japanese Financial Services Agency, and Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin).



April 23, 2015 | Permalink | Comments (0)

Deutsche Bank's Pleads Guilty, Pay $2.519 billion in Penalties & Disgorgement, for Manipulating LIBOR

Justice logoDB Group Services (UK) Limited, a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), has agreed to plead guilty to wire fraud for its role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions around the world.  In addition, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges in connection with its role in both manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR.  Together, Deutsche Bank and its subsidiary will pay $775 million in criminal penalties to the Justice Department.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Assistant Attorney General Bill Baer of the Justice Department’s Antitrust Division and Assistant Director in Charge Andrew G. McCabe of the FBI’s Washington Field Office made the announcement. 

DB Group Services (UK) Limited has agreed to plead guilty to one count of wire fraud, and to pay a $150 million fine, for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions. 

In addition, Deutsche Bank entered into a deferred prosecution agreement today and admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy in violation of the Sherman Act by rigging Yen LIBOR contributions with other banks.  The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed upon DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement.

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

“For years, employees at Deutsche Bank illegally manipulated interest rates around the globe – including LIBORs for U.S. Dollar, Yen, Swiss Franc and Pound Sterling, as well as EURIBOR – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Assistant Attorney General Caldwell.  “Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation.”

“Deutsche Bank secretly conspired with its competitors to rig the benchmark interest rates at the heart of the global financial system,” said Assistant Attorney General Baer.  “Deutsche Bank’s misconduct not only harmed its unsuspecting counterparties, it undermined the integrity and the competitiveness of financial markets everywhere.”

“Deutsche Bank admitted to manipulating benchmark interest rates in currencies around the globe in order to benefit trading positions,” said Assistant Director in Charge McCabe.  “This wide reaching investigation represents yet another step in the FBI’s ongoing effort to find and stop those who deliberately participate in complex financial crimes to further their own bottom line.”

Deutsche Bank was a member of the panel of banks whose submissions were used to calculate the LIBORs for a number of currencies, including U.S. Dollar, Yen, Pound Sterling and Swiss Franc LIBOR, as well as EURIBOR (the Euro Interbank Offered Rate).

According to the agreements, from at least 2003 through early 2011, numerous Deutsche Bank derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts to move these benchmark rates in a direction favorable to their trading positions.  Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than rates that complied with the definition of LIBOR.  Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.  Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions.   

Deutsche Bank further admitted that its employees engaged in this misconduct through face-to-face requests, electronic communications, which included both emails and electronic chats, and telephone calls.  For example, in an electronic chat on March 22, 2005, a Deutsche Bank U.S. Dollar LIBOR submitter explained how he would manipulate the rate for a trader in New York, stating, “if you need something in particular in the libors i.e. you have an interest in a high or a low fix let me know and there’s a high chance i’ll be able to go in a different level.  Just give me a shout the day before or send an email from your blackberry first thing.”

In another example described in the statement of facts, on May 17, 2006, the supervisor of LIBOR submissions in London received a request from a trader in New York asking, “If you can help we can use a high 3m fix tom.”  The supervisor replied to the trader and a U.S. Dollar LIBOR submitter, “I’m off but [submitter] is your libor man [] [submitter] could you take a look at 3s libor in the morning for [trader].”  The submitter agreed to accommodate the request, replying, “Will do chaps.”  The following morning, after he submitted the bank’s contribution, the submitter wrote to the trader, “I went in at 19+ for the 3m libor, as you’ll see it almost manage to reach 19.”

In an example from March 2007, a trader thanked one of Deutsche Bank’s EURIBOR submitters for his help in successfully manipulating EURIBOR, saying in an electronic chat: “Great job on this [Submitter], we can do more of this stuff,” to which the submitter replied, “WE CAN MY FRIEND. WE CAN….”  Later that day, the submitter bragged about Deutsche Bank’s manipulation by offices in Frankfurt and London in an email to the head of Deutsche Bank’s Global Finance Unit: “HAVE U SEEN THE 3MK FIXING TODAY? THAT WAS AN EXCELLENT CONCERTED ACTION FFT/LDN. CHEERS.”

Deutsche Bank also admitted to working with other banks to manipulate LIBOR contributions.  For instance, in a May 2009 electronic chat exchange, a UBS trader asked a Deutsche Bank trader, “cld you do me a favour would you mind moving you 6m libor up a bit today, i have a gigantic fix. . .”  The Deutsche Bank trader agreed.  The next day, the Deutsche Bank trader confirmed that the Yen LIBOR submission had been beneficial to the UBS trader, asking “u happy with me yesterday?”  The UBS trader acknowledged, “thx.”

By entering into a deferred prosecution agreement with Deutsche Bank, the Justice Department took several factors into consideration, including that Deutsche Bank’s cooperation with the government’s investigation was often helpful but also fell short in some important respects.  The department also considered the extensive remedial measures undertaken by Deutsche Bank’s management and its enhanced compliance program.  Deutsche Bank has agreed to continue cooperating with the government’s investigation, and the agreement does not prevent the Justice Department from prosecuting culpable individuals for related misconduct.  The documents will be filed in federal court in the District of Connecticut.

The Justice Department has previously announced resolutions with five other banks for their roles in manipulation of benchmark interest rates, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Lloyds Banking Group plc.  The department has also charged 12 individuals as a result of this investigation, and three of those individuals have pleaded guilty.  The pending charges are merely accusations, and the defendants are considered innocent unless and until proven guilty.

This ongoing investigation is being conducted by special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office.  The prosecution of Deutsche Bank is being handled by Assistant Chief Jennifer L. Saulino and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorney Richard A. Powers of the Antitrust Division’s New York Field Office.  Deputy Chief Benjamin D. Singer and Assistant Chief Sandra Moser of the Criminal Division’s Fraud Section, Trial Attorney Daniel Tracer of the Antitrust Division’s New York Office, Assistant U.S. Attorneys Liam Brennan and Christopher Mattei of the District of Connecticut and the Criminal Division’s Office of International Affairs have also provided valuable assistance in this matter.

The investigation leading to these cases has required, and has greatly benefited from, a diligent and wide-ranging cooperative effort among various enforcement agencies both in the United States and abroad.  The Justice Department acknowledges and expresses its deep appreciation for this assistance.  In particular, the CFTC’s Division of Enforcement referred this matter to the department and, along with the FCA, has played a major role in the investigation.  The Securities and Exchange Commission has also played a significant role in the LIBOR series of investigations.  Various agencies and enforcement authorities in the United States and from other nations, including the United Kingdom’s Serious Fraud Office, BaFIN and the European Central Bank, are also participating in different aspects of the broader investigation relating to LIBOR and other benchmark rates, and the department is grateful for their cooperation and assistance.

This prosecution is part of efforts underway by President Barack Obama’s Financial Fraud Enforcement Task Force.  President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources.  The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets and recover proceeds for victims of financial crimes.  For more information about the task force visit:

Deutsche Bank Group Services Statement of Facts

Deutsche Bank Group Services Plea Agreement

Deutsche Bank AG Statement of Facts

Deutsche Bank AG Deferred Prosecution Agreement

NYFS Consent Order

April 23, 2015 | Permalink | Comments (0)

FinCEN Issues Quarterly Update of SAR Stats


The Financial Crimes Enforcement Network (FinCEN) has issued the SAR Stats quarterly update, which provides information on Suspicious Activity Reports (SARs) filed through March 31, 2015.  

The updated statistics can be viewed at


Quarterly Update (April 2015)


April 23, 2015 | Permalink | Comments (0)

Wednesday, April 22, 2015

Julius Baer Seeking Non Prosecution Agreement Over Tax Crimes

Bloomberg Law reports that Julius Baer is at “an advanced stage of talks” with U.S. authorities, Daniel Doj J. Sauter told shareholders in Zurich on April 15, according to a copy of his speech. Chief Executive Officer Boris Collardi said in February he expected to resolve the dispute in 2015, without providing further details on timing...

read about Credit Suisse's $2.8 billion settlement.

April 22, 2015 | Permalink | Comments (0)

Tuesday, April 21, 2015

DOJ Prosecuting Discrimination in Issuing Credit and Predatory Practices

Sourced from the DOJ Blog: Courtesy of Vanita Gupta, Acting Assistant Attorney General for the Civil Rights Division

DojIn the past year, the Department of Justice has continued to achieve significant results in its fair lending enforcement efforts, including negotiating groundbreaking relief for victims of credit discrimination. 

The Civil Rights Division’s Housing and Civil Enforcement Section and its Fair Lending Unit enforce the federal fair lending laws, including the Equal Credit Opportunity Act (ECOA), Fair Housing Act (FHA) and Servicemembers Civil Relief Act (SCRA). 

On April 13, 2015, the DOJ submitted its annual report of 2014, addressing credit discrimination of all its forms.  In the five years since the Fair Lending Unit was established, the division has filed or resolved 37 lending matters under ECOA, FHA and SCRA.  This year’s enforcement actions bring the total amount for the settlements in these matters to over $1.2 billion in monetary relief for impacted communities and individual borrowers.

Highlights of that work include:

Addressing discrimination in automobile lending: Working with the state of North Carolina, DOJ filed the federal government’s first-ever discrimination lawsuit involving “buy here, pay here” auto lending.  In the DOJ's complaint against Auto Fare Inc., the DOJ alleged that the owners and operators of two “buy here, pay here” used car dealerships violated ECOA by engaging in a pattern or practice of reverse redlining – intentionally targeting African American customers for unfair and predatory credit practices – in the financing of used car purchases.  The state of North Carolina also alleged the defendants violated the state’s Unfair and Deceptive Trade Practices Act.  The 2015 consent order requires the defendants to establish a $225,000 settlement fund to compensate victims for their past discrimination and to make significant changes to the terms of their loans and their repossession practices.

Addressing discrimination in credit cards: Partnering with the Consumer Financial Protection Bureau, the DOJ filed and resolved the federal government’s largest credit card discrimination settlement in history.  In the complaint of United States v. Synchrony Bank, f/k/a GE Capital Retail Bank (D. Utah), we alleged that the bank engaged in a nationwide pattern or practice of discrimination in violation of ECOA on the basis of national origin by excluding Hispanic borrowers from two of its credit card debt-repayment programs if they had a mailing address in Puerto Rico or denoted Spanish as their preferred language for various communications.  As part of the settlement, the lender will pay at least $169 million to compensate more than 108,000 borrowers.

Addressing discrimination based on disability and receipt of public assistance: Based on a matter initially investigated by the Department of Housing and Urban Development and referred to the department, the DOJ filed a case against Fifth Third Mortgage Co. (M.D. Ga.) alleging that the lender and Cranbrook Mortgage Corporation engaged in a pattern or practice of discrimination by requiring credit applicants with disabilities to provide an official letter from their medical doctor to substantiate that their disability income would continue, but did not impose a documentation burden on applicants without disabilities to prove their income would continue.  As part of the settlement , the defendants must pay $1.52 million to compensate victims and implement other injunctive relief.

Enforcing the rights of members of the military: In 2014, the department filed its first ever lawsuit alleging discrimination against service members by servicers and owners of student loans in United States v. Sallie Mae, Inc., et al.(D. Del.).  The complaint alleges that the defendants violated Section 527 of the SCRA when they failed to reduce to six percent the interest rates on pre-service loans held by approximately 60,000 service members.  The consent order requires the defendants to pay $60 million to compensate aggrieved service members.  In addition, the defendants must streamline the process by which service members may obtain SCRA interest rate benefits.

April 21, 2015 | Permalink | Comments (0)