International Financial Law Prof Blog

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

Monday, February 29, 2016

Guidance for a Risk-Based Approach for Money or Value Transfer Services

Money or Value Transfer Services (MVTS) play an important role in the international financial system and in supporting financial inclusion. In December 2015, the United Nations FATF logoestimated that developing countries received over USD 400 billion in remittances from migrants living abroad in 2014. However, like other financial institutions, MVTS providers are also vulnerable to the abuse for the purpose of money laundering and terrorist financing.    Download Guidance-RBA-money-value-transfer-services

The FATF has updated its 2009 Guidance on a Risk-Based Approach for Money Services Businesses to bring it into line with the 2012 FATF Recommendations. This non-binding Guidance is intended to assist countries and their competent authorities, as well as the practitioners in the MTVS sector and in the banking sector that have or are considering MVTS providers as customers, to apply the risk-based approach associated to MVTS. The risk-based approach, the cornerstone of the FATF Standards, requires that measures to combat ML/TF are commensurate with the risks. Such measures should not necessarily result into the categorisation of all MVTS providers as inherently high-risk. The overall risks and threats are influenced by the extent and quality of regulatory and supervisory framework as well as the implementation of risk-based controls and mitigating measures by each MVTS provider.

While this Guidance is applicable to the entire MTVS sector (both banking and non-banking institutions offering MVTS); it is primarily intended for non-banking MVTS providers. This Guidance should be read in conjunction with other relevant Guidance, in particular FATF Guidance for a Risk-Based Approach: The Banking Sector.

February 29, 2016 | Permalink | Comments (0)

ASUS Settles FTC Charges That Insecure Home Routers and “Cloud” Services Put Consumers’ Privacy At Risk

Taiwan-based computer hardware maker ASUSTeK Computer, Inc. has agreed to settle Federal Trade Commission charges that critical security flaws in its routers put the home 1024px-US-FederalTradeCommission-Seal.svgnetworks of hundreds of thousands of consumers at risk. The administrative complaint also charges that the routers’ insecure “cloud” services led to the compromise of thousands of consumers’ connected storage devices, exposing their sensitive personal information on the internet.

The proposed consent order will require ASUS to establish and maintain a comprehensive security program subject to independent audits for the next 20 years.

“The Internet of Things is growing by leaps and bounds, with millions of consumers connecting smart devices to their home networks,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Routers play a key role in securing those home networks, so it’s critical that companies like ASUS put reasonable security in place to protect consumers and their personal information.”

ASUS marketed its routers as including numerous security features that the company claimed could “protect computers from any unauthorized access, hacking, and virus attacks” and “protect [the] local network against attacks from hackers.” Despite these claims, the FTC's complaint alleges that ASUS didn’t take reasonable steps to secure the software on its routers.

For instance, according to the complaint, hackers could exploit pervasive security bugs in the router’s web-based control panel to change any of the router’s security settings without the consumer’s knowledge. A malware researcher discovered an exploit campaign in April 2015 that abused these vulnerabilities to reconfigure vulnerable routers and commandeer consumers’ web traffic. The complaint also highlights a number of other design flaws that exacerbated these vulnerabilities, including the fact that the company set – and allowed consumers to retain – the same default login credentials on every router: username “admin” and password “admin”.

According to the complaint, ASUS’s routers also featured services called AiCloud and AiDisk that allowed consumers to plug a USB hard drive into the router to create their own “cloud” storage accessible from any of their devices. While ASUS advertised these services as a “private personal cloud for selective file sharing” and a way to “safely secure and access your treasured data through your router,” the FTC’s complaint alleges that the services had serious security flaws.

For example, the complaint alleges that  hackers could exploit a vulnerability in the AiCloud service to bypass its login screen and gain complete access to a consumer’s connected storage device without any credentials, simply by accessing a specific URL from a Web browser. Similarly, the complaint alleges that the AiDisk service did not encrypt the consumer’s files in transit, and its default privacy settings provided – without explanation – public access to the consumer’s storage device to anyone on the Internet.  

In February 2014, hackers used readily available tools to locate vulnerable ASUS routers and exploited these security flaws to gain unauthorized access to over 12,900 consumers’ connected storage devices. 

The Commission alleges that, in many instances, ASUS did not address security flaws in a timely manner and did not notify consumers about the risks posed by the vulnerable routers. In addition, the complaint alleges that ASUS did not notify consumers about the availability of security updates.  For example, according to the complaint, the router’s software update tool – which allowed consumers to check for new router software – often told consumers that their router was on the most current software when, in fact, newer software with critical security updates was available. 

In addition to establishing a comprehensive security program, the consent order will require ASUS to notify consumers about software updates or other steps they can take to protect themselves from security flaws, including through an option to register for direct security notices (e.g., through email, text message, or push notification).  The consent order will also prohibit the company from misleading consumers about the security of the company’s products, including whether a product is using up-to-date software.

This matter is part of the FTC’s ongoing effort to ensure that companies secure the software anddevices that they provide to consumers.

The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing throughMarch 24, 2016, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit comments electronically.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

February 29, 2016 in Financial Regulation | Permalink | Comments (0)

Sunday, February 28, 2016

Low Income Taxpayer Clinic Program Reports on Activities

The Internal Revenue Service’s Low Income Taxpayer Clinic (LITC) Program Office has issued its fourth annual program report. The newreport describes how LITCs across the nation Irs_logohave assisted low income taxpayers and individuals who speak English as a second language (ESL) with free or low-cost representation in disputes with the IRS.

During 2014, LITCs represented 19,882 taxpayers in disputes with the IRS and provided consultation or advice to an additional 18,810 taxpayers. LITCs helped taxpayers secure more than $4.3 million in tax refunds and eliminate over $62 million in tax liabilities, penalties and interest.

Through outreach and education activities, LITCs also ensured individuals understood their rights as U.S. taxpayers. LITCs conducted 3,046 educational activities attended by 75,706 persons. Overall, almost 1,800 volunteers contributed to the success of the LITCs.

Here is one example of how LITCs can assist with tax issues: A local Veterans Affairs office referred a taxpayer to an LITC. The taxpayer had lost his business and home while struggling with post-traumatic stress syndrome.

The LITC reconstructed his financial records, filed delinquent tax returns and successfully negotiated an offer in compromise with the IRS. Upon completion of the case, the taxpayer revealed to the LITC attorney that he had been severely depressed over the tax issues and he believes the LITC helped him retake control of his life.

The full report includes an overview and history of the LITC program, discusses the representation, education and advocacy services that LITCs provide. It also  illustrates the results that LITCs achieve on behalf of their clients.

Background information

The IRS awards matching grants of up to $100,000 per year to qualifying organizations to develop, expand or maintain an LITC. The grant program is administered by the Office of the Taxpayer Advocate at the IRS, led by National Taxpayer Advocate Nina E. Olson. Although LITCs receive partial funding from the IRS, LITCs, their employees and volunteers operate independently from the IRS.

LITCs are generally operated by:

  • Clinical programs at accredited law, business, or accounting schools.
  • Legal aid or legal services organizations.
  • Other tax-exempt organizations that assist low income or ESL individuals and families.

View the Low Income Taxpayer Clinic Program Report online now to learn more. 

February 28, 2016 in Tax Compliance | Permalink | Comments (0)

Saturday, February 27, 2016

700,000 taxpayers identities stolen from IRS - maybe yours?

USA Today reported that "A 2015 cyber hack of the IRS potentially gained access to personal data from more than 700,000 taxpayer accounts, more than double the total previously Irs_logo estimated, the tax agency said Friday."  Read the full story here



February 27, 2016 in Tax Compliance | Permalink | Comments (0)

FinCEN & OCC Penalize Florida's Gibraltar Private Bank $6.5 Million for Willful Anti-Money Laundering Compliance Violations

The Financial Crimes Enforcement Network (FinCEN) announced the assessment of a $4 million civil money penalty (CMP) against Gibraltar Private Bank and Trust Company of FINCEN Coral Gables, Florida, for willfully violating federal anti-money laundering (AML) laws, known collectively as the Bank Secrecy Act. Since first warned of its deficiencies in 2010, Gibraltar’s compliance failures persisted until its primary regulator, the Office of the Comptroller of the Currency (OCC), placed Gibraltar under a Consent Order in 2014. The OCC today also issued a $2.5 million CMP against the bank.

Gibraltar’s substantial AML program deficiencies led to its failure to monitor and detect suspicious activity despite red flags. These deficiencies ultimately caused Gibraltar to fail to timely file at least 120 suspicious activity reports (SARs) involving nearly $558 million in transactions occurring during 2009 to 2013. These deficiencies also unreasonably delayed Gibraltar’s SAR reporting regarding accounts related to a $1.2 billion Ponzi scheme led by Florida attorney Scott Rothstein. Timely filed SARs play an important role in law enforcement’s detection of criminal activity. Mr. Rothstein was convicted in 2010 and sentenced to 50 years in federal prison.

“We may never know how that scheme might have been disrupted had Gibraltar more rigorously complied with its obligations under the law. This bank’s failure to implement and maintain an effective AML program exposed its customers, its banking peers, and our financial system to significant abuse,” said FinCEN Director Jennifer Shasky Calvery.

Gibraltar’s transaction monitoring system contained incomplete and inaccurate account opening information and customer risk profiles, which hindered its compliance staff from adequately spotting unusual account activity. Gibraltar also failed to sufficiently address an automated monitoring system that generated an unmanageable number of alerts, including large numbers of false positives, which caused significant delays in Gibraltar’s review. Gibraltar also failed to properly train its compliance staff, and failed to develop and implement an adequate customer identification program.

FinCEN coordinated its enforcement action with an action by the OCC. The assessment will be deemed satisfied by an immediate payment of $1.5 million to the U.S. Department of the Treasury, and by paying $2.5 million in accordance with the penalty imposed by the OCC.

FinCEN seeks to protect the U.S. financial system from being exploited by illicit actors. Its efforts are focused on compromised financial institutions and their employees; significant fraud; third-party money launderers; transnational organized crime and security threats; and cyber threats. FinCEN has a broad array of enforcement authorities to target both domestic and foreign actors affecting the U.S. financial system.

Download Gibraltyar Bank AML consent OCC

February 27, 2016 | Permalink | Comments (0)

Friday, February 26, 2016

FDIC-Insured Institutions Earn $40.8 Billion in Fourth Quarter 2015

Community Bank Earnings Rise to $5.1 Billion

  • Net Operating Revenue of $174 Billion Is 4 Percent Higher Than a Year Ago
  • Noninterest Expenses Are 2.5 Percent Lower
  • Loan Losses Post First Year-Over-Year Increase Since Second Quarter 2010


"The banking industry continued to improve in the fourth quarter. … However, banks must remain vigilant as they manage interest-rate risk, credit risk, and evolving market conditions."
-- FDIC Chairman Martin J. Gruenberg


Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported aggregate net income of $40.8 billion in the fourth quarter of 2015, 640px-FdicLogo up $4.4 billion (11.9 percent) from earnings of $36.5 billion a year earlier. The increase in earnings was mainly attributable to a $6.8 billion increase in net operating revenue and a $2.7 billion decline in noninterest expenses. The reduction in noninterest expenses is attributed to a drop in litigation expenses at a few large banks. Financial results for the fourth quarter of 2015 and the full year are included in the FDIC’s latestQuarterly Banking Profile released today.

Of the 6,182 insured institutions reporting fourth quarter financial results, more than half (56.6 percent) reported year-over-year growth in quarterly earnings. The proportion of banks that were unprofitable in the fourth quarter fell from 9.9 percent a year earlier to 9.1 percent, the lowest level for a fourth quarter since 1996. .

Quarterly Net Income, 2009 - 2015

“Revenue and income were up from the previous year, overall asset quality continued to improve, loan balances increased, and there were fewer banks on the problem list,” Gruenberg said. “However, banks are operating in a challenging environment. Revenue growth continues to be held back by narrow interest margins. Many institutions are reaching for yield, given the competition for borrowers and low interest rates. And there are signs of growing credit risk, particularly among loans related to energy and agriculture.”

Highlights from the Fourth Quarter 2015 Quarterly Banking Profile

Community Bank Earnings Rise: The 5,735 insured institutions identified as community banks reported $5.1 billion in net income in the fourth quarter, an increase of 4 percent from the fourth quarter of 2014. Net operating revenue of $22.6 billion at community banks was $1.6 billion (7.4 percent) higher than a year earlier.

Net Operating Revenue of $174.3 Billion Is 4 Percent Higher Than a Year Ago: Loan growth helped lift revenue at most banks, as net interest income rose $3.9 billion (3.6 percent) compared to the fourth quarter of 2014.  Noninterest income was $3.0 billion (5 percent) higher, as servicing income rose $2.1 billion (178 percent) and gains on asset sales increased by $984 million (32 percent). Total net operating revenue was 4.1 percent higher than a year ago. 

Noninterest Expenses Are 2.5 Percent Lower: Total noninterest expenses of $105.8 billion in the fourth quarter were $2.7 billion (2.5 percent) less than in the fourth quarter of 2014.  Itemized litigation expenses at a few large banks were $2.4 billion (80 percent) below the level of a year ago.

Loan Losses Post First Year-Over-Year Increase Since Second Quarter of 2010: Net loan and lease charge-offs totaled $10.6 billion in the fourth quarter, an increase of $690 million (7 percent) compared to the fourth quarter of 2014.  This is the first time since the second quarter of 2010 that charge-offs have increased year-over-year.  Net charge-offs of loans to commercial and industrial borrowers were $512 million (43.4 percent) higher than a year ago, while charge-offs of credit cards were $292 million (5.6 percent) higher.  The average net charge-off rate for the fourth quarter was 0.49 percent, compared to 0.48 percent a year ago.

Loan Growth Rate Continues to Pick Up: Total loan and lease balances increased $197.3 billion (2.3 percent) during the fourth quarter. For the 12 months ended December 31, loans and leases increased $530.1 billion (6.4 percent).  This is the largest 12-month growth rate since mid-2007 to mid-2008.  At community banks, loan balances rose 2.5 percent during the fourth quarter of 2015 and increased 8.6 percent during the past 12 months.

Full-Year 2015 Earnings Are 7.5 Percent Higher Than 2014: Net income for the full year totaled $163.7 billion, an increase of $11.4 billion (7.5 percent) over the total for 2014.  Almost two out of every three banks (63.6 percent) reported higher net income in 2015.  Net operating revenue was $14.9 billion (2.2 percent) higher than in 2014, while total noninterest expenses were $5.5 billion (1.3 percent) lower.  Itemized litigation expenses at a few large banks were $6.6 billion (67.6 percent) less than in the previous year.

Deposit Insurance Fund (DIF) Rises $2.5 Billion to $72.6 Billion: The DIF increased from $70.1 billion in the third quarter to $72.6 billion in the fourth quarter, largely driven by $2.2 billion in assessment income. The DIF reserve ratio rose from 1.09 percent to 1.11 percent during the quarter.

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

Insured Institution Performance, Fourth Quarter 2015

Community Bank Performance, Fourth Quarter 2015

Deposit Insurance Fund Trends, Fourth Quarter 2015

Chairman Gruenberg's Press Statement

Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation’s banks and savings associations, 6,270 as of September 30, 2015. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing risks to which they are exposed. The FDIC receives no federal tax dollars—insured financial institutions fund its operations.

February 26, 2016 in Financial Regulation | Permalink | Comments (0)

Does Negative Publicity Increase Sales? Sometimes it helps drive sales 40% ...

Berger, Jonah, Alan T. Sorensen, and Scott J. Rasmussen (2010), “Positive Effects of Negative Publicity: When Negative Reviews Increase Sales,” Marketing Science, 29(5), 815-827.

NPR Story interview of behavioral economist Dr. Jonah Berger (Prof. Wharton)



February 26, 2016 in Economics | Permalink | Comments (0)

FinCEN Withdraws Findings of Patriot Act Money Laundering Concerns Against Banca Privada d'Andorra

The Financial Crimes Enforcement Network (FinCEN) is withdrawing three findings and related proposed rulemakings under Section 311 of the USA PATRIOT Act, after having FINCENdetermined that the subjects of the rulemakings no longer pose a money laundering threat to the U.S. financial system.

Banca Privada d’Andorra

FinCEN is withdrawing its finding and proposed rulemaking under Section 311 regarding Banca Privada d’Andorra (BPA), a bank headquartered in Andorra, as BPA no longer operates in a manner that poses a threat to the U.S. financial system. Authorities in Andorra assumed control of BPA management and operations, arrested the chief executive officer on money laundering charges, and are in the final stages of implementing a resolution plan that is isolating the assets, liabilities, and clients of BPA that raise money laundering concerns. Under the resolution plan, the assets, liabilities, and clients of BPA that do not raise money laundering concerns (i.e., the “good assets”) will be transferred to a bridge bank, known as Vall Banc, that is currently under the control of an Andorran government agency, Agència Estatal de Resolució d’Entitats Bancàries (AREB).

FinCEN believes that the steps taken by the Andorran authorities sufficiently protect the U.S. financial system from the money laundering risks previously associated with BPA. Accordingly, FinCEN has determined that BPA is no longer a primary money laundering concern and, therefore, it is not imposing any special measures under Section 311 with respect to BPA. FinCEN also notes that, given the withdrawal of the finding and proposed rule, no special measures under Section 311 would apply with respect to Vall Banc’s financial operations or with respect to the transfer of the good assets from BPA to Vall Banc or AREB.

Withdrawal of Finding and Notice of Proposed Rulemaking Regarding Banca Privada d’Andorra

Liberty Reserve S.A.

FinCEN is withdrawing its finding and proposed rulemaking under Section 311 regarding Liberty Reserve, previously headquartered in Costa Rica, as it no longer exists as a foreign financial institution. The Department of Justice has seized Liberty Reserve accounts and Internet domain names and charged seven of its principals and employees with money laundering. Liberty Reserve stopped functioning after these actions.

Withdrawal of Finding and Notice of Proposed Rulemaking Regarding Liberty Reserve S.A.

JSC CredexBank

FinCEN is withdrawing its finding and proposed rulemaking under Section 311 regarding JSC CredexBank, headquartered in Belarus, because JSC CredexBank and its successor, JSC InterPayBank, no longer operate as a foreign financial institution and no longer operate in a manner that poses a threat to the U.S. financial system. In May 2015, the National Bank of the Republic of Belarus revoked the banking license of JSC InterPayBank and delisted it from the list of banks authorized to conduct business in Belarus.

Withdrawal of Finding and Notice of Proposed Rulemaking Regarding JSC CredexBank



February 26, 2016 | Permalink | Comments (0)

Thursday, February 25, 2016

FATCA Final Regs Issued for Requirements for US Closely Held Entities to Report Specified Foreign Financial Assets

The final regulations provide for United States entities to report specified foreign financial assets for FATCA. These regulations set forth the conditions under which a US domestic entity will be considered a specified domestic entity required to undertake such reporting. These regulations affect certain domestic corporations, partnerships, and trusts who must for 2016 report such foreign assets on Form 8938.

1. Reporting Threshold

A domestic entity that meets the definition of a specified domestic entity applies the reporting threshold under § 1.6038D-2(a)(1) once, as part of determining whether it has a filing obligation. 

§ 1.6038D-2(a)(6)(ii) states: The value of any specified foreign financial asset in which a specified domestic entity has an interest and that is excluded from reporting on Form 8938 pursuant to § 1.6038D-7(a) (concerning certain assets reported on another form) is excluded for purposes of determining the aggregate value of specified foreign financial assets. For purposes of determining the aggregate value of specified foreign financial assets, a specified domestic entity that is a corporation or partnership and that has an interest in any specified foreign financial asset is treated as owning all the specified foreign financial assets (excluding specified foreign financial assets excluded from reporting on Form 8938 pursuant to § 1.6038D-7(a)) held by all domestic corporations and domestic partnerships that are closely held by the same specified individual as determined under § 1.6038D-6(b)(2).

II. Definition of Passive Income

In the final regulations, the Treasury Department and the IRS clarified the scope of the definition of passive income.  Specifically, these modifications: (1) Clarify that “dividends” includes substitute dividends and expand “interest” to cover income equivalent to interest, including substitute interest, (2) add a new exception for certain active business gains or losses from the sale of commodities, and (3) define notional principal contracts.  In addition, these final regulations add the exception for dealers.

These final regulations provide that rents and royalties derived in the active conduct of a trade or business conducted “at least in part” by employees of the corporation or partnership will not be considered passive income.

The exception for certain look-through income from related persons in § 1.1472-1(c)(1)(iv)(B)(1) is not adopted in these final regulations because § 1.6038D-6(b)(3)(ii) already eliminates passive income or assets arising from related party transactions for purposes of applying the passive income and asset thresholds to a corporation or partnership with related entities.

These final regulations provide that the passive asset percentage is determined based on a weighted average approach. Under this test, corporations or partnerships may use either fair market value or book value (as reflected on the entity's balance sheet and as determined under either a U.S. or an international financial accounting standard) to determine the value of their assets. Corporations or partnerships may be required to substantiate their determination of the passive asset percentage upon request by the IRS. 

III. Annual Determination of Specified Person's Interest in a Domestic Partnership

The requirement to determine a partner's capital or profits interest on a particular day is present in other provisions of the Internal Revenue Code, Treasury regulations, and published guidance, and the Treasury Department and the IRS believe it is an appropriate measure of an individual's economic interest in a partnership and, in general, is not overly complex. Accordingly, these final regulations retain the rule in the proposed regulations for determining if a domestic partnership is closely held.

IV. Clarification to Aggregation Rules

The Treasury Department and the IRS have determined that it is not necessary both to treat a group as a single entity and to attribute the assets or income of members of the group to an entity. Therefore, these final regulations simplify the aggregation rules by eliminating the reference to treating all domestic corporations and partnerships as a single entity.

V. Domestic Trusts

These final regulations clarify that the term current beneficiary also includes any holder of a general power of appointment, whether or not exercised, that was exercisable at any time during the taxable year, but does not include any holder of a general power of appointment that is exercisable only on the death of the holder.

Relevant Final Reg Excerpt 

(a) Specified domestic entity. A specified domestic entity is a domestic corporation, a domestic partnership, or a trust described in section 7701(a)(30)(E), if such corporation, partnership, or trust is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets. Whether a domestic corporation, a domestic partnership, or a trust described in section 7701(a)(30)(E) is a specified domestic entity is determined annually.

(b) Corporations and partnerships—(1) Formed or availed of. Except as otherwise provided in paragraph (d) of this section, a domestic corporation or a domestic partnership is formed or availed of for purposes of holding, directly or indirectly, specified foreign financial assets if and only if—

(i) The corporation or partnership is closely held by a specified individual as determined under paragraph (b)(2) of this section; and

(ii) At least 50 percent of the corporation's or partnership's gross income for the taxable year is passive income or at least 50 percent of the assets held by the corporation or partnership for the taxable year are assets that produce or are held for the production of passive income as determined under paragraph (b)(3) of this section (passive assets). For purposes of this paragraph (b)(1)(ii), the percentage of passive assets held by a corporation or partnership for a taxable year is the weighted average percentage of passive assets (weighted by total assets and measured quarterly), and the value of assets of a corporation or partnership is the fair market value of the assets or the book value of the assets that is reflected on the corporation's or partnership's balance sheet (as determined under either a U.S. or an international financial accounting standard).

(2) Closely held—(i) Domestic corporation. A domestic corporation is closely held by a specified individual if at least 80 percent of the total combined voting power of all classes of stock of the corporation entitled to vote, or at least 80 percent of the total value of the stock of the corporation, is owned, directly, indirectly, or constructively, by a specified individual on the last day of the corporation's taxable year.

(ii) Domestic partnership. A partnership is closely held by a specified individual if at least 80 percent of the capital or profits interest in the partnership is held, directly, indirectly, or constructively, by a specified individual on the last day of the partnership's taxable year.

(iii) Constructive ownership. For purposes of this paragraph (b)(2), sections 267(c) and (e)(3) apply for the purpose of determining the constructive ownership of a specified individual in a corporation or partnership, except that section 267(c)(4) is applied as if the family of an individual includes the spouses of the individual's family members.

Reporting of Specified Foreign Financial Assets issued 23 February 2016

2016 Edition of Lexis Guide to FATCA Compliance published  

Over 1,500 pages of analysis of the FATCA and CRS compliance challenges,  73 chapters by FATCA and CRS contributing experts from over 30 countries.  Besides in-depth, practical analysis, the 2016 edition includes examples, charts, time lines, links to source documents, and compliance analysis pursuant to the IGA and local regulations for many U.S. trading partners and financial centers.   The 19 newest chapters include by example an in-depth analysis of designing a FATCA internal policy that is compliant with the initial two-year soft enforcement initiative, designing an equivalent form to the W-8, reporting accounts, reporting payments, operational specificity of the mechanisms of information capture, management and exchange by firms and between countries, insights as to the application of FATCA, CRS, and the IGAs within BRIC, SEA and European country chapters.  No filler of forms and regs – it’s all beef !  FATCA book site.

February 25, 2016 | Permalink | Comments (2)

Four Pennsylvania-Based Companies and Two Individuals Agree to Pay $3 Million to Settle False Claims Act Suit Alleging Evaded Customs Duties

Corporation Pleads Guilty to Criminal Charges and Sentenced

The Department of Justice announced today that three importers and their owners – Ameri-Source International Inc., Ameri-Source Specialty Products Inc., Ameri-Source Holdings Justice logoInc., Ajay Goel and Thomas Diener – and a related importer, SMC Machining LLC, incorporated at Goel’s direction and formerly owned by his wife, have agreed to pay $3 million to resolve a lawsuit brought by the United States under the False Claims Act.  The lawsuit alleged that the defendants had engaged in a scheme to evade customs duties on imports of small-diameter graphite electrodes from the People’s Republic of China (PRC).  Small-diameter graphite electrodes are columns of synthetic graphite with diameters of around 16 inches or less that are used as fuel in electric arc and ladle furnaces, such as those used in steel manufacturing.  The companies are all based in Pennsylvania.    

“The nation’s customs laws are designed to protect domestic manufacturers from foreign products that enter the country at below-market prices due to unfair practices abroad,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division.  “This settlement shows that the Department of Justice is committed to pursuing claims against anyone involved in a scheme to seek an unfair advantage in U.S. markets by evading duties on imported goods, including the individuals who run the companies and knowingly participate in such schemes.”  

The Department of Commerce assesses and the U.S. Department of Homeland Security’s Customs and Border Protection (CBP) collects duties to protect U.S. manufacturers from unfair competition abroad by leveling the playing field for domestic products.  The particular duties at issue in this case are antidumping duties, which protect domestic manufacturers against foreign companies’ “dumping” products on U.S. markets at prices below cost.  Imports of PRC-manufactured small-diameter graphite electrodes have been subject to antidumping duties since Aug. 21, 2008. 

The settlement announced today resolves claims that Ameri-Source International Inc. evaded antidumping duties on 15 shipments of small-diameter graphite electrodes from the PRC from December 2009 to March 2012.  The United States contended that Ameri-Source International misclassified the size of the electrodes to avoid paying the duties.  There are no antidumping duties on larger diameter graphite electrodes.  The United States also alleged that Goel, Diener and the other companies caused and conspired in the misrepresentation to evade duties.  Ameri-Source International also waived indictment and pleaded guilty today to two counts of smuggling goods into the United States.   In U.S. District Court in the Western District of Pennsylvania, Ameri-Source International admitted that on April 27, 2011 and June 9, 2011, the company falsely declared imported cargo from the PRC as being graphite rods greater than 16 inches in diameter.  Chief Judge Joy Flowers Conti immediately sentenced the corporation to pay a $250,000 criminal fine within 10 days and applied the payment of the $3 million to the loss of antidumping duties of $2,137,420.00.

“We are committed to protecting U.S. jobs and industries from those who seek an unfair advantage in the U.S. marketplace,” said U.S. Attorney David J. Hickton for the Western District of Pennsylvania.  “This office’s aggressive criminal and civil enforcement efforts to combat and prosecute the evasive practices of both the corporations and individuals who perpetrated this scheme demonstrate our resolve to ensure a level playing field for all.”

“Antidumping duties level the playing field for U.S. manufacturers,” said CBP Commissioner R. Gil Kerlikowske.  “This is a prime example of how U.S. Customs and Border Protection partners with the Department of Justice, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE HSI) and the U.S. Department of Commerce to enforce antidumping duty laws.”

“This settlement underscores one of HSI’s primary efforts, which is to ensure a level playing field for companies engaged in legitimate trade and commerce with the United States,” said Special Agent in Charge John Kelleghan of Homeland Security Investigations (HSI) Philadelphia. “HSI special agents will continue to protect the revenue of the United States and aggressively investigate individuals and companies who attempt to operate outside our laws and regulations.”

“The Department of Commerce Office of Inspector General is dedicated to supporting bureaus such as the International Trade Association in protecting the U.S. economy from the type of criminal activity disclosed in this case,” said Special Agent in Charge Duane E. Townsend of the U.S. Department of Commerce Office of Inspector General.  “We greatly appreciate the cooperation and efforts of HSI and the U.S. Attorney’s Office that resulted in this agreement.”

The allegations resolved by the settlement were originally brought by whistleblower Graphite Electrode Sales Inc. under thequi tam provisions of the False Claims Act.  The act permits private parties to sue on behalf of the government those who falsely claim federal funds or, as in this case, those who avoid paying funds owed to the government or cause or conspire in such conduct.  The United States may intervene in and take over the lawsuit, as it has done here.  The act also allows the whistleblower to receive a share of any funds recovered through the lawsuit.  Graphite Electrode Sales Inc. will receive approximately $480,000 as its share of today’s settlement.

The case was handled by the Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s Office for the Western District of Pennsylvania, CBP, ICE HSI and the Department of Commerce’s International Trade Administration and Office of Inspector General. 

The lawsuit is captioned United States ex rel. Graphite Electrode Sales, Inc. v. Ameri-Source Holdings, Inc., et al., Case No. 13-cv-0474 (W.D. Pa.).  The claims resolved by this settlement are allegations only; there has been no determination of liability except as admitted in the criminal proceedings. 

February 25, 2016 in Tax Compliance | Permalink | Comments (0)

Former California Attorney Sentenced to 60 Months for His Role in International Investment Fraud Scheme

A Las Vegas man was sentenced today to 60 months in prison for his role in an investment fraud scheme that promoted fraudulent investment opportunities and caused more than $5 million in losses to investors.   Joseph Micelli, 62, was sentenced by U.S. District Judge Kent J. Dawson of the District of Nevada, who also ordered Micelli to pay $5.65 million in restitution and to forfeit $505,220 in fraudulent proceeds. 

As part of his plea, Micelli admitted that he conspired with others in the United States and Switzerland to promote investments and loan instruments that he knew to be fraudulent.  FBISeal (1)The conspirators told victims that, for an up-front payment, a Swiss company known as the Malom Group A.G. would provide access to lucrative investment opportunities and substantial cash loans.  In connection with his plea, Micelli admitted that he held himself out to investors as an attorney, when in fact he had lost his license to practice law.  In addition, as part of an effort to defraud an investor who held an equity stake in a corporation that had filed for bankruptcy, Micelli submitted a sworn affidavit to the U.S. Bankruptcy Court for the District of New Hampshire, in which he made false statements about the Malom Group’s ability to provide financing to the debtors. 

Five other defendants have been charged in the case, two of whom were convicted at trial in December, two of whom are at large in Switzerland and one of whom is awaiting extradition from Canada.          

The FBI’s Las Vegas Field Office investigated this case.  Assistant Chief Brian R. Young and Trial Attorneys Melissa Aoyagi and Anna G. Kaminska of the Criminal Division’s Fraud Section are prosecuting this case with assistance from the Criminal Division’s Office of International Affairs and the U.S. Attorney’s Office for the District of Nevada.  The U.S. Securities and Exchange Commission’s Enforcement Division, which referred the matter to the department and is conducting a parallel civil enforcement investigation, also provided valuable assistance.   

Today’s conviction is part of efforts underway by President Obama’s Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes.  With more than 20 federal agencies, 94 U.S. Attorneys’ offices and state and local partners, it is the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud.  Since its formation, the task force has made great strides in facilitating increased investigation and prosecution of financial crimes; enhancing coordination and cooperation among federal, state and local authorities; addressing discrimination in the lending and financial markets and conducting outreach to the public, victims, financial institutions and other organizations.  Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants.  For more information on the task force, visit

February 25, 2016 | Permalink | Comments (0)

Wednesday, February 24, 2016

OECD Announces New Global BEPS Projects and New OECD-BEPS Jobs in Paris

The OECD today agreed a new framework that would allow all interested countries and jurisdictions to join in efforts to update international tax rules for the 21st Century. The proposal for OECDbroadening participation in theOECD/G20 Base Erosion and Profit Shifting (BEPS) Project will be presented to G20 Finance Ministers at their next meeting on 26-27 February in Shanghai, China.

This new forum will provide for all interested countries and jurisdictions to participate as BEPS Associates in an extension of the OECD’s Committee on Fiscal Affairs (CFA). As BEPS Associates, they will work on an equal footing with the OECD and G20 members on the remaining standard-setting under the BEPS Project, as well as the review and monitoring of the implementation of the BEPS package.

The BEPS Project delivers solutions for governments to close the gaps in existing international rules that allow corporate profits to "disappear" or be artificially shifted to low or no tax environments, where companies have little or no economic activity. Revenue losses from BEPS are conservatively estimated at USD 100-240 billion annually, or 4-10% of global corporate income tax (CIT) revenues. Given developing countries’ greater reliance on CIT revenues, the impact of BEPS on these countries is particularly damaging.

"Drawing on the G20’s leadership, countries worldwide are working closer than ever to shut down the loopholes that facilitate tax avoidance," said OECD Secretary-General Angel Gurría. "The plan we are presenting today will create the largest and most inclusive forum for discussions and decisions on implementing the BEPS measures and ensuring a stronger and fairer international tax system. It is another strong signal that behaviour which was considered both legal and normal in the past will no longer be accepted."

The framework’s mandate will focus on the review of implementation of the four BEPS minimum standards, in the areas of harmful tax practices, tax treaty abuse, Country-by-Country Reporting requirements for transfer pricing and improvements in cross-border tax dispute resolution. It will also ensure ongoing data gathering on the tax challenges in the digital economy and measuring the impact of BEPS, as well as monitoring implementation of the remainder of the BEPS package and finalising the remaining BEPS standard-setting work, notably as concerns work on tax treaties and transfer pricing.

BEPS Associates will also work to support implementation of the BEPS package, particularly in developing countries, through the development and provision of practical toolkits that address the top priority issues they have identified.

If endorsed by the G20 at the Finance Ministers meeting in Shanghai on 26-27 February, the new framework will hold its first meeting in Kyoto, Japan in June.

For more information, please visit
Job opportunities
Deputy Head of Division - Tax Policy and Statistics
The Centre for Tax Policy and Administration (CTPA) is looking for a dynamic and experienced manager to take on the role of Deputy Head of the Tax Policy and Statistics Division.

The successful candidate will have extensive experience in tax policy, including economic, statistical and econometric analysis and will have a proven ability to direct policy-related analysis and research. S/he will provide intellectual leadership across a range of topics. S/he will also have the ability to establish and maintain effective working relationships and to have the background and skills to work closely with senior policymakers from the world’s leading economies.

The successful candidate will report directly to the Head of the Division.

» Full details of the position are available online. Applications should be submitted by 8 March 2016.
Head of Unit - Tax Data and Statistical Analysis
The Centre for Tax Policy and Administration (CTPA) is looking for a dynamic and experienced manager to take on the role of Head of the Tax Data and Statistical Analysis Unit in the Tax Policy and Statistics Division (TPS).

The successful candidate will have extensive experience in data collection and management, and statistical and econometric analysis of tax policy issues. S/he will lead a team responsible for the statistical and conceptual work of the Tax Policy and Statistics Division, oversee the collection and delivery of the Division’s key data and analytical products, ensure statistical quality, and provide leadership on key conceptual and measurement questions in the area of tax data and analysis. S/he will also have the ability to establish and maintain effective working relationships with all stakeholders, including as one of CTPA’s focal points for contact with other parts of the Organisation on statistical matters, and to have the background and skills to work closely with senior policymakers.

The successful candidate will report directly to the Head of the Division.
» Full details of the position are available online. Applications should be submitted by 13 March 2016.
Senior Advisor - Forum on Tax Administration: Mutual Agreement Procedures
One important element of the OECD Committee on Fiscal Affair’s recent work was the delivery of the 15 Base Erosion and Profit Shifting (BEPS) deliverables in September 2015. One of the fifteen reports, (Action 14 – Making Dispute Resolution Mechanisms More Effective), mandated the Secretariat of the Forum on Tax Administration (FTA) and its Mutual Agreement Procedures (MAP) Forum to conduct peer reviews and monitoring on the implementation of the Action 14 minimum standard based on terms of reference and a methodology developed jointly with the CFA’s Working Party 1.

The Centre for Tax Policy and Administration (CTPA) is looking for a Senior Advisor to work in the International Co-operation and Tax Administration Division (CTPA/ICA) to lead, manage and supervise the work of the FTA MAP Forum Secretariat.

S/he will report to the Head of the ICA Division.
» Full details of the position are available online. Applications should be submitted by 14 March 2016.
Advisor - Forum on Tax Administration: Mutual Agreement Procedures
One important element of the OECD Committee on Fiscal Affair’s recent work was the delivery of the 15 Base Erosion and Profit Shifting (BEPS) deliverables in September 2015. One of the fifteen reports, (Action 14 – Making Dispute Resolution Mechanisms More Effective), mandated the Secretariat of the Forum on Tax Administration (FTA) and its Mutual Agreement Procedures (MAP) Forum to conduct peer reviews and monitoring on the implementation of the Action 14 minimum standard based on terms of reference and a methodology developed jointly with the CFA’s Working Party 1.

The Centre for Tax Policy and Administration (CTPA) is looking for an experienced Advisor to work in the International Co-operation and Tax Administration Division (CTPA/ICA). The selected candidate will work under the supervision of the Head of the FTA MAP Forum Secretariat. S/he will support the FTA MAP Forum programme of work and take responsibility for conducting peer reviews based on information available on a jurisdiction’s MAP profile, the statistics reported under the reporting framework and information obtained via questionnaires, etc.
» Full details of the position are available online. Applications should be submitted by 14 March 2016.

February 24, 2016 in BEPS | Permalink | Comments (0)

Ohio Man Sentenced to 108 Months in Prison for Money Laundering via Costa Rica-Based Telemarketing Fraud Scheme

An Ohio man was sentenced to 108 months in prison for his role in laundering money for a Costa Rica-based “sweepstakes fraud” scheme that victimized U.S. residents, announced Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and U.S. Attorney Jill Westmoreland Rose of the Western District of North Carolina.

Paul R. Toth Jr., 41, of Wintersville, Ohio, was sentenced yesterday by U.S. District Judge Robert J. Conrad Jr. of the Western District of North Carolina.  In addition to imposing the Irs_logoprison sentence, Judge Conrad ordered Toth to pay $307,702 in restitution and to forfeit the same amount.

Toth was convicted on Aug. 4, 2015, following a two-day jury trial, of one count of conspiracy to commit money laundering and six counts of international money laundering stemming from his role in laundering money for a scheme to defraud two U.S. residents over the age of 55 out of more than $300,000 in savings.  The evidence at trial showed that telemarketers in Costa Rica, who were the defendant’s co-conspirators, posed as federal agents and deceived the two victims, who were husband and wife, into believing that they had won a large monetary prize in a sweepstakes contest.  The co-conspirators falsely told the victims that in order to receive the “prize,” the victims had to wire thousands of dollars to Costa Rica for a “refundable insurance fee.” 

The evidence at trial showed that, between approximately November 2009 and November 2010, Toth was a U.S.-based “smasher,” an individual who arranges to pick up victims’ money and take it to the fraudulent telemarketing organization, who facilitated the laundering of funds received from the elderly victims.  Specifically, according to trial evidence, Toth and others he recruited and supervised received more than $300,000 from victims and, using various individuals as senders and recipients to conceal the fraudulent nature of the transactions, wired more than $200,000 to co-conspirators in Costa Rica.  The evidence further demonstrated that Toth kept the remainder as his profit.

February 24, 2016 | Permalink | Comments (0)

Tuesday, February 23, 2016

Is IKEA cheating EU governments out of massive tax revenue? Green Party Commissions a Report

TAAKS AVOYD: this new item of furniture, easy to assemble if you know the right tricks, gives you the opportunity to hide your money, and does not take up much space. People, including tax administrations will barely notice it.  

You are not hearing about the latest IKEA furniture but about how this company structured itself to dodge €1 billion in taxes over the last 6 years using onshore European tax havens, according to new research commissioned by the GreensDownload Report_IKEA_tax_avoidance_Feb2016

This research builds on previous investigations to quantify how much several European countries are losing in tax because of IKEA’s tax planning strategies. With most of its retail activities located in Europe, we prove that IKEA is using a series of tax loopholes in different European countries, namely the Netherlands, Belgium and Luxembourg to avoid paying taxes.

One of the techniques is shifting royalties from each IKEA store to a subsidiary in the Netherlands, which acts as a conduit. The royalties go in and out the Netherlands untaxed and end up in Liechtenstein (or at least partly). And for 2014 alone, we estimate it amounts to €35 million of missing tax revenues in Germany, €24 million in France and €11.6 million in the UK. Countries like Sweden, Spain and Belgium are likely losing between €7.5 and €10 million as well.

The report also briefly explains why the latest European Commission's anti-tax avoidance package, published in January 2016, doesn’t go far enough to prevent this kind of tax avoidance. While some aspects will provide tax administrations with more information about the two IKEA Groups, the public won’t know more. Moreover, the proposal falls short of solutions for several tricks used by IKEA: no public disclosure of sweetheart tax deals (so-called tax rulings), no tackling of the harmful notional interest deduction scheme used by the IKEA Group in Belgium for example.

As Greens, we are calling for more ambitious tax reforms at European level. The report calls for:

  • An improved anti-avoidance package that will tackle more tax loopholes as shown by this practice case. We urge Member States to adopt a broader set of measures to truly work for tax justice in Europe
  • Greater transparency of multinationals’ activities: this means we urgently need public country by country reporting and public disclosure of sweetheart tax deals negotiated between tax administrations and large companies.
  • Moving towards more tax harmonisation in Europe. It is time for all Member States to adopt a common consolidated corporate tax base (CCCTB) and to stop the tax war some are engaged in, which only leads to a race to the bottom.
  • Considering the possibility of national and European authorities opening formal investigations on the IKEA case, as has been done for other big companies in the past.

This report was commissioned by the Greens’ working group on Tax Justice, one of the six priorities of the Greens in the European Parliament. Click here if you would like to know more about our tax justice work.

February 23, 2016 in BEPS | Permalink | Comments (0)

Monday, February 22, 2016

FATF Plenary Outcomes from February 2016

The main issues dealt with by this Plenary held on 17-19 February 2016 were:

Approval of a Consolidated FATF Strategy on Combating Terrorist Financing

Terrorist financing remains the top priority for the FATF as it resumed its discussions from the December 2015 Special Plenary on Terrorist Financing.

The FATF adopted a consolidated strategy which builds on existing work and reflects the latest developments on terrorist financing. The strategy notes the intensified global terrorist threats and sets out key policy objectives and the priority actions that the FATF and the global network will take to combat these threats. These include ensuring that there is a full understanding of the current terrorist financing threats, that the FATF Standards provide the full range of counter measures, and that countries are taking effective action against terrorist financing. The strategy sets objectives not only for the FATF as an organisation but also for individual countries.

Cooperation and exchange of information - internationally, domestically between government authorities, with and within the private sector - is crucial to effectively combat terrorist financing.  Just prior to the Plenary meeting, the FATF held two special meetings that informed the Consolidated FATF Strategy to Combatting Terrorist Financing as well as future work:

  • A meeting with the private sector provided valuable insights into the operational aspects of terrorist financing.  It involved a wide range of experts including from a full range of operational authorities and from the banking and money service business sectors. The experts exchanged views on how to identify terrorist financing, as well as on enhancing information exchange. Deeper knowledge of all aspects of terrorist financing will allow FATF to more accurately gauge whether its measures provide countries with the strongest possible tools to combat terrorist financing.
  • A joint FATF-CIFG meeting brought together 55 states and multilateral organisations, including the United Nations, the Egmont Group of Financial Intelligence Units, the International Monetary Fund, the World Bank and other stakeholders to exchange information on current efforts to combat ISIL financing. 

Focus on effective exchange of information

In December 2015, the FATF called on its members to provide more information on their terrorist financing risks and the barriers they face in effective information sharing -- at the international and domestic levels, as well as between government authorities,  with and within the private sector. The initial review of this information confirmed some of these barriers but also noted a number of good practices and useful tools and mechanisms that may help to overcome them. The FATF will continue its analysis which will help to identify steps to strengthen information exchange at all levels. Combatting terrorist financing is a global priority, and all the FATF-Style Regional Bodies (FSRBs) agreed to expeditiously conduct similar exercises. This will ensure that there is a global response to challenges in information sharing.   

Considering whether changes are necessary to the FATF Standards for combatting terrorist financing

The FATF is also analysing whether revisions to the FATF standards are necessary to integrate the financial provisions of recent United Nations Security Council Resolutions dealing with terrorism and terrorist financing, such as UNSCR 2199 and 2253.

Assessing and improving implementation of counter terrorist financing measures

In 2015, the FATF conducted a review of 199 jurisdictions to determine the extent to which they had implemented key elements of Recommendations 5 and 6 (criminalisation of terrorist financing, targeted financial sanctions). When the findings of this review were published in October 2015, the FATF identified 22 jurisdictions with fundamental problems: either the jurisdiction had not criminalised terrorist financing or it had no powers to implement targeted financial sanctions.  Since then, a number of these jurisdictions passed urgent legislation to address these shortcomings. As a result, 12 countries are no longer identified has having fundamental shortcomings.  Five countries were added to FATF’s list. The remaining 15 jurisdictions must now take urgent action to address their shortcomings, including requesting technical assistance from relevant bodies if necessary. They must report to the FATF’s International Cooperation Review Group on the progress they have made.

The FATF members with less serious shortcomings in their implementation of Recommendation 5 and 6 will report to the Plenary in June 2016 on the steps they have taken to address these shortcomings.  FSRB members will be subject to a similar process with their respective FSRB.

The FATF modified its methodology for assessing AML/CFT systems to include requirements related to banning the financing of foreign terrorist fighters.

Future work on combatting terrorist financing

The FATF will continue to prioritise measures to combat terrorist financing. It will report to the G20 Finance Ministers and Central Bank Governors’ Meeting on 26-27 February on key anti-terrorist financing issues.


The FATF is deeply concerned by Brazil’s continued failure to remedy the serious deficiencies identified in its third mutual evaluation report adopted in June 2010. Brazil has not criminalised terrorist financing since 2004 when Brazil’s second mutual evaluation report was adopted. While we welcome progress by Brazil on the freezing of terrorist assets, further improvements are required to fully satisfy the FATF standards.

The FATF now calls on Brazil to fulfil its FATF membership commitment by enacting counter terrorist financing legislation that adequately addresses these shortcomings in line with the FATF Recommendations. If adequate legislation has not been enacted by the next FATF Plenary (20 June 2016), the FATF will consider the next steps in the follow-up process.

Update on AML/CFT improvements in Algeria, Angola and Panama

The FATF congratulated Algeria, Angola and Panama for the significant progress made in addressing the strategic AML/CFT deficiencies earlier identified by the FATF and included in their respective action plans. These countries will no longer be subject to the FATF’s monitoring under its on-going global AML/CFT compliance process. Each country will work with its respective FATF-Style Regional Body as it continues to further strengthen its AML/CFT regime.

Malaysia welcomed as a Member of the FATF

The FATF granted full membership to Malaysia at this Plenary. Malaysia underwent a mutual evaluation that was adopted in 2015. Since then, it has worked to develop an action plan for addressing key effectiveness issues identified during the evaluation. Based on the commitment demonstrated by the action plan and the continuing progress in efforts to improve its AML/CFT, the Plenary agreed to grant membership and continue to monitor progress through the enhanced follow-up process.

Guidance on the Risk-Based approach for Money or Value Transfer Services


The FATF issued an updated Guidance on the Risk-Based Approach for Money or Value Transfer Services (MVTS).  MVTS providers play an important role in the international financial system, in particular for the migrant communities around the world. This guidance will assist countries and their competent authorities, as well as the practitioners in the MTVS sector and in the banking sector that have or are considering MVTS providers as customers, to apply the risk-based approach to the development of measures to combat money laundering and terrorist financing for the MVTS sector.


Revising the FATF/FSRB High-Level Principles and Objectives

The FATF updated high-level principles and objectives that provide a list of rights and obligations that apply to both the FATF and the FSRBs and which govern the relationship between the FATF and FSRBs.

Developments on de-risking

The FATF is closely following developments on de-risking by financial institutions, and is prioritising its work to give guidance on the proper implementation of the risk-based approach, including in the correspondent banking context.

February 22, 2016 | Permalink | Comments (0)

India's passes retroactive $2 billion tax assessment to thwart Supreme Court loss and threatens to confiscate Vodafone

Reuters reports that In 2012, India's Supreme Court ruled that Vodafone was not liable for any tax on the Hutchison deal, but the government then changed the law later that year to enable it to tax such deals retrospectively, demanding more than $2 billion be paid.

In 2014 Vodafone then sought international arbitration of the dispute, which has still not been settled.

India's tax office has sent Vodafone a reminder to pay $2 billion in taxes and threatened the UK group with seizure of local assets if it fails to do so, despite the dispute being the subject of an international arbitration process.

read the Reuters article here

February 22, 2016 in Tax Compliance | Permalink | Comments (0)

Sunday, February 21, 2016

Jersey Debt Downgraded

Jersey Finance reports that - Standard & Poor’s (S&P) rating service has amended its long-term foreign and local sovereign credit rating on the States of Jersey.

The agency confirms this is not reflective of Jersey’s current position but is based on potential future uncertainties, such as the UK EU Referendum and increased regulatory demands.

In 2015, S&P similarly reduced the UK Government’s rating due to the prospect of a UK exit from the EU.

February 21, 2016 in Economics | Permalink | Comments (0)

Saturday, February 20, 2016

FastCompany: The Most Innovative Companies of 2016: Top Companies by Sector

find out which companies are the 2016 most innovative on Fast Company -

February 20, 2016 in Economics | Permalink | Comments (0)

Friday, February 19, 2016

Operators of Bitcoin Mining Operation Butterfly Labs Agree to Settle FTC Charges They Deceived Consumers

Defendants Will Be Prohibited from Misleading Consumers, Taking Up-Front Payments for Bitcoin Machines

Butterfly Labs and two of its operators have agreed to settle Federal Trade Commission charges that they deceived thousands of consumers about the availability, profitability, and 1024px-US-FederalTradeCommission-Seal.svgnewness of machines designed to mine the virtual currency known as Bitcoin, and that they unfairly kept consumers’ up-front payments despite failing to deliver the machines as promised.

Under the terms of the settlements, Butterfly Labs and its part-owner and vice president of product development, Sonny Vleisides, and its general manager, Darla Drake, will be prohibited from misrepresenting to consumers whether a product or service can be used to generate Bitcoins or any other virtual currency, on what date a consumer will receive the product or service, and whether the product is new or used. The settlements also include monetary judgments that are partially suspended due to the defendants’ inability to pay.

“Even in the fast-moving world of virtual currencies like Bitcoin, companies can’t deceive people about their products,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These settlements will prevent the defendants from misleading consumers.”

The FTC’s complaint against the company and its corporate officers alleged that Butterfly Labs charged consumers thousands of dollars for its Bitcoin mining machines, but then failed to deliver the computers until they were practically useless, or in many cases, did not provide the computers at all. The settlements also resolve charges that the defendants failed to disclose that they were using the machines for themselves before delivering them, and that they kept consumers’ up-front payments even after failing to deliver machines as promised.

In addition to prohibiting the defendants from making any misleading claims about their products, the company and Vleisides will also be prohibited from taking up-front payments for Bitcoin machines and other products used to mine for any virtual currency unless those products are available and will be delivered within 30 days. If the product is not actually delivered within 30 days, the defendants must provide a refund.

Both settlement orders in the case require the defendants to provide consumers with prompt refunds if they sell a damaged or defective product, and require defendants to obtain a consumer’s permission before delivering a product late.

The orders also include partially suspended monetary judgments. Against Butterfly Labs and Vleisides, the judgment is $38,615,161, which will be suspended upon Butterfly Labs’ payment of $15,000, and Vleisides’ payment of $4,000. Against Drake, the judgment is $135,878, which will be suspended once she surrenders the cash value of all Bitcoins she obtained using company machines. The judgments were suspended based on the defendants’ inability to pay, but will become due should the defendants be found to have misrepresented their financial condition.

BF Labs, Inc.

February 19, 2016 in Financial Regulation | Permalink | Comments (0)

FBI raids UDF office in Grapevine on heels of "Ponzi scheme" allegations by Kyle Bass Hedgefund that has shorted UDF's stock

Grapevine-based real estate investment firm United Development Funding (UDF) was raided by the FBI on Thursday in the wake of allegations brought against the company by Dallas hedge fund manager Kyle Bass, who accused the company of operating a $1-billion "Ponzi-like scheme."

Meanwhile, Bass' hedge fund, Hayman Capital Management LP, claims that UDF is operating like a Ponzi scheme. By his own admission, Bass said he will benefit financially if the Badge_of_the_Federal_Bureau_of_Investigationclaims turn out to be true after taking a short position in UDF.

read the entire investigative story in the Dallas Business Journal.

The CEO os UDF responded on UDF's website: 

On February 5, 2016, after launching a website containing multiple false and misleading statements about our company and management team, a Dallas-based hedge fund has confirmed they have built a significant short position in UDF IV.

We direct you to our initial response filed with the SEC on December 14, 2015.  As is clearly detailed in our regulatory filings, our secured loans are underwritten based on collateral value, and UDF IV has not had any realized losses in its portfolio.  We are confident that we have appropriate policies and procedures in place to ensure accurate financial reporting and compliance with all applicable rules and regulations.

The hedge fund acknowledges on its website that they will profit if the stock price of UDF IV falls, and given this financial incentive we believe the hedge fund intends to continue disseminating misleading information. We remain focused on protecting investor value through the preservation of our portfolios, and we will defend our funds aggressively against these unfounded accusations.

UDF Response to Misleading Anonymous Posts

On December 10, 2015, United Development Funding III, L.P. (“UDF III”) and United Development Funding IV (“UDF IV”, and together with UDF III, “we” or the “Companies”) and other affiliated funds (together with the Companies, “UDF”) were attacked by a hedge fund or funds. We believe that the hedge fund(s) built a significant short position in UDF IV with the intention of unlawfully manipulating the price of UDF IV shares (a type of securities trading scheme known as “short and distort”). UDF IV short activity reported by at November 30, 2015 was in excess of 4.1 million shares, up from approximately 59,000 shares on December 31, 2014. We have communicated our knowledge of the facts and circumstances to the Securities and Exchange Commission (“SEC”). 

Consistent with a short and distort scheme, the posts about UDF have appeared on Internet sites and contain misleading statements, speculation and rumors. The statements clearly demonstrate a lack of understanding of the residential development project life cycle, which typically involves multi-phase master planned communities and the related financing structures. Investors who wish to understand our business should review our registration statements and periodic SEC filings, which describe the business model for each fund.

The Companies have been cooperating since April 2014 with a non-public fact-finding investigation being conducted by the SEC. We have provided a broad range of information to the SEC, however, the SEC has not identified to us any specific issues that are the subject of its investigation. The SEC has informed the Companies that this investigation is not an indication that any violations of law have occurred or that the SEC has any negative opinion of any person, entity, or security. UDF has not been accused of any wrongdoing and we believe that the Companies have appropriate policies and procedures in place to ensure accurate financial reporting and compliance with all applicable rules and regulations. The SEC has requested that the details of its fact-finding process be kept confidential and we have followed the advice of our securities counsel with respect to communication with the SEC and disclosure with respect thereto.

The following discussion refutes the misleading statements made in the posts about UDF and addresses additional questions from our investors.

UDF IV Value of Loans and Book Value Per Share

We evaluate each loan and its underlying collateral or business purpose on a quarterly basis. For our secured loans, we prepare detailed cash flow analyses using assumptions such as the land purchase price, projected development costs and expected cash flows from land parcel sales and finished lot sales, many of which are based on executed lot sales contracts between our borrowers and homebuilders. This information is available to our auditors for the quarterly reviews and annual audits of our financial statements. We believe the balances on our balance sheet are properly presented. UDF IV’s shareholder equity at September 30, 2015 totaled $510.2 million, or $16.63 per share.

UDF IV Accrued Interest on Loans

Most of our loans allow for interest accrual, which causes the loan balance to increase. Some projects may start development right away, while others may have various entitlement processes to complete before development begins. The value of collateral securing our loans generally increases as projects gain entitlements and move through the development stages. In addition, many of the projects we finance are multi-phase projects that may extend for several years, with different phases moving into development at different times. Once a project generates cash flows, payments are first applied to accrued but unpaid interest and then to principal. Our underwriting considers the expected asset life and the associated financing costs. We recognize interest income and record accrued interest on the loans where full collectability is considered probable.

February 19, 2016 in Financial Regulation | Permalink | Comments (0)