International Financial Law Prof Blog

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

Saturday, September 30, 2017

OECD releases IT-tools to support exchange of tax information policies

The OECD has released updated and new IT-tools and guidance to support the technical implementation of the exchange of tax information under the Common Reporting Standard OECD CbCR(CRS), on Country-by-Country (CbC) Reporting and in relation to tax rulings (ETR).

In relation to CbC Reporting pursuant to BEPS Action 13, the updated CbC XML Schema and User Guide now allows MNE Groups to indicate cases of stateless entities and stateless income, as well as to specify the commercial name of the MNE Group. Furthermore, both with respect to the CbC and ETR XML Schemas and User Guides, certain clarifications have been made, in particular with respect to the correction mechanisms.

The OECD is further pleased to announce that a dedicated XML Schema and User Guide have been developed to provide structured feedback on received CbC and ETR information. The CbC and ETR Status Message XML Schemas will allow tax administrations to provide structured feedback to the sender on frequent errors encountered, with a view to improving overall data quality and receiving corrected information, where necessary. In the same context, the User Guide for providing CRS-related Status Messages has also been slightly updated to clarify the technical aspects of the structured feedback process.

The different new and updated IT-tools and user guides may be accessed here: 

September 30, 2017 in BEPS | Permalink | Comments (0)

U.S. Net International Investment Position Second Quarter 2017

The U.S. net international investment position increased to -$7,934.9 billion (preliminary) at the end of the second quarter of 2017 from -$8,091.6 billion (revised) at the end of the first quarter, according to statistics released today by the Bureau of Economic Analysis (BEA). The $156.7 billion increase reflected a $1,004.2 billion increase in U.S. assets and an $847.5 billion increase in U.S. liabilities (table 1).

The $156.7 billion increase reflected net financial transactions of –$107.5 billion and net other changes in position, such as price and exchange-rate changes, of $264.2 billion (table A).

The net investment position increased 1.9 percent in the second quarter, compared with an increase of 2.7 percent in the first quarter, and an average quarterly decrease of 5.6 percent from the first quarter of 2011 through the fourth quarter of 2016.

U.S. assets increased $1,004.2 billion to $25,937.6 billion at the end of the second quarter, mostly reflecting increases in portfolio investment and direct investment assets.

  • Assets excluding financial derivatives increased $1,019.6 billion to $24,006.3 billion. The increase resulted from other changes in position of $657.3 billion and financial transactions of $362.2 billion (table A). Other changes in position mostly reflected the appreciation of major foreign currencies against the U.S. dollar that raised the value of assets in dollar terms. Financial transactions mostly reflected net acquisition of portfolio investment and direct investment equity assets.


Table A. Quarterly Change in the U.S. Net International Investment PositionBillions of dollars, not seasonally adjusted
  Position, 2017:I Change in position in 2017:II Position, 2017:II
Total Attributable to:
Financial transactions Other changes in position 1
U.S. net international investment position -8,091.6 156.7 -107.5 264.2 -7,934.9
Net position excluding financial derivatives -8,133.3 161.3 -116.8 278.1 -7,972.0
Financial derivatives other than reserves, net 41.6 -4.6 9.3 -13.9 37.1
U.S. assets 24,933.4 1,004.2 (2) (2) 25,937.6
Assets excluding financial derivatives 22,986.7 1,019.6 362.2 657.3 24,006.3
Financial derivatives other than reserves 1,946.7 -15.4 (2) (2) 1,931.3
U.S. liabilities 33,025.0 847.5 (2) (2) 33,872.5
Liabilities excluding financial derivatives 31,120.0 858.3 479.1 379.2 31,978.2
Financial derivatives other than reserves 1,905.1 -10.8 (2) (2) 1,894.3
1 Disaggregation of other changes in position into price changes, exchange-rate changes, and other changes in volume and valuation is only presented for annual statistics released in June each year.
2 Financial transactions and other changes in financial derivatives positions are available only on a net basis; they are not separately available for U.S. assets and U.S. liabilities.

U.S. liabilities increased $847.5 billion to $33,872.5 billion at the end of the second quarter, mostly reflecting increases in portfolio investment and direct investment liabilities.

  • Liabilities excluding financial derivatives increased $858.3 billion to $31,978.2 billion. The increase resulted from financial transactions of $479.1 billion and other changes in position of $379.2 billion (table A). Financial transactions mostly reflected net incurrence of portfolio investment liabilities. Other changes in position mostly reflected price increases on portfolio investment and direct investment liabilities.
Updates to First Quarter 2017 International Investment Position AggregatesBillions of dollars, not seasonally adjusted
  Preliminary estimate Revised estimate
U.S. net international investment position −8,141.2 −8,091.6
  U.S. assets 24,833.2 24,933.4
    Direct investment at market value 7,843.6 7,895.4
    Portfolio investment 10,570.2 10,591.6
    Financial derivatives other than reserves 1,946.7 1,946.7
    Other investment 4,039.6 4,066.6
    Reserve assets 433.1 433.1
  U.S. liabilities 32,974.5 33,025.0
    Direct investment at market value 7,952.4 7,952.4
    Portfolio investment 17,859.8 17,908.3
    Financial derivatives other than reserves 1,905.1 1,905.1
    Other investment 5,257.2 5,259.2

Next release: December 28, 2017 at 8:30 A.M. EST
U.S. Net International Investment Position, Third Quarter 2017

September 30, 2017 in Economics | Permalink | Comments (0)

Friday, September 29, 2017

Arrest Of 10 Individuals, Including Four Division I Coaches, For College Basketball Fraud And Corruption Schemes. High School players paid $150,000 to be recruited?

Coaches Alleged To Have Accepted Cash Bribes In Return For Steering College Players Under Their Control To Corrupt Financial Advisors

Joon H. Kim, the Acting United States Attorney for the Southern District of New York, and William F. Sweeney Jr., Assistant Director-in-Charge of the New York Office of the Federal Bureau of Investigation (“FBI”), announced the arrest today of 10 individuals, including four Division I NCAA men’s basketball coaches and a senior executive at a major athletic apparel company (“Company-1”), in connection with two related fraud and corruption schemes.  In the first scheme, as alleged in the three Complaints unsealed today, college basketball coaches took cash bribes from athlete advisors, including business managers and financial advisors, in exchange for using their influence over college players under their control to pressure and direct those players and their families to retain the services of the advisors paying the bribes.  In the second scheme, a senior executive at Company-1, working in connection with corrupt advisors, funneled bribe payments to high school-aged players and their families to secure those players’ commitments to attend universities sponsored by Company-1, rather than universities sponsored by rival athletic apparel companies. 

The three Complaints unsealed today charge four coaches, CHUCK CONNORS PERSON, LAMONT EVANS, EMANUEL RICHARDSON, a/k/a “Book,” and ANTHONY BLAND, a/k/a “Tony”; three athlete advisors, CHRISTIAN DAWKINS, MUNISH SOOD, and RASHAN MICHEL; a senior executive at Company-1, JAMES GATTO, a/k/a “Jim,” along with two individuals affiliated with Company-1, MERL CODE and JONATHAN BRAD AUGUSTINE, with wire fraud, bribery, travel act, and conspiracy offenses.  The defendants were all arrested this morning in various parts of the country.  DAWKINS, SOOD, and AUGUSTINE are scheduled to appear before U.S. Magistrate James L. Cott in federal court later today.

Acting Manhattan U.S. Attorney Joon H. Kim said:  “The picture of college basketball painted by the charges is not a pretty one – coaches at some of the nation’s top programs taking cash bribes, managers and advisors circling blue-chip prospects like coyotes, and employees of a global sportswear company funneling cash to families of high school recruits.  For the ten charged men, the madness of college basketball went well beyond the Big Dance in March.  Month after month, the defendants allegedly exploited the hoop dreams of student-athletes around the country, treating them as little more than opportunities to enrich themselves through bribery and fraud schemes.  The defendants’ alleged criminal conduct not only sullied the spirit of amateur athletics, but showed contempt for the thousands of players and coaches who follow the rules, and play the game the right way.”

FBI Assistant Director William F. Sweeney Jr. said:  “Today’s charges detail a corrupt practice in which highly rated high school and college basketball players were steered toward lucrative business deals with agents, advisors, and an international athletics apparel company.  As alleged, NCAA Division I and AAU coaches created a pay-to-play culture, agreeing to provide access to their most valuable players while also effectively exerting their influence over them.  Today’s arrests should also serve as a warning to those who conduct business this way in the world of college athletics.”
According to allegations contained in the three Complaints[1] unsealed today in Manhattan federal court, and other publicly available documents:

Overview of the Investigation

The charges in the Complaints result from a scheme involving bribery, corruption, and fraud in intercollegiate athletics.  Since 2015, the U.S. Attorney’s Office for the Southern District of New York and the FBI have been investigating the criminal influence of money on coaches and student-athletes who participate in intercollegiate basketball governed by the NCAA.  The investigation has revealed two related schemes.  In the first scheme (the “Coach Bribery Scheme”), athlete advisors – including financial advisors and business managers, among others – allegedly paid bribes to assistant and associate head basketball coaches at NCAA Division I universities, and sometimes directly to student-athletes at those universities, facilitated by the coaches.  In exchange for the bribes, the coaches agreed to pressure and exert influence over student-athletes under their control to retain the services of the bribe-payors once the athletes entered the National Basketball Association (“NBA”).  

In the second scheme (the “Company-1 Scheme”), athlete advisors working with high-level Company-1 employees, allegedly paid bribes to student-athletes playing at, or bound for, NCAA Division I universities, and to the families of such athletes.  These bribes were paid in exchange for a commitment by the athletes to matriculate at a specific university sponsored by Company-1, and a promise to ultimately sign agreements to be represented by the bribe-payors once the athletes entered the NBA.

Participants in both schemes allegedly took steps to conceal the illegal payments, including (i) funneling them to athletes and/or their families indirectly through surrogates and entities controlled by the scheme participants; and (ii) making or intending to make misrepresentations to the relevant universities regarding the involvement of student-athletes and coaches in the schemes, in violation of NCAA rules.

As described in the complaints, these schemes operated as a fraud on the universities involved, all of which provide scholarships to players and salaries to coaches with the understanding and expectation that the players and coaches are in full compliance with all relevant NCAA rules and regulations.  Moreover, these schemes subject the universities to substantial potential penalties by the NCAA, including, but not limited to, financial fines and penalties as well as the potential loss of eligibility to compete in various NCAA events. 

The Coach Bribery Schemes

The first scheme alleged in the Complaints entailed bribes by DAWKINS and SOOD, among others, to four men’s basketball coaches, PERSON, EVANS, RICHARDSON and BLAND, in exchange for the coaches’ agreement to direct players under their control, and the players’ families, to retain DAWKINS and SOOD once the players entered the NBA.  These corrupt arrangements, which turn on the coaches’ abuse of their positions of trust at the universities, are valuable both to the coaches, who receive cash bribes, and to the bribe-payors, for whom securing a future NBA player as a client can prove extremely profitable. 

Allegations Involving Chuck Person

Beginning in or around 2016, and continuing into 2017, PERSON, a former NBA player and the associate head coach at University-1, abused his coaching position at University-1 to solicit and obtain approximately $91,500 in bribe payments from a financial advisor and business manager for professional athletes, who, unbeknownst to PERSON, was providing information to law enforcement (“CW-1”).  In exchange for the bribes, PERSON agreed to direct certain University-1 basketball players to retain the services of CW-1 when those student-athletes entered the NBA.  The bribe payments initially were arranged by MICHEL, who had a preexisting relationship with PERSON and operated a clothing store that specialized in making bespoke suits for professional athletes.  Over the course of the scheme, PERSON did, in fact, arrange multiple meetings between CW-1 and players and/or their family members, in which he falsely touted CW-1’s qualifications without disclosing that he was being bribed to recommend CW-1.  For example, at one meeting, PERSON told the mother of a player at University-1 that CW-1 was PERSON’s own financial advisor and had also advised NBA Hall of Fame inductee (and University-1 alumnus) Charles Barkley, neither of which was true.  PERSON similarly told another player that CW-1 would purchase him a separate cell phone over which they could communicate so as to conceal the nature of the scheme.  

In addition to the bribe payments that PERSON solicited and received, PERSON also arranged for CW-1 to make payments directly to the families of the players PERSON was steering to CW-1.  PERSON further claimed to have given approximately $18,500 of the bribe money he received to the families of two student-athletes whom PERSON sought to steer to retain CW-1.

Allegations Involving Lamont Evans

Beginning in 2016, and continuing into 2017, EVANS solicited at least $22,000 from CW-1 and SOOD in exchange for EVANS’s agreement to exert his official influence over certain student-athletes that EVANS coached at two NCAA Division I universities, University-3 and University-4, to retain SOOD and CW-1’s business management and financial advisory services once those players entered the NBA.  In return, EVANS (who had received bribe payments from DAWKINS previously), promised SOOD and CW-1 that he would steer multiple specific players to retain their services.  Indeed, as a part of the scheme, EVANS arranged for CW-1 to meet with a student-athlete EVANS coached at University-4 (“Player-4”), and arranged for SOOD to meet with the mother of another student-athlete EVANS had previously coached at University-3, for the purpose of pressuring them to retain SOOD and CW-1.  Moreover, and in return for the bribe payments, EVANS falsely touted the services of SOOD and CW-1 to players and their families, telling Player-4, for example, that CW-1 was “my guy,” adding, falsely, that CW-1 “has helped me personally.  And I trust that,” and assuring Player-4 that “[i]t’s going to benefit you.  I promise you that.”  In explaining the benefit of bribing an assistant coach such as EVANS, DAWKINS explained to SOOD and CW-1 that because coaches like EVANS could not get “caught” receiving bribes because “his job is on the line,” EVANS and other corrupt coaches would have an incentive to “block” other athlete advisors from accessing the players under the coaches’ supervision and directing those players to the bribe-payors.

Allegations Involving Emanuel Richardson, a/k/a “Book”

Beginning in or around February 2017, and continuing through September 2017, DAWKINS and SOOD, along with two undercover law enforcement agents posing as financial backers of CW-1 (“UC-1” and “UC-2,” respectively), paid or facilitated the payment of $20,000 in bribes to RICHARDSON in return for RICHARDSON’s commitment to steer players under his control at University-4 to retain DAWKINS and SOOD’s services upon entering the NBA.  During that period, RICHARDSON repeatedly assured DAWKINS and SOOD that RICHARDSON would use his influence over players at Univeristy-4 to direct them to DAWKINS and SOOD, explaining, with respect to one particular player DAWKINS and SOOD sought to sign (“Player-6”), that Player-6 would be “insulated in who he talks to.”  RICHARDSON added, with respect to himself, that “you’re looking at the guy” whom Player-6 trusted.  RICHARDSON subsequently facilitated at least one meeting between DAWKINS, SOOD, and a representative of Player-6 for the purpose of having that representative commit the player to retain DAWKINS and SOOD’s business management and financial advisory services.  In addition, RICHARDSON appears to have provided a portion of the bribe money he received from DAWKINS, SOOD, UC-1, and UC-2 to at least one prospective high school basketball player (“Player-5”) in order to recruit that player to play for University-4. 

Allegations Involving Anthony Bland, a/k/a “Tony,”

Beginning in or around July 2017, and continuing into September 2017, DAWKINS and SOOD, working with UC-1, paid and/or facilitated the payment of at least $13,000 in bribes to BLAND in exchange for BLAND’s agreement to exert his official influence over certain student-athletes BLAND coached at University-5, to retain DAWKINS and SOOD’s business management and/or financial advisory services once those players entered the NBA.  In particular, as BLAND told DAWKINS and SOOD, in return for their bribe payments, “I definitely can get the players. . . .  And I can definitely mold the players and put them in the lap of you guys.”  In addition, and as part of the scheme, at BLAND’s direction DAWKINS and SOOD paid or facilitated the payment of an additional $9,000 directly to the families of two student-athletes at University-5.  In return, BLAND facilitated a meeting between DAWKINS and SOOD and a relative of a player currently attending University-5 (“Player-9”) for the purpose of pressuring Player-9 to retain DAWKINS and SOOD.

The Company-1 Scheme

In addition to the Coach Bribery Scheme described above, the investigation further revealed a second, related scheme.  In the second scheme, JAMES GATTO, a/k/a “Jim,” a high-level executive at Company-1, and MERL CODE, an individual affiliated with Company-1 and its high school and college basketball programs, conspired to pay high school basketball players or their families for commitments by those players to attend and play for aCompany-1-sponsored university, and to sign with Company-1 upon turning professional.  In addition, DAWKINS, SOOD, and JONATHAN BRAD AUGUSTINE brokered and facilitated the corrupt payments in exchange for a promise that the players also would retain the services of DAWKINS and SOOD upon turning professional. 

Specifically, in or around 2017, GATTO, CODE, DAWKINS, AUGUSTINE, and SOOD agreed to pay bribes to at least three high school basketball players or their families in the following manner:

Allegations Involving Player-10 and University-6

First, GATTO, CODE, DAWKINS, and SOOD worked together to funnel $100,000 from Company-1 to the family of a high school basketball player (“Player-10”) in exchange for Player-10’s commitment to play at an NCAA Division I university whose athletic programs are sponsored by Company-1 (“University-6”), and in further exchange for a commitment from Player-10 to retain DAWKINS and SOOD, and to sign with Company-1, once Player-10 joined the NBA.  DAWKINS told CW-1 and others on a recorded conversation that he did so at the request of a coach at University-6 (“Coach-2”), and call records show that GATTO spoke directly with Coach-2 multiple times in the days before Player-10 publicly committed to attending University-6. 

Moreover, because the payments to the family of Player-10 were both in violation of NCAA rules and illegal, they were disguised by GATTO, CODE, DAWKINS, and SOOD using fake purchase orders, invoices and related documents to make them appear to be payments from Company-1 to CODE’s company.  As CODE explained to DAWKINS, while such payments are sometimes made “off the books,” for this particular payment, GATTO and CODE had identified it to Company-1 as “as a payment to my team, to my organization, so it’s on the books, [but] it’s not on the books for what it’s actually for.”  Indeed, the money, once allocated by Company-1, was funneled back to DAWKINS to use to pay the father of Player-10 in cash.

Allegations Involving Player-11 and University-6

Second, DAWKINS and AUGUSTINE agreed to facilitate payments to the family of another high school basketball player (“Player-11”) in exchange for Player-11’s commitment to play at University-6 and ultimately to retain DAWKINS’s services.  While these payments were not directly funded by Company-1, they were made to benefit Company-1, which, as noted, sponsors University-6, and with the expectation that Company-1 would provide additional funding to AUGUSTINE in return.  AUGUSTINE noted, “all [Coach-2] has to do is pick up the phone and call somebody [and say] these are my guys, they’re taking care of us.” 

Because these payments from DAWKINS to Player-11’s family were both in violation of NCAA rules and illegal, AUGUSTINE suggested that the “easiest way” for DAWKINS to provide money for Player-11 and his family would be to send the money to AUGUSTINE’s “non-profit for the grassroots team,” although AUGUSTINE confirmed that he also would accept cash.

As DAWKINS subsequently explained to UC-2 in the context of providing such money to AUGUSTINE and others, “obviously some of it can’t be completely accounted for on paper because some of it is, whatever you want to call it, illegal.”

Allegations Involving Player-12 and University-7

Third, GATTO, CODE, DAWKINS, and AUGUSTINE agreed to make payments of as much as $150,000 from Company-1 to another high school basketball player (“Player-12”) in order to secure Player-12’s commitment to play at an NCAA Division I university whose athletic programs are also sponsored by Company-1 (“University-7”).  Because Player-12 played for an amateur team run by AUGUSTINE and sponsored by Company-1, AUGUSTINE, with the assistance of CODE and DAWKINS, attempted to broker the deal to secure Player-12’s commitment to attend University-7 rather than a school sponsored by a rival athletic apparel company.  In exchange for the payment, Player-12 similarly was expected to commit to retaining DAWKINS’s services and signing with Company-1 once Player-12 joined the NBA.

Much as with the payments to Player-10 described above, according to intercepted calls, GATTO stated that the payments from Company-1 to Player-12 were allegedly requested specifically by a coach at University-7 (“Coach-3”), who allegedly called GATTO directly and who, according to DAWKINS, CODE, and AUGUSTINE, “knows everything” and, in particular, “knows something’s gotta happen for” Player-12 to commit to attending University-7. 

*                *                *




Charges (Potential Maximum Term of Imprisonment)

Chuck Connors Person


Auburn, AL

Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud, Wire fraud conspiracy; Travel Act conspiracy (80 years)

Rashan Michel


Smyrna, GA

Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,

Wire fraud conspiracy; Travel Act conspiracy (80 years)

Lamont Evans


Stillwater, OK

Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,

Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)

Emanuel Richardson, a/k/a “Book”


Tucson, AZ

Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,

Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)

Anthony Bland, a/k/a “Tony”


Los Angeles, CA

Bribery conspiracy, Solicitation of bribes, Honest services fraud conspiracy, Honest services fraud,

Conspiracy to commit wire fraud; Travel Act conspiracy (80 years)

Christian Dawkins


Atlanta, GA

Bribery conspiracy, Payments of bribes, Honest services fraud conspiracy, Honest services fraud (3 counts), Wire fraud conspiracy (2 counts), Wire fraud (2 counts), Travel Act conspiracy, Money laundering conspiracy (200 years)

Munish Sood


Trenton, NJ

Bribery conspiracy, Payments of bribes, Honest services fraud conspiracy, Honest services fraud (3 counts), Wire fraud conspiracy (2 counts), Wire fraud (2 counts), Travel Act conspiracy, Money laundering conspiracy (200 years)

James Gatto, a/k/a “Jim”


Wilsonville, OR

Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)

Merl Code


Greer, SC

Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)

Jonathan Brad Augustine


Winter Garden, FL

Wire fraud conspiracy, Wire fraud (2 counts), Money laundering conspiracy (80 years)

The maximum potential sentences are prescribed by Congress and are provided here for informational purposes only, as the sentencing of the defendants will be determined by a judge.

Mr. Kim praised the work of the FBI and the Criminal Investigators of the United States Attorney’s Office for the Southern District of New York.

Anyone with information relevant to the investigation is asked to contact the FBI at the special phone number established to receive such information, (212) 384-2135.

The case is being handled by the Office’s Public Corruption Unit.  Assistant United States Attorneys Robert Boone, Russell Capone, Edward B. Diskant, and Noah Solowiejczyk are in charge of the prosecution.

[1] As the introductory phrase signifies, the entirety of the texts of the Complaints and the descriptions of the Complaints set forth below constitute only allegations and every fact described should be treated as an allegation.


Download U.S. v. Chuck Person and Rashan Michel Complaint

Download U.S. v. James Gatto et al Complaint

Download U.S. v. Lamont Evans et al Complaint

September 29, 2017 in AML | Permalink | Comments (0)

State Personal Income: Second Quarter 2017

State personal income grew 0.7 percent on average in the second quarter of 2017, after increasing 1.4 percent in the first quarter, according to estimates released today by the Bureau of Economic Analysis (table 1). Each of the major aggregates of personal income–net earnings, property income, and personal current transfer receipts–grew more slowly than in the first quarter.

Personal income grew 1.3 percent in Nevada, faster than in any other state. Utah had the next fastest growth at 1.1 percent. Iowa, Nebraska, and West Virginia had the slowest growth in personal income, with each state growing less than half the rate of the nation.

Personal Income: Percent Change, 2017:Q1-2017:Q2

Earnings. On average, earnings increased 0.8 percent in the second quarter of 2017, after increasing 1.5 percent in the first quarter. Earnings growth ranged from 1.6 percent in Nevada to -0.1 percent in Nebraska, and was the leading contributor to growth in personal income in most states (table 2).

Earnings 2017:Q1-2017:Q2 (Percent Change)
  • Growth in construction earnings was the leading contributor to above average earnings growth in Nevada and Oregon (table 3).
  • Growth in retail trade earnings was the leading contributor to above average earnings growth in Utah.
  • Growth in professional, scientific, and technical services earnings was the leading contributor to above average earnings growth in Florida.
  • Growth in information earnings was the leading contributor to above average earnings growth in Georgia and Colorado.
  • Growth in construction earnings and in finance and insurance earnings were both contributors to above average earnings growth in Rhode Island.
  • Growth in finance and insurance earnings was the leading contributor to above average earnings growth in Texas.

Farm earnings declined for the nation and in every state in the second quarter (table 4) and was the leading contributor to slow earnings growth in many states. In Nebraska, Iowa and North Dakota, the decline in farm earnings reduced earnings growth by half a percentage point or more. The slow growth in farm earnings reflects lower prices for grains and other crops.

For the nation, earnings grew in 20 of the 24 industries for which BEA prepares quarterly estimates. Earnings growth in three industries–health care and social assistance; professional, scientific, and technical services; and finance and insurance–was the leading contributor to overall growth in personal income.

Property income. Property income increased 0.8 percent in the second quarter of 2017, down from 1.3 percent in the first quarter. Property income growth ranged from 1.2 percent in Michigan to 0.4 percent in Rhode Island.

Transfer receipts. Transfer receipts grew 0.2 percent for the nation in the second quarter of 2017, down from the 1.3 percent growth in the first quarter. Growth rates ranged from 2.0 percent in Alaska to -1.1 percent in Iowa.

September 29, 2017 in Economics | Permalink | Comments (0)

Bermuda granted whitelist status

Bermuda has become the first overseas territory to be awarded whitelist status by France.  ... will attend key meetings in Paris and Brussels next month to “provide necessary support to Bermuda’s efforts to avoid blacklisting by the EU Code of Conduct Group”.  read the entire story in the Bermuda Royal Gazette

September 29, 2017 | Permalink | Comments (0)

Thursday, September 28, 2017

EU finance ministers agreed to develop new digital taxation rules

The finance and economic affairs ministers of the EU member states discussed updating international tax rules for companies at their informal meeting in Tallinn today, so that these rules could also be applied to taxing enterprises that use digital technology. The ministers agreed to move forward swiftly and to reach a common understanding at the Ecofin Council in December.

“For us, it is important to agree on new international tax rules that also take into account the business models of the digital economy. This would guarantee the equal taxation of all companies regardless of their location or place of activity. I hope that today’s discussion helped us get a step closer to a suitable solution,” said Toomas Tõniste, the Minister for Finance of Estonia, after the meeting.

“Tax problems connected with the digital economy and the need for new solutions have been a subject of discussion for a long time. At the same time, companies have to operate in unequal conditions. Countries are deprived of tax income and to compensate for that, they impose unilateral measures. This, however, harms our common market and the entire European Union,” the minister added. “Thus, the sooner we reach a solution the better. This guarantees the fairer taxation of companies and creates a better business environment.”

According to Minister Tõniste, a common solution that covers the entire European Union is also important because different tax rules in member states can create multiple taxation and lead to a belief that doing business outside of the EU is more lucrative than inside the European Union. “If we can agree on the approach inside the European Union, then we can also affect the global rules in a way that is favourable to us. We all agree that a global solution would be the best solution,” said the minister.

Business models of the digital economy differ substantially from the business models of the traditional economy, and companies often operate virtually in several countries. The international rules for taxing the profit of companies, however, still assume that in order to create a taxable profit, the company has to be physically present. This allows many companies not to pay their taxes because the tax rules are out of date. This is also one of the reasons why this situation cannot simply be solved with measures that stop companies from evading their taxes.

Estonia is of the opinion that when bringing the tax rules up to date, it is important to abandon the requirement that companies have to be physically present in a country or own assets there, and replace this with the concept of a virtual permanent establishment. A precondition for this is a more precise agreement on the virtual taxpayers who have to start paying taxes.



September 28, 2017 in BEPS | Permalink | Comments (0)

Wednesday, September 27, 2017

First automatic Common Reporting Standard exchanges between 49 jurisdictions set to take place this month; now over 2000 bilateral exchange relationships in place

In 2014, the OECD and the G20 approved the Common Reporting Standard (CRS), which will be the basis for the automatic annual exchange of information on offshore financial accounts to the tax authorities of the residence country of account holders. At present, 102 jurisdictions have publicly committed to implement the CRS, with 49 being committed to start exchanges this month and a further 53 taking up exchanges in September 2018.

The successful implementation of the CRS requires both domestic legislation to ensure that financial institutions correctly identify and report accounts held by non-residents, and an Book cover international legal framework for the automatic exchange of CRS information. The preferred route to put the international legal framework in place is through the CRS Multilateral Competent Authority Agreement (CRS MCAA), which defines the scope, timing, format and conditions for the exchange of CRS information and is based on the multilateral Convention on Mutual Administrative Assistance in Tax Matters, the prime instrument for cooperation in tax matters. At present, 95 jurisdictions have signed the CRS MCAA.

While the CRS MCAA is a multilateral agreement, exchange relationships for CRS information are bilateral in nature and are activated when both jurisdictions have the domestic framework for CRS exchange in place and have listed each other as intended exchange partners.

Today, we are pleased to announce that another series of bilateral exchange relationships was established under the CRS MCAA. In total, there are now over 2000 bilateral relationships for the automatic exchange of CRS information in place across the globe. The full list of automatic exchange relationships that are currently in place under the CRS MCAA is available online.

With first exchanges for jurisdictions committed to a 2017 timeline now being only weeks away, all 49 have now activated their exchange relationships under the CRS MCAA and the network of bilateral exchange relationships (also including those established through the EU DAC2 Directive and bilateral agreements) now covers over 99% of the total number of possible exchange relationships. In addition, 20 of the 53 jurisdictions committed to first exchanges in 2018 have already put the international legal requirements in place to commence exchanges under the CRS MCAA next year. A further activation round for jurisdictions committed to a 2018 timeline is scheduled to take place in November 2017 which will allow the remaining jurisdictions to nominate the partners with which they will undertake automatic exchanges of CRS information.

Today's wave of activations of bilateral exchange relationships is a key milestone for the successful and timely implementation of the CRS in the 49 jurisdictions committed to first exchanges this month and marks the delivery on their political commitment to fight tax evasion.

September 27, 2017 in GATCA | Permalink | Comments (0)

Tuesday, September 26, 2017

OECD releases first peer reviews on implementation of BEPS minimum standards on improving tax dispute resolution mechanisms

 As part of continuing efforts to improve the international tax framework,  the OECD has released the first analysis of individual country efforts to  improve dispute resolution mechanisms.  The six peer review reports represent the first evaluation of how countries are implementing new minimum standards agreed in the OECD/G20 BEPS Project. The BEPS Project sets out 15 key actions to reform the international tax framework, by ensuring that profits are reported where economic activities are carried out and value is created.

A key pillar of the project focused on improving the mutual agreement procedure (MAP), which resulted in a new minimum standard to ensure that tax treaty related disputes are resolved in a timely, effective and efficient manner (Action 14). This minimum standard is complemented by a set of best practices. In addition to implementing the Action 14 minimum standard, countries committed  to have their compliance with this standard reviewed and monitored by their peers. (For further information about the OECD's work on Action 14, see:

The first six peer review reports relate to implementation by BelgiumCanada, the NetherlandsSwitzerland, the United Kingdom and the United States. A document addressing the OECDimplementation of best practices is also available on each jurisdiction. The six reports include over 110 recommendations relating to the minimum standard. In stage 2 of the peer review process, each jurisdiction’s efforts to address any shortcomings identified in its stage 1 peer review report will be monitored. The six assessed jurisdictions performed well in various MAP areas:

  • All provide for roll-back of bilateral APAs with a view to preventing disputes from arising;
  • MAP is available and access to MAP is granted in the situations required by the minimum standard;
  • The competent authority function is adequately resourced, and takes a pragmatic and principled approach for the resolution of MAP cases; and
  • MAP agreements reached so far have been implemented on time.

The main areas where improvements are necessary concern:

  • Resolution of MAP cases within the pursued average of 24 months is a challenge for some jurisdictions, especially concerning transfer pricing cases;
  • MAP guidance is generally clear and accessible, however, improvements for some jurisdictions are necessary and already under way; and
  • Each of the six jurisdictions was given recommendations to align their tax treaty MAP provisions with the Action 14 minimum standard. For a number of those treaties, such alignment will already be realised via the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS.

These first peer review reports represent an important step forward to turn the political commitments made by members of the Inclusive Framework  into measureable, tangible progress. The six jurisdictions concerned are already working to address deficiencies identified in their respective reports. The OECD will continue to publish stage 1 peer review reports in accordance with the Action 14 peer review assessment schedule.

Lexis’ Practical Guide to U.S. Transfer Pricing is updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Free download here

September 26, 2017 in BEPS | Permalink | Comments (0)

Gross Domestic Product by Metropolitan Area, 2016

Professional and Business Services Led Growth Across Metropolitan Areas in 2016

Real gross domestic product (GDP) increased in 267 out of 382 metropolitan areas in 2016 according to statistics on the geographic breakout of GDP released today by the Bureau of Economic Analysis. Real GDP by metropolitan area growth ranged from 8.1 percent in Lake Charles, LA and Bend-Redmond, OR to -13.3 percent in Odessa, TX (table 2).

Percent Change in Real GDP by Metropolitan Area

Real GDP for U.S. metropolitan areas grew 1.7 percent in 2016, led by growth in professional and business services; information services; and finance, insurance, real estate, rental, and leasing.


  • Professional and business services grew 2.7 percent across the nation's metropolitan areas in 2016 (table 3). This industry contributed to growth in 273 metropolitan areas, most notably in Oshkosk-Nennah, WI and Ocala, FL, which grew 2.6 percent and 5.0 percent, respectively.
  • Information services grew 6.5 percent. This industry contributed to growth in 260 metropolitan areas, and was the leading contributor to growth in Provo-Orem, UT and Seattle-Tacoma-Bellevue, WA, which grew 6.1 percent and 4.3 percent, respectively.
  • Finance, insurance, real estate, rental, and leasing grew 1.2 percent. This industry contributed to growth in 217 metropolitan areas, and made major contributions to growth in Elizabethtown-Fort Knox, KY and Saint Cloud, MN, which grew 4.6 percent and 5.3 percent, respectively.
  • Natural resources and mining declined 5.3 percent. This industry subtracted from growth in 169 metropolitan areas. Notable declines in this industry occurred in Odessa, TX (-13.3) and Casper, WY (-11.6).

Large Metropolitan Area Highlights

  • Of the large metropolitan areas, those with population greater than two million, San Francisco-Oakland-Hayward, CA (5.4 percent) and Austin-Round Rock, TX (4.9 percent) were the fastest growing metropolitan areas. Real GDP growth in San Francisco-Oakland-Hayward, CA was led by growth in finance, insurance, real estate, rental, and leasing, while growth in Austin-Round Rock, TX was led by professional and business services.
  • The only large metropolitan area that declined was Houston-The Woodlands-Sugar Land, TX (-3.0 percent). The real GDP decline in Houston-The Woodlands-Sugar Land, TX was led by a decline in natural resources and mining.

Small Metropolitan Area Highlights

  • Of the small metropolitan areas, those with population less than two million, Bend-Redmond, OR (8.1 percent) and Lake Charles, LA (8.1 percent) were the fastest growing metropolitan areas. Bend-Redmond, OR was led by growth in finance, insurance, real estate, rental, and leasing, while Lake Charles, LA was led by growth in nondurable-goods manufacturing.
  • The largest declines in real GDP for small metropolitan areas were in Odessa, TX (-13.3 percent) and Casper, WY (-11.6 percent). Natural resources and mining subtracted from growth in each of these metropolitan areas.

Updates to Gross Domestic Product by Metropolitan Area

In addition to the statistics presented in this news release, BEA also revised GDP by metropolitan area statistics for 2001–2015. Updates incorporated revised earnings data from BEA's Local Area Personal Income release published in November 2016.

More metropolitan area highlights can be found on the regional highlights pages that accompany this release.

Next release – September 2018 for: Gross Domestic Product by Metropolitan Area, 2017

September 26, 2017 in Economics | Permalink | Comments (0)

CSGO Lotto Owners Settle FTC’s First-Ever Complaint Against Individual Social Media Influencers

Owners must disclose material connections in future posts; FTC staff also sends 21 warning letters to prominent social media influencers

The Do's and Don'ts of Social Media InfluencersTrevor “TmarTn” Martin and Thomas “Syndicate” Cassell, two social media influencers who are widely followed in the online gaming community, have settled Federal Trade Commission charges that they deceptively endorsed the online gambling service CSGO Lotto, while failing to disclose they jointly owned the company.

They also allegedly paid other well-known influencers thousands of dollars to promote the site on YouTube, Twitch, Twitter, and Facebook, without requiring them to disclose the payments in their social media posts.

The Commission order settling the charges requires Martin and Cassell to clearly and conspicuously disclose any material connections with an endorser or between an endorser and any promoted product or service.

“Consumers need to know when social media influencers are being paid or have any other material connection to the brands endorsed in their posts,” said FTC Acting Chairman Maureen Ohlhausen. “This action, the FTC’s first against individual influencers, should send a message that such connections must be clearly disclosed so consumers can make informed purchasing decisions.”

Also today, the FTC announced that staff has both sent warning letters to 21 social media influencers it contacted earlier this year regarding their Instagram posts, and updated staff guidance for social media influencers and endorsers.

According to the FTC, beginning in late 2015, Martin, Cassell, and their company, CSGOLotto, Inc., operated and advertised the website. The CSGO Lotto name was based on Counter-Strike: Global Offensive, also known as “CS: GO,” an online multi-player, first-person shooter game. The game uses collectible virtual items called “skins” that can be used to cover weapons in distinctive patterns. Skins can be bought, sold, and traded for real money. CSGO Lotto enabled consumers to gamble, using skins as virtual currency.

Martin is the company’s president and Cassell is its vice president. As alleged in the complaint, each posted YouTube videos of themselves gambling on their website and encouraging others to use the service. Martin’s videos had titles such as, “HOW TO WIN $13,000 IN 5 MINUTES (CS-GO Betting)” and “$24,000 COIN FLIP (HUGE CSGO BETTING!) + Giveaway.”

Cassell posted videos with titles such as “INSANE KNIFE BETS! (CS:GO Betting),” and “ALL OR NOTHING! (CS:GO Betting).” In all, Cassell’s videos promoting the CSGO Lotto website were viewed more than 5.7 million times. Martin and Cassell allegedly also promoted the site on Twitter without adequately disclosing their connection to CSGO Lotto.

According to the FTC’s complaint, Martin, Cassell, and their company also had an “influencer program” and paid other gaming influencers between $2,500 and $55,000 to promote the CSGO Lotto website to their social media circles, while prohibiting them from saying anything negative about the site.

The Commission’s complaint alleges that Martin, Cassell, and their company misrepresented that videos of themselves and other influencers gambling on the CSGO Lotto website and their social media posts about the website reflected the independent opinions of impartial users of the service. The complaint charges that, in truth, Martin and Cassell are owners and officers of the company operating the CSGO Lotto website and the other influencers were paid to promote the website and were prohibited from impugning its reputation.

Finally, the complaint alleges that a number of Martin’s, Cassell’s, and the gaming influencers’ CSGO Lotto videos and social media posts deceptively failed to adequately disclose that Martin and Cassell are owners and officers of the company operating the gambling service, or that the influencers received compensation to promote it.

The proposed order settling the FTC’s charges prohibits Martin, Cassell, and CSGOLotto, Inc. from misrepresenting that any endorser is an independent user or ordinary consumer of a product or service. The order also requires clear and conspicuous disclosures of any unexpected material connections with endorsers.

New Instagram Influencer Warning Letters

Following up on the more than 90 educational letters FTC staff sent to social media influencers and brands in April of this year, the staff has sent warning letters to 21 of the influencers previously contacted. The earlier educational letters informed the influencers that if they are endorsing a brand and have a “material connection” to the marketer, this must be clearly and conspicuously disclosed, unless the connection is already clear from the context of the endorsement.

The warning letters cite specific social media posts of concern to staff and provide details on why they may not be in compliance with the FTC Act as explained in the Commission’s Endorsement Guides. For example, some of the letters point out that tagging a brand in an Instagram picture is an endorsement of the brand and requires an appropriate disclosure.

The letters ask that the recipients advise FTC staff as to whether they have material connections to the brands in the identified posts, and if so, what actions they will be taking to ensure that all of their social media posts endorsing brands and businesses with which they have material connections clearly and conspicuously disclose their relationships. The FTC is not disclosing the names of the 21 influencers who received the warning letters.

Updated Guidance to Influencers and Marketers

The Commission today also issued an updated version of The FTC’s Endorsement Guides: What People are Asking, a staff guidance document that answers frequently asked questions. Previously revised in 2015, the newly updated version includes more than 20 additional questions and answers addressing specific questions social media influencers and marketers may have about whether and how to disclose material connections in their posts.

The new information covers a range of topics, including tags in pictures, Instagram disclosures, Snapchat disclosures, obligations of foreign influencers, disclosure of free travel, whether a disclosure must be at the beginning of a post, and the adequacy of various disclosures like “#ambassador.”

The Commission vote to issue the administrative complaint and to accept the consent agreement was 2-0. 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 through October 10, 2017, after which the Commission will decide whether to make the proposed consent order final. Interested parties can submit comments electronically by following the instructions in the “Invitation to Comment” part of the “Supplementary Information” section.

September 26, 2017 in Financial Regulation | Permalink | Comments (0)

Telia Company AB and Its Uzbek Subsidiary Enter Into a Global Foreign Bribery Resolution of More Than $965 Million for Corrupt Payments in Uzbekistan

Companies Agree to Coordinated Resolution between the Department of Justice, U.S. Securities and Exchange Commission (SEC) and the Kingdom of the Netherlands Representing the Second Major Resolution Involving Corruption by Telecom Companies in Uzbekistan

Stockholm-based Telia Company AB, an international telecommunications company that was formerly an issuer of publicly traded securities in the U.S., and its Uzbek subsidiary, Coscom LLC, entered into a global foreign bribery resolution and agreed to pay a combined total penalty of more than $965 million to resolve charges arising out of a scheme to pay bribes in Uzbekistan.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon H. Kim of the Southern District of New York, Chief Don Fort of Internal Revenue Service-Criminal Investigation (IRS-CI) and Special Agent in Charge Patrick J. Lechleitner of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (ICE-HSI) Washington, D.C., Field Office made the announcement.

“This resolution underscores the Department’s continued and unwavering commitment to robust FCPA and white-collar criminal enforcement.  It also demonstrates the Department’s cooperative posture with its foreign counterparts to stamp out international corruption and to reach fair, appropriate and coordinated resolutions,” said Acting Assistant Attorney General Blanco.  “Foreign and domestic companies that pay bribes put honest companies at a disadvantage and distort the free and fair market and the rule of law.  Today’s resolution reflects the significant efforts of law enforcement, the Criminal Division and the U.S. Attorney’s Office for the Southern District of New York to bring such companies to justice, and to maintain a competitive and level playing field for companies to do business, create jobs and thrive.”

“Today, we announce one of the largest criminal corporate bribery and corruption resolutions ever, with penalties totaling just under a billion dollars,” said Acting U.S. Attorney Kim.   “Swedish telecom company Telia and its Uzbek subsidiary Coscom have admitted to paying, over many years, more than $331 million in bribes to an Uzbek government official.  Telia, whose securities traded publicly in New York, corruptly built a lucrative telecommunications business in Uzbekistan, using bribe payments wired around the world through accounts here in New York City.  If your securities trade on our exchanges and you use our banks to move ill-gotten money, then you have to abide by our country’s laws.  Telia and Coscom refused to do so, and they have been held accountable in Manhattan federal court today.”

“Today marks the second resolution of proceedings against corporate entities who have engaged in a global bribery scheme of government officials,” said Chief Fort.  “It also further demonstrates the dedication we have to identifying illegal financial transactions being used for bribery in the international community.  It is important that the global economy remain on a fair playing field and IRS-CI will remain committed in our efforts to dismantle these kinds of corrupt financial schemes.”

“Today’s resolution marks a win against a foreign corruption scheme where millions of dollars in bribery funds were paid to Uzbekistan officials and laundered through the U.S. financial system.” said Special Agent in Charge Lechleitner.  “HSI, working hand in hand with our partners at IRS Criminal Investigation, leveled the playing field for publicly traded companies by exposing these corrupt practices and helped the U.S. government collect nearly $275 million in criminal penalties”

Telia entered into a deferred prosecution agreement in connection with a criminal information filed today in the Southern District of New York charging the company with conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA).   The case is assigned to U.S. District Judge George B. Daniels.  In addition, Coscom pleaded guilty and was sentenced by Judge Daniels on a one-count criminal information charging the company with conspiracy to violate the anti-bribery provisions of the FCPA.  Pursuant to its agreement with the Department, Telia agreed to pay a total criminal penalty of $274,603,972 to the U.S., including a $500,000 criminal fine and $40 million in criminal forfeiture that Telia agreed to pay on behalf of Coscom.  Telia also agreed to implement rigorous internal controls and cooperate fully with the Department’s ongoing investigation, including its investigation of individuals.

The U.S. Securities and Exchange Commission (SEC) and the Public Prosecution Service of the Netherlands (Openbaar Ministrie, or OM) announced separate settlements with Telia in connection with related proceedings.  Under the terms of its resolution with the SEC, Telia agreed to a total of $457,169,977 in disgorgement of profits and prejudgment interest, and the SEC agreed to credit any disgorged profits that Telia pays to the Swedish Prosecution Authority (SPA) or OM, up to half of the total.  Telia agreed to pay the OM a criminal penalty of $274,000,000 for a total criminal penalty of $548,603,972, and a total resolution amount of more than $1 billion.  The Department of Justice agreed to credit the criminal penalty paid to the OM as part of its agreement with the company.  The SEC agreed to credit the $40 million in forfeiture paid to the Department as part of its agreement with the company.  Thus, the combined total amount of criminal and regulatory penalties paid by Telia and Coscom to the U.S., Dutch, and Swedish authorities will be $965,773,949. 

According to the companies’ admissions, Telia and Coscom, through various managers and employees within Telia, Coscom and affiliated entities, paid approximately $331 million in bribes to an Uzbek government official, who was a close relative of a high-ranking government official and had influence over the Uzbek governmental body that regulated the telecom industry.  The companies structured and concealed the bribes through various payments including to a shell company that certain Telia and Coscom management knew was beneficially owned by the foreign official.  The bribes were paid on multiple occasions between approximately 2007 and 2010, so that Telia could enter the Uzbek market and Coscom could gain valuable telecom assets and continue operating in Uzbekistan.  Certain Telia and Coscom management also contemplated structuring an additional bribe payment in late 2012, after Swedish media began reporting about Telia’s corrupt payments in Uzbekistan, Swedish authorities began a criminal investigation and Telia opened an internal investigation.

A number of significant factors contributed to the Department’s criminal resolution with the companies.  Among these, the companies received significant credit for their extensive remedial measures and cooperation with the Department’s investigation.  Specifically, the criminal penalty reflects a 25 percent reduction off the bottom of the U.S. Sentencing Guidelines fine range.  However, the companies did not receive more significant mitigation credit, either in the penalty or the form of resolution, because the companies did not voluntarily self-disclose their misconduct to the Department.

The resolution, reached in coordination with the SEC and authorities in the Netherlands, marks the second such resolution by a major international telecommunciations provider for bribery in Uzbekistan.  On Feb. 18, 2016, Amsterdam-based VimpelCom Limited and its Uzbek subsidiary, Unitel LLC, also entered into resolutions with the Department of Justice and admitted to a conspiracy to make more than $114 million in bribery payments to the same Uzbek government official between 2006 and 2012.  The investigation has thus far yielded a combined total of over $1.76 billion in global fines and disgorgement, including over $500 million in criminal penalties to the Department of Justice.  In related actions, the Department has also filed civil complaints seeking the forfeiture of more than $850 million held in bank accounts in Switzerland, Belgium, Luxembourg and Ireland, which constitute bribe payments made by VimpelCom, Telia and a third telecommunications company, or funds involved in the laundering of those corrupt payments, to the Uzbek official. 

*          *          *

Law enforcement colleagues within the OM and the SPA provided significant cooperation and assistance in this matter.  Law enforcement colleagues in Austria, Belgium, Cyprus, France, Ireland, Latvia, Luxembourg, Norway, Switzerland, the Isle of Man and the United Kingdom have also provided valuable assistance.  The Criminal Division’s Office of International Affairs provided significant assistance, as well.  The SEC referred the matter to the Department and also provided extensive cooperation and assistance.

The IRS-CI and ICE-HSI are investigating the cases as part of the IRS Global Illicit Financial Team in Washington, D.C.  Senior Litigation Counsel Nicola J. Mrazek and Trial Attorney Ephraim Wernick of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney Edward Imperatore of the Southern District of New York are prosecuting the criminal case, with substantial assistance from the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS).  MLARS Trial Attorney Michael Khoo is prosecuting the forfeiture case with substantial assistance from the Fraud Section and former MLARS Trial Attorney Marie M. Dalton, now an Assistant U.S. Attorney in the Western District of Washington. 

September 26, 2017 in AML | Permalink | Comments (0)

Monday, September 25, 2017

CFPB Amends Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection

The Bureau of Consumer Financial Protection is issuing a final rule that amends Regulation B to permit creditors additional flexibility in complying with Regulation B in order to CFPB_Logofacilitate compliance with Regulation C, adds certain model forms and removes others from Regulation B, and makes various other amendments to Regulation B and its commentary to facilitate the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants.

Download 201709_cfpb_final-rule_regulation-b

September 25, 2017 in Financial Regulation | Permalink | Comments (0)

EU Commission Proposes Tax System for Digital Sales

Taxation: Commission sets out path towards fair taxation of the Digital Economy

The European Commission is today launching a new EU agenda to ensure that the digital economy is taxed in a fair and growth-friendly way. The Communication adopted by the Commission sets out the challenges Member States currently face when it comes to acting on this pressing issue and outlines possible solutions to be explored.

The aim is to ensure a coherent EU approach to taxing the digital economy that supports the Commission's key priorities of completing the Digital Single Market and ensuring the fair EU Counciland effective taxation of all companies. Today's Communication paves the way for a legislative proposal on EU rules for the taxation of profits in the digital economy, as confirmed by President Juncker in the 2017 State of the Union. Those rules could be set out as early as spring 2018. Today's paper should also feed into international work in this area, notably in the G20 and the OECD.

Andrus Ansip, Vice-President for the Digital Single Market said: “Modern taxation rules are essential to leverage the full potential of the EU's Digital Single Market and to encourage innovation and growth. This means having a modern and sustainable tax framework which provides legal certainty, growth-friendly incentives and a level playing field for all businesses. The EU continues to push for a comprehensive revision of global tax rules to meet the new realities."

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue said: "There is broad agreement that the growing digitalisation of the economy creates huge economic opportunities. At the same time, our tax systems should evolve to capture new business models while being fair, efficient and future-proof. It's also a question of sustainability of our tax revenues as traditional tax sources come under strain. Not least, it's about maintaining the integrity of the Single Market and avoiding fragmentation by finding common solutions to global challenges."

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs added: "The goal of this Commission has always been to ensure that companies pay their fair share of tax where they generate profits. Digital firms make vast profits from their millions of users, even if they do not have a physical presence in the EU. We now want to create a level playing field so that all companies active in the EU can compete fairly, irrespective of whether they are operating via the cloud or from brick and mortar premises."

The current tax framework does not fit with modern realities. The tax rules in place today were designed for the traditional economy and cannot capture activities which are increasingly based on intangible assets and data. As a result, the effective tax rate of digital companies in the EU is estimated to be half that of traditional companies – and often much less. At the same time, patchwork unilateral measures by Member States to address the problem threaten to create new obstacles and loopholes in the Single Market.

The first focus should be on pushing for a fundamental reform of international tax rules, which would ensure a better link between how value is created and where it is taxed. Member States should converge on a strong and ambitious EU position, so we can push for meaningful outcomes in the OECD report to the G20 on this issue next spring. The Digital Summit in Tallinn will be a good occasion for Member States to define this position at the highest political level.

In the absence of adequate global progress, the EU should implement its own solutions to taxing the profits of digital economy companies. Today's Communication outlines the Commission's long term strategy, as well as some of the short term solutions that have been discussed at EU and international level so far. The Common Consolidated Corporate Tax Base (CCCTB) in particular offers a good basis to address the key challenges and provide a sustainable, robust and fair framework for taxing all large businesses in the future. As this proposal is currently being discussed by Member States, digital taxation could easily be included in the scope of the final agreed rules. However, short term 'quick fixes' such as a targeted turnover tax and an EU-wide advertising tax will also be assessed (see MEMO).

Next steps

As announced at the informal ECOFIN of September, the Estonian Presidency will continue working on these issues with a view to having clear and ambitious Council conclusions by the end of the year. These conclusions should act as the EU contribution to international discussions on digital taxation, and lay the basis for future work in the Single Market.

In the meantime, the Commission will continue to analyse the policy options and consult with relevant stakeholders and industry representatives on this important and pressing issue.

The Commission looks forward to the OECD's report to the G20 in spring 2018, which should set out appropriate and meaningful solutions to taxing the digital economy at the international level and which can be integrated into the upcoming Commission proposal for binding rules in the EU's Single Market. If this is not the case, the Commission will in any case be ready to present an original legislative proposal to ensure a fair, effective and competitive tax framework for the Digital Single Market.

For More Information:

Q&A (MEMO/17/3341)

DG TAXUD webpage on digital taxation

September 25, 2017 in BEPS | Permalink | Comments (0)

Sunday, September 24, 2017

Former Canadian Mountie Sentenced to Money Laundering Charges Stemming from a Conspiracy to Smuggle Ivory Tusks

A retired officer of the Royal Canadian Mounted Police was sentenced by U.S. District Court Judge John A. Woodcock for the District of Maine to 62 months in prison for 10 money Justice logolaundering offenses, announced the Justice Department. Gregory R. Logan, 59, of St. John, New Brunswick, was extradited to the United States from Canada on March 11, 2016.  He was indicted in the District of Maine in November 2012 and charged with conspiracy, smuggling and money laundering, and pled guilty to 10 money laundering offenses on September 28, 2016.

“This defendant illegally imported hundreds of narwhal tusks into the United States, with a value in the millions of dollars.  Unlawful wildlife trade like this undermines efforts by federal, state, and foreign governments to protect and restore populations of species like the narwhal, a majestic creature of the sea with long and spiraled protruding ivory tusks,” said Acting Assistant Attorney General Jeffrey H. Wood of the Environment and Natural Resources Division. “Our Division successfully worked with the U.S. Fish and Wildlife Service, NOAA Fisheries, and the Canadian Government to successfully conclude this case.”

 “This investigation highlights the best of law enforcement working together.  Our special agents, with counterparts from the National Oceanic and Atmospheric Administration and Environment and Climate Change Canada, investigated a complex scheme where illegal narwhal tusks were trafficked across the U.S.-Canada border,” said acting Chief of Law Enforcement Ed Grace for the U.S. Fish and Wildlife Service. “Wildlife smuggling is a transnational crime that knows no borders and requires an international response. We will continue to work closely with our international, federal, and state partners to investigate and arrest individuals who smuggle and sell protected wildlife for their own financial gain.”

"Today's sentencing brings to a close a long investigation and prosecutorial process that underscores our global commitment to end wildlife trafficking," said Chris Oliver, Assistant Administrator for NOAA Fisheries. "We are grateful for the international cooperation that has lead to this conclusion."

“This case is the result of a successful joint investigation involving partners across Canada and the United States working to stop the illegal commercialization and exploitation of Canadian wildlife, in this case the smuggling of narwhal tusks,” said Glen Ehler, Regional Director, Wildlife Enforcement Directorate, Enforcement Branch, Environment and Climate Change Canada. “Today’s sentence and the previous conviction in Canada send a strong message that this type of offence will not be tolerated.”

 Logan was involved in a scheme to smuggle narwhal tusks from Canada to the United States for sale to American customers and transfer the proceeds of those sales back to Canada.  Logan was arrested in Canada, based on a request from the United States, in December 2013.  Logan pleaded guilty to a related wildlife smuggling crime in Canada and the terms of his extradition limited the case against him in the United States to the money laundering offenses.  Also charged in the original indictment was Andrew J. Zarauskas of Union, New Jersey.  Zarauskas was convicted after a jury trial in Bangor and sentenced to 33 months in prison.

 Narwhals are medium-sized toothed whales that are native to the Arctic.  They are known for their distinctive ivory tusk, which can grow to more than eight feet in length.  Given the threats to their population, narwhals are protected domestically by the Marine Mammal Protection Act and internationally by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) – an international treaty to which more than 170 countries, including the United States and Canada, are parties.  It is illegal to import narwhals, or their parts, into the United States for commercial purposes.  Further, any importation must be accompanied by a permit and must be declared to U.S. Customs and Border Protection and the U.S. Fish and Wildlife Service.

 According to the indictment, Logan smuggled more than 250 narwhal tusks into the United States between 2000 and 2010.  As part of the plea agreement, Logan agreed that the market value of the narwhal tusks in this case was between $1.5 million and $3 million. Knowing that the tusks were illegal to bring into the United States and sell, Logan transported them across the border in false compartments in his vehicle and trailer.  Logan utilized a shipping store in Ellsworth, Maine, to send the tusks to customers throughout the United States, including Zarauskas and others.  Logan knew that his customers would re-sell the tusks for a profit and in an attempt to increase that re-sale price, Logan would occasionally provide fraudulent documentation claiming that the tusks had originally belonged to a private collector in Maine who had acquired them legally.

 In addition to shipping the tusks from Maine, Logan maintained a post office box the Ellsworth shipping store as well as an account at a bank in Bangor.  Logan instructed his customers to send payment in the form of checks to the post office box, or wire money directly to his Maine bank account.  Logan then transported the money to Canada by having the shipping store forward his mail to him in Canada, and by using an ATM card to withdraw money from his Maine bank account at Canadian ATM machines.  At times, Logan also directed his customers to send funds directly to him in Canada.

 The case was investigated by special agents of the National Oceanic and Atmospheric Administration, Office of Law Enforcement; U.S. Fish & Wildlife Service, Office of Law Enforcement; and Wildlife Officers from Environment and Climate Change Canada.  The case was prosecuted by Trial Attorneys James B. Nelson and Lauren D. Steele.  

September 24, 2017 in AML | Permalink | Comments (0)

Saturday, September 23, 2017

Who Owns the Wealth in Tax Havens? Macro Evidence and Implications for Global Inequality

My comment - really good read based on BIS statistics! See excerpt below that I think captures the article. 

Who Owns the Wealth in Tax Havens? Macro Evidence and Implications for Global Inequality
Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman
NBER Working Paper No. 23805
September 2017
JEL No. E21,H26,H87

Drawing on newly published macroeconomic statistics, this paper estimates the amount of household wealth owned by each country in offshore tax havens. The equivalent of 10% of world GDP is held in tax havens globally, but this average masks a great deal of heterogeneity—from a few percent of GDP in Scandinavia, to about 15% in Continental Europe, and 60% in Gulf countries and some Latin American economies. We use these estimates to construct revised series of top wealth shares in ten countries, which account for close to half of world GDP. Because offshore wealth is very concentrated at the top, accounting for it increases the top 0.01% wealth share substantially in Europe, even in countries that do not use tax havens extensively. It has
considerable effects in Russia, where the vast majority of wealth at the top is held offshore. These results highlight the importance of looking beyond tax and survey data to study wealth accumulation among the very rich in a globalized world.

Excerpt: We find that while about 10% of world GDP is held in tax havens globally, this average masks a great deal of heterogeneity. Scandinavian countries own the equivalent of only a few percent of GDP in offshore wealth, but this figure rises to about 15% in Continental Europe, and to as much as 60% in Russia, Gulf countries, and a number of Latin American countries. The size of offshore wealth is not easily explained by tax or institutional factors. Among countries with a large stock of offshore assets, one finds autocracies (Saudi Arabia, Russia), countries with a recent history of autocratic rule (Argentina, Greece), alongside old democracies (United Kingdom, France). Among those with the lowest stock of offshore assets, one finds relatively low-tax countries (Korea, Japan) alongside the world’s highest tax countries (Denmark, Norway). Instead, geography and specific national trajectories seem to matter a great deal. Proximity to Switzerland—the first country that developed a cross-border wealth management industry, in the 1920s—is associated with higher offshore wealth, as is the presence of natural resources, and political and economic instability
post-World War II.

September 23, 2017 in Articles | Permalink | Comments (0)

Friday, September 22, 2017

EU Proposes Tax on Digital Sales in State of Buyer

The Digital Single Market (DSM) is one of the 10 political priorities of the European Commission. The DSM strategy1 aims to open up digital opportunities for people and businesses EU Commissionin a market of over 500 million EU consumers. Completing the Digital Single Market could contribute to EUR 415 billion per year to Europe's economy, create jobs and transform our public services. In the 18 months following the adoption of the DSM Strategy, the European Commission delivered the announced proposals. In the mid-term review of the strategy 2 it has updated its analysis and focused on the next series of challenges. Digital technologies are transforming our world and having an important impact on taxation systems. They help improving their management, offering solutions to reduce administrative burdens, facilitate collaboration between tax authorities, and address tax evasion. However, they transform business models, with intangibles playing an increasingly important role, putting pressure on Europe's taxation system.

In the field of taxation, policy makers are struggling to find solutions which would ensure fair and effective taxation as the digital transformation of the economy accelerates. There are weaknesses in the international tax rules as they were originally designed for "brick and mortar" businesses and have now become outdated. The current tax rules no longer fit the modern context where businesses rely heavily on hard-to-value intangible assets, data and automation, which facilitate online trading across borders with no physical presence. These issues are not confined to the digital economy and potentially impact all businesses. As a result, some businesses are present in some countries where they offer services to consumers and conclude contracts with them, taking full advantage of the infrastructure and rule of law institutions available while they are not considered present for tax purposes. This free rider position tilts the playing field in their favour compared to established businesses.

The underlying principle for corporation tax is that profits should be taxed where the value is created. However, in a digitalised world, it is not always very clear what that value is, how to measure it, or where it is created.
The two main policy challenges that need to be addressed can be summarised as follows:

  • Where to tax? (nexus) – how to establish and protect taxing rights in a country where businesses can provide services digitally with little or no physical presence despite having a commercial presence; and
  • What to tax? (value creation) – how to attribute profit in new digitalised business models driven by intangible assets, data and knowledge.

These challenges need to be looked at together to find a meaningful solution for determining where economic activities are carried out and value is created for tax purposes. The issue of "Where to tax?" – how to establish taxing rights in a country where a business only has a digital presence and no physical presence – can be illustrated by the following theoretical example.

Some alternative options for shorter-term solutions
 Equalisation tax on turnover of digitalised companies - A tax on all untaxed or insufficiently taxed income generated from all internet-based business activities, including business-to-business and business-to-consumer, creditable against the corporate income tax or as a separate tax.
 Withholding tax on digital transactions - A standalone gross-basis final withholding tax on certain payments made to non-resident providers of goods and services ordered online.
 Levy on revenues generated from the provision of digital services or advertising activity - A separate levy could be applied to all transactions concluded remotely with in-country customers where a non-resident entity has a significant economic presence.

Download EU Commission Report on the Tax Proposals for the Digital Economy

September 22, 2017 in BEPS | Permalink | Comments (0)

FINRA suspends ex-Citi broker for alleged unsuitable muni bond investment in a U.S. law school

A former Citigroup broker was suspended by FINRA and fined for allegedly making an unsuitable recommendation to a retired couple to invest in muni bond (a U.S. law school).  The bond was canceled based on a restructuring agreement with the bondholders and Citigroup paid restitution to the retired couple to compensate them for their losses.  

read the full story at Bank Investment Consultant 

September 22, 2017 in Financial Regulation | Permalink | Comments (0)

FinCEN Warns Financial Institutions to Guard Against Corrupt Venezuelan Money Flowing to U.S.

The Financial Crimes Enforcement Network (FinCEN) issued an advisory to alert financial institutions of widespread public corruption in Venezuela and the methods Venezuelan FINCEN 2senior political figures and their associates may use to move and hide proceeds of their corruption. The advisory also describes a number of financial red flags to assist in identifying and reporting suspicious activity that may be indicative of corruption.

“In recent years, financial institutions have reported to FinCEN their suspicions regarding many transactions suspected of being linked to Venezuelan public corruption, including government contracts,” said Acting FinCEN Director Jamal El-Hindi. “Not all transactions involving Venezuela involve corruption, but, particularly now, during a period of turmoil in that country, financial institutions need to continue their vigilance to help identify and stop the flow of corrupt proceeds and guard against money laundering and other illicit financial activity.”

Venezuela faces severe economic and political circumstances due to the rupture of democratic and constitutional order. Endemic corruption can further damage the country’s economic growth and stability. The red flags identified in this FinCEN advisory are intended to help financial institutions differentiate between illicit and legitimate transactions. Ongoing vigilance by the financial community, including continued reporting of suspicious transactions as informed by this advisory, can also support law enforcement in identifying and investigating potentially illicit funds from Venezuela entering the U.S. financial system.

Financial institutions should take risk-based steps to identify and limit any exposure they may have to funds and other assets associated with Venezuelan public corruption. Consistent with a risk-based approach, however, financial institutions should be aware that normal business and other transactions involving Venezuelan nationals and businesses do not necessarily represent the same risk as transactions and relationships identified as being connected to the Venezuelan government.

Reports from financial institutions are critical to stopping, deterring, and preventing the proceeds tied to suspected Venezuelan public corruption from moving through the U.S. financial system.

The Financial Crimes Enforcement Network (FinCEN) is issuing this advisory to alert financial institutions of widespread public corruption in Venezuela and the methods Venezuelan senior political figures (and their associates and front persons) may use to move and hide corruption proceeds.[1]  This advisory also provides financial red flags to assist in identifying and reporting to FinCEN suspicious activity that may be indicative of Venezuelan corruption, including the abuse of Venezuelan government contracts, wire transfers from shell corporations, and real estate purchases in the South Florida and Houston, Texas regions. 

This advisory should be shared with:

• Private Banking Units

• Chief Risk Officers

• Chief Compliance Officers

• AML/BSA Analysts

• Sanctions Analysts

• Legal Departments

Awareness of money laundering schemes used by corrupt Venezuelan officials may help financial institutions (1) differentiate between illicit and legitimate transactions, and (2) identify and report transactions involving suspected corruption proceeds being held or moved by their customers, including through their private and correspondent banking relationships. 

Consistent with a risk-based approach, however, financial institutions should be aware that normal business and other transactions involving Venezuelan nationals and businesses do not necessarily represent the same risk as transactions and relationships identified as being connected to the Venezuelan government, Venezuelan officials, and Venezuelan state-owned enterprises (SOEs) involved in public corruption that exhibit the red flags below or other similar indicia.

Public Corruption in Venezuela

Venezuela faces severe economic and political circumstances due to the rupture of democratic and constitutional order by the government and its policy choices.  Endemic corruption, such as that seen in Venezuela, can further damage its economic growth and stability.  Such corruption, particularly related to government contracts and resources, can also deprive populations of their wealth; interfere with efforts to promote economic development; discourage private investment; and foster a climate where financial crime and other forms of lawlessness can thrive. 

In recent years, financial institutions have reported to FinCEN their suspicions regarding many transactions suspected of being linked to Venezuelan public corruption, including government contracts.  Based on this reporting and other information, all Venezuelan government agencies and bodies, including SOEs, appear vulnerable to public corruption and money laundering.  The Venezuelan government appears to use its control over large parts of the economy to generate significant wealth for government officials and SOE executives, their families, and associates.  In this regard, there is a high risk of corruption involving Venezuelan government officials and employees at all levels, including those managing or working at Venezuelan SOEs. 

Recent Sanctions Actions

On February 13, 2017, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Venezuelan Vice President Tareck El Aissami (El Aissami) for playing a significant role in international narcotics trafficking pursuant to the Foreign Narcotics Kingpin Designation Act.  On the same day, OFAC also designated his front man, Samark Lopez Bello, for materially assisting El Aissami and acting on his behalf.[2]  Their designations disrupted their ability to launder illicit proceeds, and hundreds of millions in assets associated with Lopez Bello have since been blocked.  On March 8, 2015, the President of the United States issued Executive Order (E.O.) 13692 which blocks property and suspends entry of certain persons contributing to the situation in Venezuela. E.O. 13692 authorizes the Secretary of the Treasury to designate persons, inter alia, involved in public corruption by senior officials within the Government of Venezuela or persons who have materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services to or in support of, such designated persons. On August 25, 2017, the President of the United States issued E.O. 13808 imposing additional sanctions prohibiting certain debt, equity, and profit and dividend disbursement activities with the Government of Venezuela and Venezuelan state-owned oil company, Petroleos de Venezuela, S.A. (PDVSA).[3]

The OFAC designations increase the likelihood that other non-designated Venezuelan senior political figures may seek to protect their assets, including those that are likely to be associated with political corruption, to avoid potential future blocking actions. 

Venezuelan Government Corruption – Red Flags

Venezuelan Government Agencies and State-Owned Enterprises

Transactions involving Venezuelan government agencies and SOEs, particularly those involving government contracts, can potentially be used as vehicles to move, launder, and conceal embezzled corruption proceeds.  SOEs (as well as their officials) may try to use the U.S. financial system to move or hide proceeds of public corruption.  Among the SOEs referenced in OFAC’s recent designations related to Venezuela are the National Center for Foreign Commerce (CENCOEX), Suministros Venezolanos Industriales, CA (SUVINCA), the Foreign Trade Bank (BANCOEX), the National Telephone Company (CANTV), the National Electric Corporation (CORPELEC), Venezuelan Economic and Social Bank (BANDES), and similar state-controlled entities.  As law enforcement and financial institutions increase scrutiny of transactions involving Venezuelan SOEs, corrupt officials may try to channel illicit proceeds through lesser-known or newly-created SOEs or affiliated enterprises.           

The Role of Currency Controls

Currency controls in Venezuela limit the supply of U.S. dollars for most economic activities, which encourages the demand for foreign currency and smuggled goods in the parallel market. Although illegal, Venezuela’s parallel market is a highly profitable business for those with regime connections that enable them to access inexpensive dollars and goods.[4]  This parallel market relies upon unregulated brokers, whose clients often include criminals who integrate illicit proceeds into the legal economy. Venezuelan officials who receive preferential access to U.S. dollars at the more favorable, official exchange rate, also exploit the multi-tier exchange rate system for profit. 

The red flags noted below, which are derived from information available to FinCEN (including suspicious activity reporting), published information associated with OFAC designations, and other public reporting, may help financial institutions identify suspected schemes by corrupt officials, their family members, and associates to channel corruption proceeds, often involving government contracts or resources, through transactions involving Venezuelan SOEs and subsidiaries:

Government Contracts: Corrupt officials may use contracts with the Venezuelan government as vehicles to embezzle funds and receive bribes.  In this regard, some financial red flags can include:

Image removed.Transactions involving Venezuelan government contracts that are directed to personal accounts.

Image removed.Transactions involving Venezuelan government contracts that are directed to companies that operate in an unrelated line of business (e.g., payments for construction projects directed to textile merchants).

Image removed.Transactions involving Venezuelan government contracts that originate with, or are directed to, entities that are shell corporations, general “trading companies,” or companies that lack a general business purpose.

Members of the regime and their allies direct government contracts to their associated companies to import goods and obtain approval from the Venezuelan Corporation of Foreign Trade (CORPOVEX) for foreign-domiciled companies—often shell companies—to participate in the import activity.[5]  Both the importers and the receiving government officials often divert a portion of the merchandise to the black market, where profits are higher. 

Image removed.Documentation corroborating transactions involving Venezuelan government contracts (e.g., invoices) that include charges at substantially higher prices than market rates or that include overly simple documentation or lack traditional details (e.g., valuations for goods and services).  Venezuelan officials who receive preferential access to U.S. dollars at the more favorable, official exchange rate may exploit this multi-tier exchange rate system for profit. 

Image removed.Payments involving Venezuelan government contracts that originate from non-official Venezuelan accounts, particularly accounts located in jurisdictions outside of Venezuela (e.g., Panama or the Caribbean).

Export businesses in South Florida that specialize in sending goods to Venezuela are particularly vulnerable to trade-based money laundering (TBML) schemes.  These include businesses that send heavy equipment, auto parts, and electronics (cell phones and other appliances) from Florida to Venezuela. 

Image removed.Payments involving Venezuelan government contracts that originate from third parties that are not official Venezuelan government entities (e.g., shell companies).

Public reports indicate that the use of third parties, or brokers, to deal with government entities is common in Venezuela and is a significant source of risk.  Brokers, particularly when colluding with corrupt government officials, can facilitate overseas transactions in a way that circumvents currency controls and masks payments from SOEs. 

Image removed.Cash deposits instead of wire transfers in the accounts of companies with Venezuelan government contracts.

In addition, other financial red flags observed in transactions suspected of involving Venezuelan government corruption include:

Image removed.Transactions for the purchase of real estate—primarily in the South Florida and Houston, Texas regions—involving current or former Venezuelan government officials, family members or associates that is not commensurate with their official salaries.

Image removed.Corrupt Venezuelan government officials seeking to abuse a U.S. or foreign bank’s wealth management units by using complex financial transactions to move and hide corruption proceeds.

Reminder of Regulatory Obligations for U.S. Financial Institutions

FinCEN is providing the information in this advisory to assist U.S. financial institutions in meeting their due diligence obligations that may apply to activity involving certain Venezuelan persons.  To best meet these obligations, financial institutions should generally be aware of public reports of high-level corruption associated with senior Venezuelan foreign political figures, their family members, associates, or associated legal entities or arrangements.  Financial institutions should assess the risk for laundering of the proceeds of public corruption associated with specific particular customers and transactions.  Financial institutions also should be aware that OFAC has designated (and provided related guidance on) several Venezuelan persons and entities located in or related to Venezuela.[6] 

Consistent with existing regulatory obligations, financial institutions should take reasonable, risk-based steps to identify and limit any exposure they may have to funds and other assets associated with Venezuelan public corruption.  Such reasonable steps should not, however, put into question a financial institution’s ability to maintain or continue otherwise appropriate relationships with customers or other financial institutions, and should not be used as the basis to engage in wholesale or indiscriminate de-risking of any class of customers or financial institutions.  FinCEN also reminds financial institutions of previous interagency guidance on providing services to foreign embassies, consulates, and missions.[7] 

Enhanced Due Diligence Obligations for Private Bank Accounts

Under Section 312 of the USA PATRIOT Act (31 U.S.C. § 5318(i)), U.S. financial institutions have regulatory obligations to apply enhanced scrutiny to private banking accounts held by, or on behalf of, senior foreign political figures and to monitor transactions that could potentially represent misappropriated or diverted state assets, the proceeds of bribery or other illegal payments, or other public corruption proceeds.[8]

FinCEN’s regulations implementing Section 312 require a written due diligence program for private banking accounts held for non-U.S. persons that is designed to detect and report any known or suspected money laundering or other suspicious activity.[9]  Accordingly, covered financial institutions maintaining private banking accounts for senior foreign political figures are required to apply enhanced scrutiny of such accounts to detect and report transactions that may involve the proceeds of foreign corruption.[10]

General Obligations for Correspondent Account Due Diligence and Anti-Money Laundering (AML) Programs

U.S. financial institutions must comply with their general due diligence obligations under 31 CFR § 1010.610(a) and their AML program requirements under 31 U.S.C. § 5318(h) and 31 CFR § 1010.210.  In addition, as required under 31 CFR § 1010.610(a), covered financial institutions should ensure that their due diligence programs, which address correspondent accounts maintained for foreign financial institutions, include appropriate, specific, risk-based, and, where necessary, enhanced policies, procedures, and controls that are reasonably designed to detect and report known or suspected money laundering activity conducted through or involving any correspondent account established, maintained, administered, or managed in the United States.

Suspicious Activity Reporting

A financial institution is required to file a suspicious activity report (SAR) if it knows, suspects, or has reason to suspect a transaction conducted or attempted by, at, or through the financial institution involves funds derived from illegal activity, or attempts to disguise funds derived from illegal activity; is designed to evade regulations promulgated under the Bank Secrecy Act (BSA); lacks a business or apparent lawful purpose; or involves the use of the financial institution to facilitate criminal activity, including foreign corruption.[11] 

Additional SAR Reporting Guidance on Senior Foreign Political Figures

In April 2008, FinCEN issued Guidance to assist financial institutions with reporting suspicious activity regarding proceeds of foreign corruption.[12]  A related FinCEN SAR Activity Review, which focused on foreign political corruption, also discusses indicators of transactions that may be related to proceeds of foreign corruption.[13]  Financial institutions may find this Guidance and the SAR Activity Review useful in assisting with suspicious activity monitoring and due diligence requirements related to senior foreign political figures.

SAR Filing Instructions

When filing a SAR, financial institutions should provide all pertinent available information in the SAR form and narrative.  FinCEN further requests that financial institutions select SAR field 35(l) (Suspected Public/Private Corruption (Foreign)) and reference this advisory by including the key term:

“Venezuelan Corruption”

in the SAR narrative and in SAR field 35(z) (Other Suspicious Activity-Other) to indicate a connection between the suspicious activity being reported and the persons and activities highlighted in this advisory. 

SAR reporting, in conjunction with effective implementation of due diligence requirements and OFAC obligations by financial institutions, has been crucial to identifying money laundering and other financial crimes associated with foreign and domestic political corruption.  SAR reporting is consistently beneficial and critical to FinCEN and U.S. law enforcement analytical and investigative efforts, OFAC designation efforts, and the overall security and stability of the U.S. financial system.[14] 


September 22, 2017 in AML | Permalink | Comments (0)

Thursday, September 21, 2017

CEO of International Metallurgical Company Sentenced to 57 Months in Prison for Conspiring to Export Specialty Metals to Iran

Erdal Kuyumcu, the chief executive officer of Global Metallurgy, LLC, based in Woodside, New York, was sentenced to 57 months in prison following his June 14, 2016 guilty plea to conspiracy to violate the International Emergency Economic Powers Act by exporting specialty metals from the United States to Iran.  The sentencing proceeding was held before Chief United States District Judge Dora L. Irizarry.

The sentence was announced by Bridget M. Rohde, Acting United States Attorney for the Eastern District of New York, Dana J. Boente, Acting Assistant Attorney General for National Security, William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation (FBI), and Jonathan Carson, Special Agent-in-Charge of the U.S. Department of Commerce’s Bureau of Industry and Security, Office of Export Enforcement’s New York Field Office.

 “This Office, together with our law enforcement partners, will continue to use every tool available, including U.S. export laws, to prevent goods with potentially dangerous uses from falling into the wrong hands and jeopardizing our national security,” stated Acting United States Attorney Rohde. “Here, the defendant exported a metallic powder that has potential military and nuclear applications to Iran, a state sponsor of terrorism.”

“With this sentence, the defendant is being held accountable for conspiring with others to send specialized U.S. technology – over a thousand pounds of metallic powder with nuclear and missile applications – to Iran via Turkey,” stated Acting Assistant Attorney General Boente.  “The National Security Division will aggressively prosecute those who seek to unlawfully provide dangerous material and technology to Iran, a state sponsor of terrorism.”   

“Laws exist to keep groups and governments from buying materials in support of doing harm.  Iran has demonstrated in this case it is willing to use whatever means necessary to hide the end user of the materials, to include utilizing a U.S. citizen to carry out their proliferating activities,” stated Assistant Director-in-Charge Sweeney.  “The FBI New York and its foreign and domestic partners work every day to investigate and interdict adversaries from procuring these items and materials to build nuclear and other weapons of mass destruction, which could end up in dangerous hands.”

“Today's sentencing is the result of outstanding collaborative work by the Justice Department, the Commerce Department and the FBI to break up a network whose aim was to illegally ship sophisticated U.S.-origin technology to Iran,” said Special Agent-in-Charge Carson.  “We will continue to pursue violators wherever they may be.”

According to court documents, Kuyumcu, a U.S. citizen, conspired to export from the United States to Iran a metallic powder primarily composed of cobalt and nickel, without having obtained the required license from the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).  As established during a two-day presentencing evidentiary hearing, the metallic powder has potential military and nuclear applications.  Such specialized metals are regulated by the U.S. Department of Commerce to combat nuclear proliferation and terrorism, and exporting them without the required license is illegal. 

In furtherance of the illegal scheme, Kuyumcu and others plotted to obtain more than 1,000 pounds of the metallic powder from a U.S.-based supplier.  To hide the true destination of the goods from the supplier, Kuyumcu arranged for the metallic powder to be shipped first to Turkey and then to Iran.  Kuyumcu used coded language when discussing shipment of the powder with a Turkey-based co-conspirator, such as referring to Iran as the “neighbor.”  Shortly after one of the shipments was sent from Turkey to Iran, a steel company in Iran sent a letter-sized package to Kuyumcu’s Turkey-based co-conspirator.  The Iranian steel company had the same address as an OFAC-designated Iranian entity under the Weapons of Mass Destruction proliferators sanctions program that was associated with Iran’s nuclear and ballistic missile programs. 

The government’s case is being handled by the Office’s National Security & Cybercrime Section.   Assistant U.S. Attorneys Tiana A. Demas and Ameet B. Kabrawala, and Trial Attorney David Recker from the National Security Division’s Counterintelligence and Export Control Section, are in charge of the prosecution. 

September 21, 2017 in AML | Permalink | Comments (0)

Top 10 Metropolis by Domestic Product

Texas is represented twice in the top ten, DFW at 4th largest GDP in the USA and Houston Metro at 6th largest.  100 of the Fortune 1,000 are headquartered in Texas (with Bureau Econ Analysisapproximately 1/3 in both DFW at 36 headquarters and Houston Metro with a similar count and the other third throughout the state such as Austin and San Antonio), and 36 in DFW Correspondingly, DFW and Houston Metro are in the top ten legal markets for employment.  Texas Lawyer reports that the "Dallas Legal Market is Smoking Hot in 2017"

(in Millions) from Bureau of Economic Analysis (September 2017)

  1. NYC-Newark-Jersey City, NY-NJ-PA         1,657,457
  2. Los Angeles-Long Beach-Anaheim, CA      1,001,677
  3. Chicago-Naperville-Elgin, IL-IN-WI         651,222
  4. Dallas-Fort Worth-Arlington, TX              511,606 
  5. Washington-Arl-Alex, DC-VA-MD-WV   509,224
  6. Houston-Woodlands-Sugar Land, TX     478,618 
  7. San Francisco-Oakland-Hayward, CA     470,529 
  8. Philly-Camden-Wilm PA-NJ-DE-MD     431,03
  9. Boston-Cambridge-Newton, MA-NH     422,660 
  10. Atlanta-Sandy Springs-Roswell, GA       363,768 

September 21, 2017 in Economics | Permalink | Comments (0)