International Financial Law Prof Blog

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

Tuesday, March 31, 2020

District Court Orders Injunctions against Two Telecom Carriers Who Facilitated Hundreds of Millions of Fraudulent Robocalls to Consumers in the United States

First of Their Kind Injunctions Obtained by Justice Department

The U.S. District Court for the Eastern District of New York entered orders in two separate civil actions, barring eight individuals and entities from continuing to facilitate the transmission of massive volumes of fraudulent robocalls to consumers in the United States, the Department of Justice announced today. 

In one of the matters, United States v. Nicholas Palumbo, et al., the District Court entered a preliminary injunction that bars two individuals and two entities from operating as intermediate voice-over-internet-protocol (VoIP) carriers during the pendency of the civil action.  In the other matter, United States v. John Kahen, et al., the District Court entered consent decrees that permanently bar an individual and three entities from operating as intermediate VoIP carriers conveying any telephone calls into the U.S. telephone system.

“These massive robocall fraud schemes target telephones of residents across our country, many of whom are elderly or are otherwise potentially vulnerable to such schemes,” said Assistant Attorney General Jody Hunt of the Department of Justice’s Civil Division.  “The department is committed to stopping this unlawful conduct and pursuing those who knowingly facilitate these schemes for their own financial gain.”

“This office will take all appropriate measures to stop fraudulent robocalling schemes responsible for causing catastrophic losses to victims, including seeking to permanently shut down the U.S.-based enablers of such schemes,” said United States Attorney Richad P. Donoghue for the Eastern District of New York.  “Protecting elderly and vulnerable individuals from being conned by foreign call center scammers remains a priority of this office and the Department of Justice.”

As alleged in the complaints, the defendants in both cases operated as VoIP carriers, receiving internet-based calls from other entities, often located abroad, and transmitting those calls first to other carriers within the United States and, ultimately, to the phones of individuals.  Numerous foreign-based call centers are alleged to have used the defendants’ VoIP carrier services to pass fraudulent government- and business-imposter robocalls to victims in the United States.  The defendants also sold U.S. phone numbers to foreign entities, which were used as victim call-back numbers as part of massive robocalling fraud schemes.

As also alleged, the defendants were warned numerous times that they were carrying fraudulent robocalls — including calls impersonating government agencies, such as the Social Security Administration, the IRS, and legitimate businesses, such as Microsoft — and yet continued to carry those calls and facilitate fraud schemes targeting individuals in the United States.  Many of the robocalls were made by foreign fraudsters impersonating government investigators and conveying alarming messages, such as: the recipient’s social security number or other personal information has been compromised or otherwise connected to criminal activity; the recipient faces imminent arrest; the recipient’s assets are being frozen; the recipient’s bank and credit accounts have suspect activity; the recipient’s benefits are being stopped; the recipient faces imminent deportation; or combinations of these threats.  Each of these claims was a lie, designed to scare the call recipient into paying large sums of money.  These calls led to massive financial losses to elderly and other vulnerable victims throughout the United States.

“The court’s decision sends a clear message to gateway carriers who knowingly do business with scammers targeting Americans from overseas,” said Gail S. Ennis, Inspector General for the Social Security Administration.  “We will continue to pursue those who facilitate these scam calls by allowing them into the U.S. telephone network.  I want to thank the Department of Justice for its support throughout this investigation and its commitment to protecting Americans from this insidious form of fraud and theft.”

United States v. Nicholas Palumbo, et al.

In the first case, the District Court issued a preliminary injunction against spouses Nicholas and Natasha Palumbo of Scottsdale, Arizona, and the Arizona companies they own and operate, Ecommerce National LLC d/b/a TollFreeDeals.com and SIP Retail d/b/a sipretail.com.  The District Court held, in a written opinion, that the evidence presented by the United States demonstrated probable cause to conclude that the defendants were engaged in “widespread patterns of telecommunications fraud, intended to deprive call recipients in the Eastern District of New York and elsewhere of money and property.”

The preliminary injunction issued by the court bars those defendants from carrying any VoIP calls destined for phones in the United States and providing any U.S. telephone numbers (often used as call-back numbers in the fraudulent robocalling schemes) to any individuals or entities during the pendency of this litigation.  The court noted that though defendants had been warned more than 100 times of specific instances of fraudulent calls being transmitted through their network, they never severed their business relationship with any entity they learned was associated with fraudulent call traffic, prior to the United States’ filing of its lawsuit.  The court further noted that “the telecommunications ‘intermediary’ industry is set up perfectly to allow fraudulent operators to rotate telephone numbers endlessly and blame other parties for the fraudulent call traffic they carry,” that the United States “demonstrat[ed] probable cause to conclude that defendants’ business is permeated with fraud,” that “multiple individual victims in the United States suffered significant fraud losses,” and that “[e]very day that the defendants’ actions in this vein continue, the public is at risk of harm in the form of additional high-dollar fraud losses.”

The claims in the United States v. Nicholas Palumboet al. matter are allegations only, and there has not been any final determination of liability or wrongdoing.

United States v. John Kahen, et al.

In the second case, the District Court entered consent decrees permanently resolving the matter against five individuals and entities who were also operating intermediary VoIP carriers.  The court entered a consent decree on March 2, 2020 against Jon Kahen, a/k/a Jon Kaen of New York, and New York corporations Global Voicecom Inc. and Global Telecommunication Services Inc., permanently barring those defendants from, among other things, using the U.S. telephone system to: deliver prerecorded messages through automatic means, carry calls to the United States from foreign locations, and provide calling and toll-free services for calls originating in the United States.  In addition, the defendants are permanently barred from serving as employees, agents, or consultants to any person or entity engaged in these activities.  In a second consent decree, entered on March 24, 2020, the District Court barred KAT Telecom Inc., a New York corporation, from conveying or causing any other person or entity from conveying fraudulent telephone calls, fraudulent recordings, and unauthorized “spoofed” telephone calls.  In the event that KAT Telecom, Inc. resumes operations, it must also implement strong anti-fraud measures, including anti-fraud monitoring, mitigation, and know-your-customer measures.

March 31, 2020 in AML | Permalink | Comments (0)

Sunday, March 29, 2020

Gross Domestic Product, Fourth Quarter and Year 2019; Corporate Profits, Fourth Quarter and Year 2019

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the fourth quarter of 2019 (table 1), according to the "third" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP also increased 2.1 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month.  In the second estimate, the increase in real GDP was also 2.1 percent. In the third estimate, an upward revision to personal consumption expenditures (PCE) was largely offset by downward revisions to federal government spending and nonresidential fixed investment (see "Updates to GDP" on page 2).

Real GDP: Percent change from preceding quarter

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

Real GDP growth in the fourth quarter was the same as that in the third. In the fourth quarter, a downturn in imports and an acceleration in government spending were offset by a larger decrease in private inventory investment and a slowdown in PCE.

Real gross domestic income (GDI) increased 2.6 percent in the fourth quarter, compared with an increase of 1.2 percent in the third quarter. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.4 percent in the fourth quarter, compared with an increase of 1.7 percent in the third quarter (table 1).

Current‑dollar GDP increased 3.5 percent, or $186.6 billion, in the fourth quarter to a level of $21.73 trillion. In the third quarter, current-dollar GDP increased 3.8 percent, or $202.2 billion (tables 1 and 3).

The price index for gross domestic purchases increased 1.4 percent in the fourth quarter, the same increase as in the third quarter (table 4). The PCE price index increased 1.4 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 2.1 percent.

More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA's website.

Updates to GDP

In the third estimate, the fourth-quarter growth rate in real GDP was unrevised from the second estimate. PCE, residential investment, and state and local government spending were revised up. These upward revisions were offset by downward revisions to federal government spending and nonresidential fixed investment as well as an upward revision to imports. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section that follows.

  Advance Estimate Second Estimate Third Estimate
(Percent change from preceding quarter)
Real GDP 2.1 2.1 2.1
Current-dollar GDP 3.6 3.5 3.5
Real GDI ... ... 2.6
Average of Real GDP and Real GDI ... ... 2.4
Gross domestic purchases price index 1.5 1.4 1.4
PCE price index 1.6 1.3 1.4
PCE price index excluding food and energy 1.3 1.2 1.3

GDP for 2019

Real GDP increased 2.3 percent in 2019 (from the 2018 annual level to the 2019 annual level), compared with an increase of 2.9 percent in 2018 (table 1).

The increase in real GDP in 2019 reflected positive contributions from PCE, nonresidential fixed investment, federal government spending, state and local government spending, and private inventory investment that were partly offset by a negative contribution from residential fixed investment. Imports increased (table 2).

The deceleration in real GDP in 2019, compared to 2018, primarily reflected decelerations in nonresidential fixed investment, exports, and PCE which were partly offset by accelerations in both state and local and federal government spending. Imports increased less in 2019 than in 2018.

Current-dollar GDP increased 4.1 percent, or $847.5 billion, in 2019 to a level of $21.43 trillion, compared with an increase of 5.4 percent, or $1,060.8 billion, in 2018 (table 1 and table 3).

Real GDI increased 1.9 percent in 2019, compared with an increase of 2.5 percent in 2018 (table 1).

The price index for gross domestic purchases increased 1.5 percent in 2019, compared with an increase of 2.4 percent in 2018 (table 4). The PCE price index increased 1.4 percent, compared with an increase of 2.1 percent. Excluding food and energy prices, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 4).

Measured from the fourth quarter of 2018 to the fourth quarter of 2019, real GDP increased 2.3 percent during the period. That compared with an increase of 2.5 percent during 2018. Real GDI, as measured from the fourth quarter of 2018 to the fourth quarter of 2019, increased 2.0 percent during 2019. That compared with an increase of 2.3 percent during 2018 (table 6).

The price index for gross domestic purchases, as measured from the fourth quarter of 2018 to the fourth quarter of 2019, increased 1.4 percent during 2019. That compared with an increase of 2.2 percent during 2018.  The PCE price index increased 1.4 percent, compared with an increase of 1.9 percent. Excluding food and energy, the PCE price index increased 1.6 percent, compared with an increase of 1.9 percent (table 6).

Corporate Profits, Fourth Quarter and 2019

Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) increased $53.0 billion in the fourth quarter, in contrast to a decrease of $4.7 billion in the third quarter (table 10).

Profits of domestic financial corporations increased $0.7 billion in the fourth quarter, in contrast to a decrease of $4.7 billion in the third quarter. Profits of domestic nonfinancial corporations increased $53.7 billion, in contrast to a decrease of $5.5 billion. Rest-of-the-world profits decreased $1.4 billion, in contrast to an increase of $5.5 billion. In the fourth quarter, receipts increased $3.4 billion, and payments increased $4.8 billion.

In 2019, profits from current production were unchanged, compared with an increase of $68.7 billion in 2018. Profits of domestic financial corporations increased $7.1 billion, compared with an increase of $11.1 billion. Profits of domestic nonfinancial corporations decreased $36.4 billion, in contrast to an increase of $10.0 billion. Rest-of-the-world profits increased $29.3 billion, compared with an increase of $47.6 billion.

March 29, 2020 in Economics | Permalink | Comments (0)

Friday, March 27, 2020

Nicolás Maduro Moros and 14 Current and Former Venezuelan Officials Charged with Narco-Terrorism, Corruption, Drug Trafficking and Other Criminal Charges

Maduro and Other High Ranking Venezuelan Officials Allegedly Partnered With the FARC to Use Cocaine as a Weapon to “Flood” the United States

Former President of Venezuela Nicolás Maduro Moros, Venezuela’s vice president for the economy, Venezuela’s Minister of Defense, and Venezuela’s Chief Supreme Court Justice are among those charged in New York City; Washington, DC; and Miami, along with current and former Venezuelan government officials as well as two Fuerzas Armadas Revolucionarias de Colombia (FARC) leaders, announced U.S. Attorney General William P. Barr, U.S. Attorney Geoffrey S. Berman of the Southern District of New York, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Acting Administrator Uttam Dhillon of the U.S. Drug Enforcement Administration (DEA) and Acting Executive Associate Director Alysa D. Erichs of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI).

“The Venezuelan regime, once led by Nicolás Maduro Moros, remains plagued by criminality and corruption,” said Attorney General Barr.  “For more than 20 years, Maduro and a number of high-ranking colleagues allegedly conspired with the FARC, causing tons of cocaine to enter and devastate American communities.  Today’s announcement is focused on rooting out the extensive corruption within the Venezuelan government – a system constructed and controlled to enrich those at the highest levels of the government.  The United States will not allow these corrupt Venezuelan officials to use the U.S. banking system to move their illicit proceeds from South America nor further their criminal schemes.” 

“Today we announce criminal charges against Nicolás Maduro Moros for running, together with his top lieutenants, a narco-terrorism partnership with the FARC for the past 20 years,” said U.S. Attorney Geoffrey S. Berman.  “The scope and magnitude of the drug trafficking alleged was made possible only because Maduro and others corrupted the institutions of Venezuela and provided political and military protection for the rampant narco-terrorism crimes described in our charges.  As alleged, Maduro and the other defendants expressly intended to flood the United States with cocaine in order to undermine the health and wellbeing of our nation.  Maduro very deliberately deployed cocaine as a weapon.  While Maduro and other cartel members held lofty titles in Venezuela’s political and military leadership, the conduct described in the Indictment wasn’t statecraft or service to the Venezuelan people.  As alleged, the defendants betrayed the Venezuelan people and corrupted Venezuelan institutions to line their pockets with drug money.”

“Over the last decade, corrupt Venezuelan government officials have systematically looted Venezuela of billions of dollars,” said U.S. Attorney Ariana Fajardo Orshan.  “Far too often, these corrupt officials and their co-conspirators have used South Florida banks and real estate to conceal and perpetuate their illegal activity.  As the recent charges show, Venezuelan corruption and money laundering in South Florida extends to even the highest levels of Venezuela’s judicial system.  In the last couple of years, the US Attorney’s Office in South Florida and its federal law enforcement partners have united to bring dozens of criminal charges against high-level regime officials and co-conspirators resulting in seizures of approximately $450 million dollars.”  

“These indictments expose the devastating systemic corruption at the highest levels of Nicolas Maduro’s regime,” said DEA Acting Administrator Uttam Dhillon.  “These officials repeatedly and knowingly betrayed the people of Venezuela, conspiring, for personal gain, with drug traffickers and designated foreign terrorist organizations like the FARC.  Today’s actions send a clear message to corrupt officials everywhere that no one is above the law or beyond the reach of U.S. law enforcement.  The Department of Justice and the Drug Enforcement Administration will continue to protect the American people from ruthless drug traffickers – no matter who they are or where they live.”

“The collaborative nature of this investigation is representative of the ongoing work HSI and international law enforcement agencies perform each day, often behind the scenes and unknown to the public, to make our communities safer and free from corruption,” said HSI’s Acting Executive Associate Director Alysa D. Erichs.  “Today’s announcement highlights HSI’s global reach and commitment to aggressively identify, target and investigate individuals who violate U.S. laws, exploit financial systems, and hide behind cryptocurrency to further their illicit criminal activity.  Let this indictment be a reminder that no one is above the law - not even powerful political officials.”

A four-count superseding indictment unsealed today in the Southern District of New York (SDNY) charges Nicolás Maduro Moros, 57; Diosdado Cabello Rondón, 56, head of Venezuela’s National Constituent Assembly; Hugo Armando Carvajal Barrios aka “El Pollo,” 59, former director of military intelligence; Clíver Antonio Alcalá Cordones, 58, former General in the Venezuelan armed forces; Luciano Marín Arango aka “Ivan Marquez,” 64, a member of the FARC’s Secretariat, which is the FARC’s highest leadership body; and Seuxis Paucis Hernández Solarte aka “Jesús Santrich,” 53, a member of the FARC’s Central High Command, which is the FARC’s second-highest leadership body.  The case is pending before U.S. District Judge Alvin K. Hellerstein.

The U.S. Department of State, through its Narcotics Rewards Program, is offering rewards of up to $15 million for information leading to the arrest and/or conviction of Maduro Moros, up to $10 million for information leading to the arrest and/or conviction of Cabello Rondón, Carvajal Barrios, and Alcalá Cordones, and up to $5 million for information leading to the arrest and/or conviction of Marín Arango.

Maduro Moros, Cabello Rondón, Carvajal Barrios, Alcalá Cordones, Marín Arango, and Hernández Solarte have each been charged with: (1) participating in a narco-terrorism conspiracy, which carries a 20-year mandatory minimum sentence and a maximum of life in prison; (2) conspiring to import cocaine into the United States, which carries a 10-year mandatory minimum sentence and a maximum of life in prison; (3) using and carrying machine guns and destructive devices during and in relation to, and possessing machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine-importation conspiracies, which carries a 30-year mandatory minimum sentence and a maximum of life in prison; and (4) conspiring to use and carry machine guns and destructive devices during and in relation to, and to possess machine guns and destructive devices in furtherance of, the narco-terrorism and cocaine-importation conspiracies, which carries a maximum sentence of life in prison.  The potential mandatory minimum and maximum sentences in this case are prescribed by Congress and provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

According to the allegations contained in the superseding indictment, other court filings, and statements made during court proceedings:

Since at least 1999, Maduro Moros, Cabello Rondón, Carvajal Barrios and Alcalá Cordones, acted as leaders and managers of the Cártel de Los Soles, or “Cartel of the Suns.”  The Cartel’s name refers to the sun insignias affixed to the uniforms of high-ranking Venezuelan military officials.  Maduro Moros and the other charged Cartel members abused the Venezuelan people and corrupted the legitimate institutions of Venezuela—including parts of the military, intelligence apparatus, legislature, and the judiciary—to facilitate the importation of tons of cocaine into the United States.  The Cártel de Los Soles sought to not only enrich its members and enhance their power, but also to “flood” the United States with cocaine and inflict the drug’s harmful and addictive effects on users in the United States.

Marín Arango and Hernández Solarte are leaders of the FARC.  Beginning in approximately 1999, while the FARC was purporting to negotiate toward peace with the Colombian government, FARC leaders agreed with leaders of the Cártel de Los Soles to relocate some of the FARC’s operations to Venezuela under the protection of the Cartel.  Thereafter, the FARC and the Cártel de Los Soles dispatched processed cocaine from Venezuela to the United States via transshipment points in the Caribbean and Central America, such as Honduras.  By approximately 2004, the U.S. Department of State estimated that 250 or more tons of cocaine were transiting Venezuela per year.  The maritime shipments were shipped north from Venezuela’s coastline using go-fast vessels, fishing boats, and container ships.  Air shipments were often dispatched from clandestine airstrips, typically made of dirt or grass, concentrated in the Apure State. According to the U.S. Department of State, approximately 75 unauthorized flights suspected of drug-trafficking activities entered Honduran airspace in 2010 alone, using what is known as the “air bridge” cocaine route between Venezuela and Honduras.

In his role as a leader of the Cártel de Los Soles, Maduro Moros negotiated multi-ton shipments of FARC-produced cocaine; directed that the Cártel de Los Soles provide military-grade weapons to the FARC; coordinated foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking; and solicited assistance from FARC leadership in training an unsanctioned militia group that functioned, in essence, as an armed forces unit for the Cártel de Los Soles.

DEA’s Special Operations Division Bilateral Investigations Unit, New York Strike Force, and Miami Field Division conducted the investigation.  This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Amanda L. Houle, Matthew J. Laroche, Jason A. Richman, and Kyle A. Wirshba are in charge of the prosecution.

*                *                *

An indictment unsealed today in the District of Columbia charges Vladimir Padrino Lopez, 56, Minister of Defense of Venezuela. The indictment alleges that from March 2014 until May 2019, Padrino Lopez conspired with others to distribute cocaine on board an aircraft registered in the United States. 

Padrino Lopez, who holds the rank of General in the Venezuelan armed forces, held the authority for interdicting aircraft, many of which are registered in the United States, suspected of being used to traffic drugs from Venezuela to countries in Central America.  On numerous occasions, Padrino Lopez ordered or authorized the Venezuelan military to force suspected trafficking aircraft to land or to shoot down the aircraft.  However, Padrino Lopez allowed for other aircraft whose drug trafficking coordinators paid bribes to him to safely transit Venezuelan airspace. 

On Sept. 25, 2018, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) included Padrino Lopez on its Specially Designated Nationals List.  Pursuant to the Foreign Narcotics Kingpin Designation Act, this means that his assets are blocked and U.S. persons are generally prohibited from having financial transactions with him. 

The DEA Orlando District Office led the investigation, which was supported by the Organized Crime Drug Enforcement Task Force program and the Criminal Division’s Office of Enforcement Operations. Acting Deputy Chief Charles Miracle and Trial Attorneys Michael Christin and Kirt Marsh of the Criminal Division’s Narcotic and Dangerous Drug Section are prosecuting the case.

*                *                *

Maikel Jose Moreno Perez, 54, current Chief Justice of the Venezuelan Supreme Court, was charged via a criminal complaint in the Southern District of Florida with conspiracy to commit money laundering and money laundering in connection with the alleged corrupt receipt or intended receipt of tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases in Venezuela.  

The complaint alleges, for example, that the defendant authorized a seizure and sale of a General Motors auto plant with an estimated value of $100 million in exchange for a personal percentage of the proceeds.  Similarly, the complaint alleges that the defendant received bribes to authorize the dismissal of charges or release against Venezuelans, including one charged in a multibillion-dollar fraud scheme against the Venezuelan state-owned oil company.

According to the criminal complaint, in or around October 2014, Moreno Perez told U.S. authorities in a visa application that he earned the equivalent of about $12,000 per year from his work in Venezuela. From 2012 to 2016, the defendant’s U.S. bank records show approximately $3 million in inflows to the defendant’s accounts, primarily from large round-dollar transfers from shell corporations with foreign bank accounts linked to Co-Conspirator 1, who is a former criminal defense attorney in Venezuela that currently controls a media company in Venezuela.

As set out in the criminal complaint, the defendant’s bank records allegedly show that from 2012 to 2016, the defendant spent approximately $3 million, primarily in the geographical area of South Florida. For example, bank records allegedly show that Moreno Perez spent about $1 million for a private aircraft and private pilot, more than $600,000 in credit or debit card purchases at stores primarily in South Florida (including tens of thousands of dollars at luxury stores in Bal Harbor, such as Prada and Salvatore Ferragamo), about $50,000 in payments to a luxury watch repair store in Aventura, and approximately $40,000 in payments to a Venezuelan beauty pageant director.

HSI’s Miami Field Office conducted the investigation.  Assistant U.S. Attorney Michael N. Berger of the Southern District of Florida is in charge of the prosecution.

*                *                *

A separate superseding indictment unsealed today in the Southern District of New York charges Tareck Zaidan El Aissami Maddah, 45, Venezuela’s vice president for the economy, Joselit Ramirez Camacho, 33, Venezuela’s superintendent of cryptocurrency (Sunacrip), and Samark Lopez Bello, 45, a Venezuelan businessman, with a series of crimes relating to efforts to evade sanctions imposed by OFAC against Maduro Moros, El Aissami Maddah, and Lopez Bello.  

The indictment alleges that from February 2017 until March 2019, El Aissami Maddah and Ramirez Camacho worked with U.S. persons and U.S.-based entities to provide private flight services for the benefit of Maduro’s 2018 presidential campaign, in violation of OFAC’s sanctions targeting Maduro after he organized elections for the illegitimate National Constituent Assembly that Cabello Rondon now leads.  

The U.S. Department of State, through its Narcotics Rewards Program, is offering a reward of up to $10 million for information leading to the arrest and/or conviction of El Aissami Maddah.

HSI’s New York Field Office conducted the investigation.  This case is being handled by the U.S. Attorney’s Office for the Southern District of New York’s Terrorism and International Narcotics Unit. Assistant U.S. Attorneys Sam Adelsberg and Amanda L. Houle are in charge of the prosecution.

*                *                *

Other individuals charged in separate indictments include:

  • Luis Motta Dominguez, 67, Former Minister of Energy, was charged in the Southern District of Florida for his alleged role in laundering the proceeds of violations of the Foreign Corrupt Practices Act (FCPA) in connection with his alleged receipt of bribes to award Corpoelec business to U.S.-based companies;
  • Nestor Reverol Torres, 55, former General Director of Venezuela’s La Oficina Nacional Antidrogas (ONA) and former commander of Venezuela’s National Guard and Edylberto Jose Molina Molina, 57, former Sub-Director of Venezuela’s ONA and currently Venezuela’s military attaché to Germany, were charged in the Eastern District of New York with participating in an international cocaine distribution conspiracy where they allegedly assisted narcotics traffickers in importing cocaine into the United States;
  • Vassyly Kotosky Villarroel Ramirez aka “Mauro” and “Angel,” 47, a former captain in the Venezuelan Guardia Nacional, was charged in a third superseding indictment in the Eastern District of New York with participating in an international cocaine distribution conspiracy between Jan. 1, 2004, and Dec. 1, 2009;
  • Rafael Antonio Villasana Fernandez, 48, a former officer in the Venezuelan Guardia Nacional, was charged in the Eastern District of New York with participating in an international cocaine distribution conspiracy between Jan. 1, 2004, and Dec. 1, 2009. According to court documents, Kotosky and Villasana allegedly used official government vehicles to transport more than seven metric tons of cocaine from the Colombian border to various airports and seaports in Venezuela for ultimate importation into the United States;
  • Nervis Gerardo Villalobos Cardenas, 52, former Vice Minister of Energy of Venezuela, was charged in a 20-count indictment in the Southern District of Texas with conspiracy to commit money laundering, money laundering and conspiracy to violate the Foreign Corrupt Practices Act (FCPA) for his alleged role in an international money laundering scheme involving bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices; and
  • Oscar Rafael Colmenarez Villalobos, 51, former Venezuelan Air Force Officer, charged in the District of Arizona with violations of the Arms Export Control Act. He allegedly conspired with others, including individuals associated with an aviation company in Arizona, to smuggle from the United States to Venezuela T-76 military aircraft engines used on OV-10 Bronco aircraft to individuals in Venezuela and allegedly made false and misleading statements on shipping and export control documents to conceal the prohibited activities and transactions from detection of the U.S. government.

Court Documents

District of Arizona

District of Columbia

Southern District of Florida

Eastern District of New York

Southern District of New York

Southern District of Texas

March 27, 2020 in AML | Permalink | Comments (0)

Thursday, March 26, 2020

Coronavirus (COVID-19): Small Business Guidance & Loan Resources

Everything You Need to Know About Coronavirus Federal Small Business Stimulus Aid Programs (U.S. Chamber of Commerce)

A breakdown of all the federal programs and aid for small business coronavirus assistance.

Signed into law on March 6, The Coronavirus Preparedness and Response Supplemental Appropriations Act provides $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak, enabling the U.S. Small Business Administration to offer $7 billion in disaster assistance loans to small businesses impacted by COVID-19.

What does it mean for small business?

  • The SBA is offering designated states and territories low-interest federal disaster loans to small businesses suffering substantial economic harm as a result of the coronavirus.
  • These loans may be used by small businesses to pay fixed debts, payroll, accounts payable and additional bills that can’t be paid because of COVID-19’s impact. The interest rate is 3.75% for small businesses without other available means of credit. The interest rate for non-profits is 2.75%. Businesses with credit available elsewhere are not eligible.
  • The SBA loans come with long-term repayments, up to a maximum of 30 years, in an effort to keep payments affordable. Loan terms are determined on a case-by-case basis, according to individual borrower’s ability to repay.
  • The SBA has amended its disaster loan criteria to help borrowers still paying back SBA loans from previous disasters. By making this change, deferments through December 31, 2020, will be automatic. Hence, borrowers of home and business disaster loans do not have to contact SBA to request deferment.

March 26, 2020 in Financial Regulation | Permalink | Comments (0)

Wednesday, March 25, 2020

text of final Covid-19 Senate Bill “Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Risk Management Graduate Course Case Studies Based on Covid-19 this Summer at Texas A&M (online via Zoom) “Delivered by a renowned group of industry thought leaders who deliver detailed and thought-provoking materials and professional guidance, you’ll explore immediately applicable practical knowledge and full coverage of risk management and Covid-19, tackle content fully tailored to the market place and a pandemic's changing conditions: confident and practice-ready.” Contact Texas A&M's risk management here

Final Covid-19 Text of Bill for Senate Vote [PDF Link]  “Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’.

Tax and Benefits sections of Final Bill described below by Senate Finance Committee (March 25, 2020)

DIVISION A – KEEPING WORKERS PAID AND EMPLOYED, HEALTH CARE SYSTEM ENHANCEMENTS, AND ECONOMIC STABILIZATION

TITLE II—ASSISTANCE FOR AMERICAN WORKERS, FAMILIES, AND BUSINESSES

Subtitle A—Unemployment Insurance Provisions

Section 2101. Short Title

This title is called the Relief for Workers Affected by Coronavirus Act

Section 2102. Pandemic Unemployment Assistance

This section creates a temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for

unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.

Section 2103. Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations

This section provides payment to states to reimburse nonprofits, government agencies, and Indian tribes for half of the costs they incur through December 31, 2020 to pay

unemployment benefits.

Section 2104. Emergency Increase in Unemployment Compensation Benefits

This section provides an additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.

Section 2105. Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States with No Waiting Week

This section provides funding to pay the cost of the first week of unemployment benefits through December 31, 2020 for states that choose to pay recipients as soon as they become unemployed instead of waiting one week before the individual is eligible to receive benefits.

Section 2106. Emergency State Staffing Flexibility

This section provides states with temporary, limited flexibility to hire temporary staff, rehire former staff, or take other steps to quickly process unemployment claims.

Section 2107. Pandemic Emergency Unemployment Compensation

This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of state unemployment benefits are no longer available.

Section 2108. Temporary Financing of Short-Time Compensation Payments in States with Programs in Law

This section provides funding to support “short-time compensation” programs, where employers reduce employee hours instead of laying off workers and the employees with reduced hours receive a pro-rated unemployment benefit. This provision would pay 100 percent of the costs they incur in providing this short-time compensation through December 31, 2020.

Section 2109. Temporary Financing of Short-Time Compensation Agreements

This section provides funding to support states which begin “short-time compensation” programs. This provision would pay 50 percent of the costs that a state incurs in providing short-time compensation through December 31, 2020.

Section 2110. Grants for Short-Time Compensation Programs

This section provides $100 million in grants to states that enact “short-time compensation” programs to help them implement and administer these programs.

Section 2111. Assistance and Guidance in Implementing Programs

This section requires the Department of Labor to disseminate model legislative language for states, provide technical assistance, and establish reporting requirements related to “shorttime compensation” programs.

Section 2112. Waiver of the 7-day Waiting Period for Benefits under the Railroad Unemployment Insurance Act

This section temporarily eliminates the 7-day waiting period for railroad unemployment insurance benefits through December 31, 2020 (to make this program consistent with the change made in unemployment benefits for states through the same period in an earlier section of this subtitle).

Section 2113. Enhanced Benefits under the Railroad Unemployment Insurance Act

This section provides an additional $600 per week payment to each recipient of railroad unemployment insurance or Pandemic Unemployment Assistance for up to four months (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2114. Extended Unemployment under the Railroad Unemployment Insurance Act

This section provides an additional 13 weeks of unemployment benefits through December 31, 2020 to help those who remain unemployed after weeks of regular unemployment benefits are no longer available (to make this program consistent with the change made in unemployment benefits for states in an earlier section of this subtitle).

Section 2115. Funding for the Department of Labor Office of Inspector General for Oversight of Unemployment Provisions

This section provides the Department of Labor’s Inspector General with $25 million to carry out audits, investigations, and other oversight of the provisions of this subtitle.

Section 2116. Implementation

This section gives the Secretary of Labor the ability to issue operating instructions or other guidance as necessary in order to implement this subtitle, as well as allows the Department of Labor to waive Paperwork Reduction Act requirements, speeding up their ability to gather necessary information from states.

Subtitle B – Rebates and Other Individual Provisions

Section 2201. 2020 recovery rebates for individuals

All U.S. residents with adjusted gross income up to $75,000 ($150,000 married), who are not a dependent of another taxpayer and have a work eligible social security number, are eligible for the full $1,200 ($2,400 married) rebate. In addition, they are eligible for an additional $500 per child. This is true even for those who have no income, as well as those whose income comes entirely from non-taxable means-tested benefit programs, such as SSI benefits.

For the vast majority of Americans, no action on their part will be required in order to receive a rebate check as IRS will use a taxpayer’s 2019 tax return if filed, or in the

alternative their 2018 return. This includes many low-income individuals who file a tax return in order to take advantage of the refundable Earned Income Tax Credit and Child Tax Credit. The rebate amount is reduced by $5 for each $100 that a taxpayer’s income exceeds the phase-out threshold. The amount is completely phased-out for single filers with incomes exceeding $99,000, $146,500 for head of household filers with one child, and $198,000 for joint filers with no children.

Section 2202. Special rules for use of retirement funds

Consistent with previous disaster-related relief, the provision waives the 10-percent early withdrawal penalty for distributions up to $100,000 from qualified retirement accounts for coronavirus-related purposes made on or after January 1, 2020. In addition, income attributable to such distributions would be subject to tax over three years, and the taxpayer may recontribute the funds to an eligible retirement plan within three years without regard to that year’s cap on contributions. Further, the provision provides flexibility for loans from certain retirement plans for coronavirus-related relief.

A coronavirus-related distribution is a one made to an individual: (1) who is diagnosed with COVID-19, (2) whose spouse or dependent is diagnosed with COVID-19, or (3) who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care due to COVID-19, closing or reducing hours of a business owned or operated by the individual due to COVID-19, or other factors as determined by the Treasury Secretary.

Section 2203. Temporary waiver of required minimum distribution rules for certain retirement plans and accounts

The provision waives the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020. This provision provides relief to

individuals who would otherwise be required to withdraw funds from such retirement accounts during the economic slowdown due to COVID-19.

Section 2204. Allowance of partial above the line deduction for charitable contributions

The provision encourages Americans to contribute to churches and charitable organizations in 2020 by permitting them to deduct up to $300 of cash contributions, whether they itemize their deductions or not.

Section 2205. Modification of limitations on charitable contributions during 2020

The provision increases the limitations on deductions for charitable contributions by individuals who itemize, as well as corporations. For individuals, the 50-percent of

adjusted gross income limitation is suspended for 2020. For corporations, the 10-percent limitation is increased to 25 percent of taxable income. This provision also increases the limitation on deductions for contributions of food inventory from 15 percent to 25 percent. Section 2206. Exclusion for certain employer payments of student loans The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

Subtitle C – Business Provisions

Section 2301. Employee retention credit for employers subject to closure due to COVID-19

The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shutdown order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.

The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Section 2302. Delay of payment of employer payroll taxes

The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Social Security Trust Funds will be held harmless under this provision.

Section 2303. Modifications for net operating losses

The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to fully offset income. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Section 2304. Modification of limitation on losses for taxpayers other than corporations

The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.

Section 2305. Modification of credit for prior year minimum tax liability of corporations

The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act, but corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.

Section 2306. Modification of limitation on business interest

The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020. As businesses look to weather the storm of the current crisis, this provision will allow them to increase liquidity with a reduced cost of capital, so that they are able to continue operations and keep employees on payroll.

Section 2307. Technical amendment regarding qualified improvement property

The provision enables businesses, especially in the hospitality industry, to write off immediately costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building. The provision, which corrects an error in the Tax Cuts and Jobs Act, not only increases companies’ access to cash flow by allowing them to amend a prior year return, but also incentivizes them to continue to invest in improvements as the country recovers from the COVID-19 emergency.

Section 2308. Temporary exception from excise tax for alcohol used to produce hand sanitizer

The provision waives the federal excise tax on any distilled spirits used for or contained in hand sanitizer that is produced and distributed in a manner consistent with guidance issued by the Food and Drug Administration and is effective for calendar year 2020

March 25, 2020 in Tax Compliance | Permalink | Comments (0)

Tuesday, March 24, 2020

U.S. International Transactions, Fourth Quarter and Year 2019

Current Account Deficit Narrows by 12.4 Percent in Fourth Quarter

Current Account Balance, Fourth Quarter

The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, narrowed by $15.6 billion, or 12.4 percent, to $109.8 billion in the fourth quarter of 2019, according to statistics from the U.S. Bureau of Economic Analysis (BEA). The revised third quarter deficit was $125.4 billion.

The fourth quarter deficit was 2.0 percent of current dollar gross domestic product (GDP), down from 2.3 percent in the third quarter.

The $15.6 billion narrowing of the current account deficit in the fourth quarter mainly reflected a reduced deficit on goods that was partly offset by an expanded deficit on secondary income.

Quarterly U.S. Current Account and Component Balances

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents decreased $5.1 billion, to $936.1 billion, in the fourth quarter. Imports of goods and services from, and income paid to, foreign residents decreased $20.7 billion, to $1.05 trillion.

Quarterly U.S. Current Account Transactions

Trade in Goods (table 2)

Exports of goods decreased $2.5 billion, to $409.7 billion, led by a decrease in foods, feeds, and beverages, mainly soybeans. Changes in the other major categories were nearly offsetting. Imports of goods decreased $20.6 billion, to $612.5 billion, mainly reflecting decreases in consumer goods, led by apparel, footwear, and household goods, and in automotive, vehicles, parts, and engines, led by trucks, buses, and special purpose vehicles.

Trade in Services (table 3)

Exports of services increased $2.8 billion, to $213.9 billion, mainly reflecting increases in travel, primarily other personal travel, and in other business services, mostly professional and management consulting services. Imports of services increased $2.3 billion, to $151.0 billion, reflecting increases in all major categories. Increases were led by travel, mainly other personal travel.

Primary Income (table 4)

Receipts of primary income decreased $2.8 billion, to $278.0 billion, and payments of primary income decreased $4.2 billion, to $210.7 billion. The decreases in both receipts and payments mainly reflected decreases in other investment income, mostly interest on loans and deposits.

Secondary Income (table 5)

Receipts of secondary income decreased $2.5 billion, to $34.4 billion, mainly reflecting a decrease in private sector fines and penalties, a component of private transfer receipts. Payments of secondary income increased $1.9 billion, to $71.7 billion, mainly reflecting an increase in U.S. government grants.

Financial Account Transactions, Fourth Quarter (tables 1, 6, 7, and 8)

Net financial account transactions were −$71.8 billion in the fourth quarter, reflecting net U.S. borrowing from foreign residents.

Financial Assets (tables 1, 6, 7, and 8)

Fourth quarter transactions increased U.S. residents' foreign financial assets by $1.0 billion. Transactions increased direct investment assets, mainly equity, by $35.2 billion; portfolio investment assets by $18.9 billion, resulting from large and mostly offsetting transactions in equity securities and debt securities; and reserve assets by $0.2 billion. Transactions decreased other investment assets, primarily loans, by $53.4 billion.

Liabilities (tables 1, 6, 7, and 8)

Fourth quarter transactions increased U.S. liabilities to foreign residents by $71.9 billion. Transactions increased direct investment liabilities, mainly equity, by $43.5 billion and other investment liabilities, mainly loans, by $56.5 billion. Transactions decreased portfolio investment liabilities, mainly short-term debt securities, by $28.2 billion.

Financial Derivatives (table 1)

Net transactions in financial derivatives were −$0.9 billion in the fourth quarter, reflecting net borrowing from foreign residents.

Updates to Third Quarter 2019 International Transactions Accounts Balances

Billions of dollars, seasonally adjusted
  Preliminary estimate Revised estimate
Current account balance -124.1 −125.4
    Goods balance −219.6 −220.9
    Services balance 62.2 62.5
    Primary income balance 68.7 65.9
    Secondary income balance −35.5 −32.9
Net financial account transactions −47.9 −76.4

Current Account Balance, Year 2019

The U.S. current account deficit widened by $7.4 billion, or 1.5 percent, to $498.4 billion in 2019. The deficit was 2.3 percent of current dollar GDP, down from 2.4 percent in 2018.

The $7.4 billion widening of the current account deficit in 2019 mainly reflected an expanded deficit on secondary income and a reduced surplus on services that were partly offset by a reduced deficit on goods.

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents increased $28.3 billion, to $3.76 trillion, in 2019. Imports of goods and services from, and income paid to, foreign residents increased $35.6 billion, to $4.26 trillion.

Trade in Goods (table 2)

Exports of goods decreased $21.5 billion, to $1.65 trillion, mainly reflecting a decrease in capital goods, mostly civilian aircraft. Imports of goods decreased $42.6 billion, to $2.52 trillion, mainly reflecting a decrease in industrial supplies and materials, mostly petroleum and products.

Trade in Services (table 3)

Exports of services increased $18.2 billion, to $845.2 billion, mainly reflecting an increase in other business services, primarily professional and management consulting services. Imports of services increased $28.1 billion, to $595.4 billion, reflecting increases in all major categories. Increases were led by travel, mostly other personal travel.

Primary Income (table 4)

Receipts of primary income increased $38.9 billion, to $1.12 trillion, and payments of primary income increased $35.9 billion, to $866.1 billion. The increases in both receipts and payments mainly reflected increases in other investment income, mostly interest on loans, and in portfolio investment income, mostly dividends on equity and investment fund shares.

Secondary Income (table 5)

Receipts of secondary income decreased $7.4 billion, to $142.8 billion, mainly reflecting a decrease in private transfers, mostly insurance-related transfers. Payments of secondary income increased $14.3 billion, to $281.7 billion, mainly reflecting an increase in private transfers, mostly insurance-related transfers.

Financial Account Transactions, Year 2019 (tables 1, 6, 7, and 8)

Net financial account transactions were −$395.9 billion in 2019, reflecting net U.S. borrowing from foreign residents.

Financial Assets (tables 1, 6, 7, and 8)

Transactions in 2019 increased U.S. residents' foreign financial assets by $426.9 billion. Transactions increased direct investment assets, mainly equity, by $197.7 billion; portfolio investment assets, resulting from large and mostly offsetting transactions in equity securities and debt securities, by $35.9 billion; other investment assets, mostly bank deposits, by $188.7 billion; and reserve assets by $4.7 billion.

Liabilities (tables 1, 6, 7, and 8)

Transactions in 2019 increased U.S. liabilities to foreign residents by $784.4 billion. Transactions increased direct investment liabilities, mostly equity, by $310.8 billion; portfolio investment liabilities, resulting from large and partly offsetting transactions in equity securities and debt securities, by $231.6 billion; and other investment liabilities, mostly bank deposits, by $242.0 billion.

Financial Derivatives (table 1)

Net transactions in financial derivatives were −$38.4 billion in 2019, reflecting net borrowing from foreign residents.

Upcoming Update to the U.S. International Transactions Accounts

The annual update of the U.S. international transactions accounts will be released along with preliminary estimates for the first quarter of 2020 on June 19, 2020. A preview of the annual update will appear in the April 2020 issue of the Survey of Current Business.

Change to the European Union

With the release of "U.S. International Transactions, First Quarter 2020 and Annual Update" on June 19, 2020, statistics for the area grouping "European Union" will exclude the United Kingdom, which withdrew from the European Union effective February 1, 2020. For more information, see "What is the impact of the United Kingdom's withdrawal from the European Union on BEA's data products?"

March 24, 2020 in Economics | Permalink | Comments (0)

Friday, March 20, 2020

Byrnes & Bloink's TaxFacts Intelligence Weekly for March 19, 2020

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

Reducing complicated tax questions to understandable answers that can be immediately put into real-life practice, Tax Facts works when and where you need it….on your desktop, at home on your laptop, and on the go through your tablet or smartphone.  Questions? Contact customer service: TaxFactsHelp@alm.com800-543-0874

 

Editor’s Note: New rulings from the IRS help clarify that COVID-19 expenses can be paid by HDHPs (before the deductible has been met) and FSAs can pay for genetic testing when the information is intended to be provided to a medical professional for treatment purposes. Note that the decision on genetic testing comes in the form of a PLR that addresses some rather unique facts, so it may not be very broadly applicable. We also have a new (and regrettably timely) ruling on worthless securities.

IRS Announces HDHPs Can Pay Coronavirus Costs

The IRS announced that high deductible health plans are permitted to cover the costs associated with the coronavirus. HDHPs can cover coronavirus-related testing and equipment needed to treat the virus. Generally, HDHPs are prohibited from covering certain non-specified expenses before the covered individual's deductible has been met. Certain preventative care expenses are excepted from this rule. HDHPs will not jeopardize their status if they pay coronavirus-related expenses before the insured has met the deductible, and the insured will remain HSA-eligible. The guidance applies only to HSA-eligible HDHPs. For more information on the rules governing HDHPs, visit Tax Facts Online. Read More

Tax Court Rules on Worthless Securities Deduction

The Tax Court held that a worthless securities deduction may be permitted even if the entity that issued the securities still held some value. In a complex case involving a number of rounds of financing over several years, the court found it was reasonable to believe that a junior interest may be worthless if there are not funds to pay currently, or anticipated in the future, the senior interests. For more information on the worthless securities deduction, visit Tax Facts Online. Read More

IRS Finds Health FSA Can Reimburse a Portion of Ancestry Genetic Testing

In a private letter ruling (applicable only to the taxpayer requesting the ruling), the IRS found that a portion of the ancestry genetic test could be reimbursed by the health FSA. In the redacted PLR, the IRS discussed whether the genetic testing service could be classified as medical care. The taxpayer's goal was to provide genetic information to their healthcare provider, but it was impossible to purchase the genetic information without also purchasing the ancestry services. The IRS found that portions of the testing may be considered medical care, although ancestry reports could not be classified as reimbursable medical care. The IRS directed the taxpayer to use a "reasonable method" to allocate between medical and non-medical services. For more information on health FSAs, visit Tax Facts Online. Read More

Texas A&M University School of Law has launched its online wealth management, risk management, and international tax risk management graduate curricula for industry professionals. Apply now for Summer courses that begin May: FATCA & CRS Risk Management; International Tax Risk Management, Data, and Analytics I  Texas A&M University is a public university and is ranked 1st among public universities for its superior education at an affordable cost (Fiske, 2018) and ranked 1st of Texas public universities for best value (Money, 2018). To apply for Summer, call or fill in the form https://law.tamu.edu/distance-education/

 

March 20, 2020 in Tax Compliance | Permalink | Comments (0)

Thursday, March 19, 2020

Azerbaijani Laundromat Launders US$2.9 Billion

OCCRP reports: From 2012 to 2014, even as the Azerbaijani government arrested activists and journalists wholesale, members of the country’s ruling elite were using a secret slush fund to pay off European politicians, buy luxury goods, launder money, and otherwise benefit themselves.

Read the full investigation here

March 19, 2020 in AML | Permalink | Comments (0)

Wednesday, March 18, 2020

Thematic Inspection of Cybersecurity Risk Management in Asset Management Firms

The Central Bank of Ireland (Central Bank) recently undertook a Thematic Inspection of Cybersecurity Risk Management (Thematic Inspection) in Investment Firms and Fund Service Providers (Asset Management Firms). The purpose of the inspection was to determine the adequacy of cybersecurity controls and cybersecurity risk management practices of the inspected firms and to identify good practices.

The Thematic Inspection examined (i) cybersecurity risk governance, (ii) cybersecurity risk management frameworks and (iii) certain technical controls for mitigating cybersecurity risk. The on-site inspections included a point-in-time maturity assessment of key cybersecurity risk management practices in place across the selected firms.

The risks associated with IT and cybersecurity are key concerns for the Central Bank. The Central Bank’s ‘Cross Industry Guidance in respect of Information Technology and Cybersecurity Risks 2016’ (2016 Cross Industry Guidance) highlights that “firms are expected to have adequate processes in place to effectively address cyber risk. While it is recognised that there is no one size fits all solution to addressing this risk, all firms should understand the strategic implications of cyber risk. The cyber risk management elements of the IT risk management framework, including associated policies and procedures, should not be viewed as static.

Firms should review and update the framework regularly to reflect threat intelligence and changes in the internal and external operational environment”.

Available here

March 18, 2020 in Financial Regulation | Permalink | Comments (0)

Tuesday, March 17, 2020

SBA to Provide Disaster Assistance Loans for Small Businesses Impacted by Coronavirus (COVID-19)

SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for a small business. These loans can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

  • These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses without credit available elsewhere; businesses with credit available elsewhere are not eligible. The interest rate for non-profits is 2.75%.
  • SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Process for Accessing SBA’s Coronavirus (COVID-19) Disaster Relief Lending

  • The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration.
  • Any such Economic Injury Disaster Loan assistance declaration issued by the SBA makes loans available to small businesses and private, non-profit organizations in designated areas of a state or territory to help alleviate economic injury caused by the Coronavirus (COVID-19).
  • SBA’s Office of Disaster Assistance will coordinate with the state’s or territory’s Governor to submit the request for Economic Injury Disaster Loan assistance.
  • Once a declaration is made for designated areas within a state, the information on the application process for Economic Injury Disaster Loan assistance will be made available to all affected communities.
  • SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response, and the SBA is strongly committed to providing the most effective and customer-focused response possible.

See §121.201   What size standards has SBA identified by North American Industry Classification System codes?

The size standards described in this section apply to all SBA programs unless otherwise specified in this part. The size standards themselves are expressed either in the number of employees or annual receipts in millions of dollars unless otherwise specified. The number of employees or annual receipts indicates the maximum allowed for a concern and its affiliates to be considered small.  By example, a hotel that does not exceed $35 million gross revenue is a small business whereas a B&B Inn or a full-service restaurant may not exceed $8 million in revenue.

Even tax law firms can qualify for SBA loans. The office of lawyers that do not exceed $12 million in revenue is a "small" law firm. But tax preparation services? Allowed up to $22 million in revenue.

For additional information, please contact the SBA disaster assistance customer service center. Call 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov(link sends e-mail).

March 17, 2020 | Permalink | Comments (0)

Australia Revenue Estimates of High Wealth Income Tax Gap from Noncompliance

The high wealth income tax gap is an estimate of the difference between the total amount of income tax collected from high wealth private groups and the amount we estimate would have been collected if every one of these taxpayers was fully compliant with the law.

High wealth private groups are defined as Australian resident individuals who, together with their associates, control wealth of more than $50 million. For the purpose of estimating this gap, we include:

  • registered individuals linked to a high wealth private group
  • companies where ownership by the head individual is 40% or more.

Companies with total business income greater than $250 million are included in the large corporate groups income tax gap.

The income of high wealth private groups includes distributions from trusts and partnerships that are part of their structure; these amounts are accounted for as part of this gap estimate.

In 2016–17, there were approximately 5,000 high wealth private groups with more than $50 million in net wealth. They comprised 9,000 individuals and 18,000 companies. In total, they paid $9.3 billion in income tax and employed 780,000 employees.

Estimate of the tax gap

For 2016–17, the net income tax gap estimate for high wealth private groups was $772 million or 7.7%. This means we estimate that high wealth private groups paid more than 92% of the total theoretical tax payable for 2016–17.

The estimate is an aggregate of the income tax gap for individuals and companies in our population of high wealth private groups. On average, high wealth individuals contribute to 53% of the total net gap and high wealth companies account for slightly less, approximately 47%.

High wealth income tax performance

High wealth private groups voluntarily contributed over $9 billion in income tax for the 2016–17 income year. This is more than 90% of the revenue we were expecting from them.

This shows the vast majority are reporting and paying tax correctly. We understand sometimes people will make honest mistakes, this is usually due to:

  • not correctly recording or reporting transactions outside of the normal course of business
  • not correctly accounting for private use of business funds or assets
  • not reporting income earned from overseas investments or related partnership or trust distributions.

We encourage you to seek advice from your tax advisor as part of your tax governance.

The majority of high wealth private groups are already taking the right steps to avoid these errors and pay the right amount of tax. These include:

  • investing in strong tax governance practices and system controls
  • talking to your tax advisor, or us, if you’re planning to change your business or wealth management arrangement
  • using our tools and services to get greater certainty about the tax consequences, including early engagement and commercial deals services.

We have a number of strategies in place to help reduce the gap. We are improving our detection of errors and deliberate tax avoidance through data and analytics. We are also:

  • increasing our engagement to talk to you about our view of your tax affairs, supporting you to correct past mistakes, and mitigate future tax issues and risks
  • providing guidance in the form of practical compliance guidelines, rulings and taxpayer alerts.

Also, from 2020–21 the expansion of the reportable tax position schedule will apply to large private companies and corporate groups.

This is our first release of the income tax gap estimate for the high wealth population. As we calculate additional estimates over future years, we will be able to see clearer long-term trends.

Find out about:

See also

March 17, 2020 in Tax Compliance | Permalink | Comments (0)

Monday, March 16, 2020

4 tax policy suggestions to address the damage of the Covid-19 / coronavirus pandemic

I have four tax policy suggestions for Congress that it can include in a taxpayer coronavirus relief bill. I welcome acronym suggestions for this proposed bill's name, especially a creative bill name whose acronym is "Zombie" or "Eat Brains". The four tax relief suggestions that will mitigate damage caused by Covid-19 are:

Proposal 1 (stop medical bankruptcy): In 2020 the itemized deduction for medical expenses is reduced by 7.5% of a taxpayer's AGI.  For 2020, I propose eliminating the 7.5% reduction of medical expenses attributed to the coronavirus or any 2020 flu (or zombie bite), such as hospitalization.  Medical diagnosis should suffice. Not going to be used by many people.  But the people who do use will really need it - those that do not awake as zombies that is.

Proposal 2 (stop restaurant bankruptcy): The administration proposes the suspension of the Social Security and Medicare payroll tax to jump-start consumer spending, presumably after the removal of quarantine orders to stay indoors or at least six feet away from each other. Not very targeted.  Someone like me may just shift the payroll tax relief and use it instead to upward adjust my 403(b) retirement savings for 2020, taking advantage of my full $19,500 contribution allowance for 2020 (and because I am 50 years old or older - add another $6,000 retirement 'catchup' to that $19,500 for a full $25,500),  Not only have I not spent the money to help the economy rebound, I have reduced my tax due for 2020 because my retirement contributions reduce my taxable income.  I have saved tax twice!! While I quite like that idea personally, I feel empathy for all the local restaurant owners who may go bankrupt unless I go out to eat at more local restaurants once I assured that 2020 was not the year of the zombie apocalypse.

A better-targeted proposal to save our nation's local restaurants and the local farmers that supply them is to allow taxpayers an itemized deduction up to $1,000 for an individual and $2,000 for a married filing jointly 2020, beyond the standard deduction, of 100% of restaurant meals expense between June 1 and October 31, at U.S. restaurants with the last three years gross annual receipts averaging less than [$5 million - whatever is reasonable so that big chains are not included, Small Business Administration uses a maximum of $8 million for full-service restaurants (NAICS 722511)- I'm OK with that].  I know - many reasons not to do this, such as Americans will become hooked on eating out at local restaurants. Wait, why is that a bad thing?  And we will need to address the tax abusers who will order one slice of pizza and 20 bottles of wine, to go. So maybe the maximum meal receipt must be set at $100 per meal receipt per adult. That should allow plenty of food for a couple, and alcohol, and leave enough for the children to still have mac & cheese. Plus it requires ten different restaurant trips. Local restauranteurs and the local farmers can hold out hope that 2020 will not require filing for bankruptcy protection.  November is Thanksgiving when people eat out anyway, at least in the restaurants that have remained open.  By the way, I am purposely leaving business out of this.  Business has a 50% business meal deduction anyway. And my policy suggestion is about Americans being social and not talking business at the dinner table (and perhaps not politics either).

Proposal 3 (stop hotel bankruptcy): And let's not forget about locally-owned hotels with average gross receipts below $8 million (SBA uses $35 million for hotels and $8 million for B&B Inns so maybe I am way off base with just $8 million - see NAICS subsector 721 Accomodation). A $500 itemized deduction for 2020 for a U.S. hotel stay (not Air BnB homes or apartments, actually licensed hotels/BnB Inns) for an individual or couple between June 1 and October 31. Might not buy a weekend at the Ritz but the Ritz probably exceeds the small business amount of revenue a year.  Is it sound tax policy? Huey Long (I'm from Louisiana) promised a chicken in every pot and a car in every yard.  I promise a get-a-way weekend at a small(ish) hotel.

Proposal 4 (keep employees employed): A tax credit (I am not sure the right amount, let the Labor Secretary decide, something around $5,000 an employee) to employers of less than 500 employees who do not reduce the monthly payroll of the employees, or fire any employees, between June 1 and September 30. October 1 employers start thinking about Christmas hiring for the shopping season.  I can imagine some mathematically-inclined employees thinking "I am going to walk into my boss' office and projectile vomit because the cost of losing the tax credits for firing me is too high." OK, so firing 'for cause including projectile Zombie vomiting on the boss ' will be allowed without loss of the tax credit.  Now if a business wants to expand and hire a lot of employees up to 500 that's great.  I propose that all employees employed and start fulltime work before June 1st qualify for a reduced $4,000 tax credit (basically $1,000 a month of employment for June through September).

These four proposals are enough to keep the economy, restaurants, hotels, and employees out of recession and bankruptcy.  But I have more proposals not currently part of the current bill, but common sense dictates should be (well, maybe not).  Why have we heard nothing from the House to encourage donations of toilet paper rolls to local shelters?   And why hotels and restaurants, but not spas?  I'll leave it to the politicians (and lobbyists) to argue about.  Meanwhile, I look forward to receiving your comments while I set up my anti-zombie chicken wire barricade around the yard.

I'll be covering these and related issues in my weekly Tax Facts Intelligence Newsletter.

2020’s Tax Facts Offers a Complete Web, App-Based, and Print Experience

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March 16, 2020 in Tax Compliance | Permalink | Comments (0)

Sunday, March 15, 2020

What will be the impact of the Covid-19 (coronavirus) on tax filings due by April 15? (Or will we all be eaten by zombies by then?)

If the illness known as Covid-19 generated by the coronavirus does not cause a zombie apocalypse (it's almost April 1st, expect wide coverage of zombies in your neighborhood), then we still need to plan for our tax payments due April 15th this year. Not talking about 2019 but rather the first of the 2020 estimated tax payments.  However, it is likely that taxpayers with business or investment income may reduce the 2020 quarterly estimated tax payments that will be due April 15 this year, June 15, September 15, and January 15 of 2021.  Why?

2019 was a good income year for most taxpayers earning investment and business income.  But 2020 will likely be a depressed income year, maybe even a recession (for those not eaten by zombies). Thus, estimated tax payments to avoid a penalty, generally, 90% of the tax that is estimated to be due for 2020, should be much reduced from the 2019 level paid. (Contrarian investor taxpayers that shorted the market may actually need to make higher estimated taxpayers because the contrarians are likely to have a great capital gain year).

What are the changes enacted in the Tax Cuts and Jobs Act of 2017 that, because of the coronavirus, impact 2020's estimated tax payments?

  • A taxpayer's ability to reduce tax because of a net operating loss ("NOL") in 2020 has been reduced by the TCJA. An NOL resulting in 2020 cannot be applied to taxes paid in the previous two-years of 2019 and 2018 to claw those taxes back.  Before the TCJA, the NOL "carry-back" of two-years was allowed.  NOLs may still be carried forward.  Excess NOL in 2020 may be used to reduce 2021's income and thus tax due.

However, the TCJA even modifies how much NOL may be used to reduce 2020's taxable income.  Starting in 2018, the TCJA modified the tax law on "excess business losses" by limiting losses from all types of business for noncorporate taxpayers. An "excess business loss" is the amount of a taxpayer's total deductions from business income that exceeds a taxpayer’s "total gross income and capital gains from business plus $250,000 for an individual taxpayer or $500,000 for married taxpayers filing a joint return."  Said another way, the business loss in 2020 is limited to a maximum of $250,000 for an individual taxpayer. Yet, the remainder does not evaporate like a vampire stabbed with a stake in the heart.  The remainder may be carried forward to 2021.  The remainder is called a "net operating loss" or NOL.

But the TCJA has another limitation for the carry forward of an NOL.  The NOL may only be used in 2021 to reduce the taxpayer's taxable income by 80%.  The remainder NOL in 2021, if any, that resulted from 2020's original loss and 2021's limitation to just 80% of taxable income may again be carried forward, to 2022, yet again subject to the 80% of taxable income limitation.  The NOL may keep rolling forward indefinitely, subject to the 80% limitation until it is all used.

  • High net wealth taxpayers that generate gross receipts greater than $26 million may be subject to the TCJA's limitation of interest expense for 2020. The TCJA included a rule that limits the amount of interest associated with a taxpayer's business income when the taxpayer has on average annual gross receipts of more than $26 million since 2018.  The limitation does not apply to a taxpayer whose business income is generated from providing services as an employee, and a taxpayer that generates business income from real estate may elect not to have the limitation apply.

The amount of deductible business interest expense that is above a taxpayer's business interest income is limited to 30% of the taxpayer’s adjusted taxable income (called "ATI").  For 2020, ATI will probably be significantly lower than in 2019 and 2018. A taxpayer calculated ATI taking the year's taxable income then reducing it by the business interest expense as if the limitation did not apply. The remaining amount is then further reduced by any net operating loss deduction; the 20% deemed deduction for qualified business income, any depreciation, amortization, or depletion deduction, and finally, any capital loss.  The business interest expense allowable for 2020 is 30% of that remainder.  The lost business income resulting from the coronavirus in 2020 may lead the remainder to be zero, and 30% of zero is zero.  Like the NOL above, the business interest expense if not usable in 2020 does not vanish. It carries forward to 2021 and each year thereafter, applying the same limitation rules each year.

  • Many taxpayers may end 2020 in a capital loss position if the stock market does not fully recover by December.  If a taxpayer’s capital losses are more than the year's capital gains, then $3,000 of that loss may be deducted from the taxpayer's 2020 regular income.  Remaining capital loss above the $3,000 may be carried forward to apply against 2021 income, and so on until used up.
  • The IRS may offer taxpayers more time beyond the April 15th deadline to file and pay 2019's tax in 2020.  The filing and payment for 2019, and estimated tax for 2020, is due on or before April 15. But the IRS has indicated that it may extend that deadline.  A taxpayer may, regardless, file a request for a six-month extension on or before April 15, 2020, that is automatically granted if filed on time. But any tax owing for 2019 will still be due April 15, 2020, after which interest begins to be charged by the IRS to the taxpayer's tax debt.   Check the IRS website here for whether, because of the coronavirus, it has extended the payment deadline beyond April 15, 2020. Can the IRS extend the deadline, legally? Yes. Because Congress enacted a section of the Internal Revenue Code (our tax law) "§ 7508A" which is aptly named "Authority to postpone certain deadlines by reason of Presidentially declared disaster or terroristic or military actions".  The President declared an official national emergency (see here). 
  • Taxpayers are not required to exhaust the deductible required by a high-deductible health plan (called "HDHP") before using the HDHP to pay for COVID-19 related testing and treatment.

I'll be covering these and related issues in my weekly Tax Facts Intelligence Newsletter.

March 15, 2020 in Tax Compliance | Permalink | Comments (0)

Saturday, March 14, 2020

Zombie Apocalypse or Just Another Flu Season?

  • CDC estimates that the burden of illness during the 2018–2019 season included an estimated 35.5 million people getting sick with influenza, 16.5 million people going to a health care provider for their illness, 490,600 hospitalizations, and 34,200 deaths from influenza (Table 1). 
  • The overall burden of influenza for the 2017-2018 season was an estimated 45 million influenza illnesses, 21 million influenza-associated medical visits, 810,000 influenza-related hospitalizations, and 61,000 influenza-associated deaths

Flu activity as reported by clinical laboratories remains high but decreased for the fourth week in a row; however, influenza-like illness activity increased slightly.  Severity indicators remain moderate to low overall, but hospitalization rates differ by age group, with high rates among children and young adults.

Influenza-Associated Hospitalizations 2019-20 Season

The overall cumulative hospitalization rate was 61.6 per 100,000 population which is higher than all recent seasons at this time of year except for the 2017-18 season. Rates in children 0-4 years old and adults 18-49 years old are now the highest CDC has on record for these age groups, surpassing the rate reported during the 2009 H1N1 pandemic. Hospitalization rates for school-aged children are higher than any recent regular season but lower than rates during the pandemic.

  • Laboratory confirmed influenza associated hospitalization rates for the overall U.S. population remain moderate compared to recent seasons, but rates for children 0-4 years and adults 18-49 years are now the highest CDC has on record for these age groups, surpassing rates reported during the 2009 H1N1 pandemic.  Hospitalization rates for school-aged children (5-17 years) are higher than any recent regular season but remain lower than rates experienced by this age group during the pandemic.
  • Pneumonia and influenza mortality has been low, but 144 influenza-associated deaths in children have been reported so far this season. This number is higher for the same time period than in every season since reporting began in 2004-05, except for the 2009 pandemic.
  • CDC estimates that so far this season there have been at least 36 million flu illnesses, 370,000 hospitalizations and 22,000 deaths from flu.

What viruses will the 2019-2020 flu vaccines protect against?

There are many different flu viruses and they are constantly changing. The composition of U.S. flu vaccines is reviewed annually and updated as needed to match circulating flu viruses. Flu vaccines protect against the three or four viruses (depending on the vaccine) that research suggests will be most common. For 2019-2020, trivalent (three-component) vaccines are recommended to contain:

  • A/Brisbane/02/2018 (H1N1)pdm09-like virus (updated)
  • A/Kansas/14/2017 (H3N2)-like virus (updated)
  • B/Colorado/06/2017-like (Victoria lineage) virus

Quadrivalent (four-component) vaccines, which protect against a second lineage of B viruses, are recommended to contain:

  • the three recommended viruses above, plus B/Phuket/3073/2013-like (Yamagata lineage) virus.

How well-matched are 2019-2020 vaccine viruses to circulating flu viruses? How well is flu vaccine protecting against illness?

It’s understandable that people want to know how well flu vaccines are working or are expected to work this season. CDC does not have flu vaccine effectiveness estimates for this season yet because it is still early in the season  and these estimates are based on epidemiologic studies comparing illness among vaccinated versus unvaccinated people. That data will be available later.

In the meantime, laboratory data can provide some insight into how well vaccines might work. The most helpful data for this is the antigenic characterization data, which are updated weekly in FluView. Limited antigenic data on recently circulating viruses are available at this point in the season, and the data suggest similarity of the circulating influenza A(H1N1)pdm09 and B/Yamagata viruses tested so far to the vaccine viruses. However, the influenza B/Victoria and A(H3N2) viruses that have been tested show some reduced similarity to the vaccine viruses. Again, at this point in the flu season, the antigenic data are limited and can only give early insights into how well vaccines might work. More information about how CDC antigenically characterizes flu viruses is available, and more complete antigenic data will be available in the coming weeks.

During past seasons when vaccine viruses were antigenically “like” most circulating viruses, vaccine effectiveness in the range of 40% to 60% has been observed. This means that people who get vaccinated may still get sick, but they are about half as likely to get sick as someone who was not vaccinated. Another important thing to remember is that vaccination may make illness less severe in people who get vaccinated and still get sick. In general people who get vaccinated are better off than people who do not get vaccinated. It’s important to remember though, that things can change very quickly with flu and we could still see circulation of flu viruses with significant antigenic drift this season.

 

 

March 14, 2020 in Economics | Permalink | Comments (0)

Friday, March 13, 2020

Whistle-blower Exposes Massive Global Boiler Room 'Milton Group' from Ukraine, Leader Calls Himself “the Wolf of Kiev”,

OCCRP reports Those worst affected were preyed upon by the call center’s “retention” desk, whose job was to conjure up new ways to extract more money, often through brutal psychological pressure. Some were harassed into taking out huge loans, threatened by forged letters from UK financial regulators demanding taxes, or contacted by fake lawyers offering to help get their money back — for yet another fee. In the most extreme cases, Milton Group’s retention specialists would convince victims to install software on their computers that allowed the scammers to control them remotely, and steal more money in the process. Some lost more than $200,000. Read the full investigative story here

March 13, 2020 in AML | Permalink | Comments (0)

Thursday, March 12, 2020

Public comments received on the 2020 Review of Country-by-Country Reporting (BEPS Action 13 Minimum Standard)

Update 12/03/2020: Comments have been added/replaced in their respective folders within the ZIP file. Please consult the "Read me" file for a description of all updates. 

March 12, 2020 in OECD | Permalink | Comments (0)

Former West Virginia University Professor Pleads Guilty to Fraud That Enabled Him to Participate in the People’s Republic of China’s “Thousand Talents Plan”

Dr. James Patrick Lewis, of Fairview, West Virginia, has admitted to a fraud charge involving West Virginia University, the Department of Justice announced.

Lewis, age 54, pleaded guilty to a one-count information charging him with “Federal Program Fraud.” From 2006 to August 2019, Lewis was a tenured professor at West Virginia University in the physics department, specializing in molecular reactions used in coal conversion technologies. In July 2017, Lewis entered into a contract of employment with the People’s Republic of China through its “Global Experts 1000 Talents Plan.” China’s Thousand Talents Plan is one of the most prominent Chinese Talent recruit plans that are designed to attract, recruit, and cultivate high-level scientific talent in furtherance of China’s scientific development, economic prosperity and national security. These talent programs seek to lure overseas talent and foreign experts to bring their knowledge and experience to China and reward individuals for stealing proprietary information.

“Lewis defrauded a public university into giving him leave, so that he could satisfy his competing obligations to a Chinese institution, which he hid from the school,” said Assistant Attorney General for National Security John C. Demers.  “I applaud the increased focus of the academic community to detect conflicts of interest and conflicts of commitment.  Only with more transparency will we stem the tide of covert ties to Chinese institutions and programs, ties meant by the Chinese government to result in the transfer of intellectual property from the United States."

“This case represents an attempt to serve China to the detriment of West Virginia University and the United States. Academia is a prime target for these activities and we will remain committed to prosecuting such fraud wherever it is found. I want to thank the FBI, the IRS and our prosecution team for a job well done,” said U.S Attorney Bill Powell, Northern District of West Virginia.

“The FBI knows the Chinese government intentionally targets the advanced technologies and technical expertise developed in the U.S. to give itself a competitive advantage in the world marketplace,” said FBI Pittsburgh Special Agent in Charge Robert Jones. “Participation in a talent plan like the one Dr. Lewis was part of is not illegal. But FBI investigations have revealed participants are often incentivized to transfer proprietary information or research conducted in the U.S. to China. This remains a significant threat and a high priority threat for the FBI. We are dedicated to making sure foreign governments know U.S. trade secrets cannot and will not be bought.”

According to Lewis’s contract, the Chinese Academy of Sciences agreed to employ Lewis as a professor for at least three years. In return, Lewis agreed to maintain an active research program that yielded publications in high quality, peer-reviewed journals, and to provide research training and experience for Chinese Academy of Sciences students.

As a part of the program, Lewis was promised benefits, including a living subsidy of 1 million Yuan (approximately $143,000), a research subsidy of 4 million Yuan (approximately $573,000), and a salary of 600,000 Yuan (approximately $86,000). To receive the benefits, Lewis would have to work full time in China for three consecutive years, for no less than nine months per year, and would have to begin work no later than Aug. 8, 2018.

In March 2018, Lewis submitted a request to WVU for an alternate/parental work assignment, requesting to be released from his teaching duties for the fall 2018 semester in order to serve as the primary caregiver for a child he and his wife were expecting in June 2018. In fact, however, Lewis knew this request was fraudulent. Rather than caring for his newborn child, Lewis planned to work in China during the fall 2018 semester as a part of his agreement with the “1000 Talents Plan.” Based on the false justification Lewis offered, WVU granted his request.

In the fall of 2018, Lewis spent all but three weeks of the semester in China while his newborn child remained in the United States. During this period, Lewis received his full salary from WVU pursuant to his alternate/parental work assignment. Lewis’s scheme allowed him to fraudulently obtain $20,189 from WVU.

As a part of the plea agreement, Lewis has agreed to pay restitution in the amount of $20,189 in full to WVU.  Lewis is no longer employed by WVU, having resigned in August 2019.

Lewis faces up to 10 years incarceration and a fine of up to $250,000. Under the Federal Sentencing Guidelines, the actual sentence imposed will be based upon the seriousness of the offenses and the prior criminal history, if any, of the defendant.

March 12, 2020 in AML | Permalink | Comments (0)

Wednesday, March 11, 2020

Department of Justice Begins First Distribution of Funds Recovered Through Asset Forfeiture to Compensate Victims of Western Union Fraud Scheme

The Department of Justice announced that the Western Union Remission Fund began its first distribution of approximately $153 million in funds forfeited to the U.S. government from the Western Union Company (Western Union) to over 109,000 victims located in the United States and abroad. These victims, many of whom were elderly victims of consumer fraud and abuse, will be recovering the full amount of their losses.

“The $153 million distribution announced today brings some measure of justice for the elderly and other victims who were financially harmed by the fraudulent schemes in this case,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “The department remains resolute in its efforts to not only prevent fraud from occurring in the first place, but also to find and return ill-gotten gains.”

“Money Transfer Businesses such as Western Union are particularly susceptible to misuse by scammers,” said U.S. Attorney David J. Freed for the Middle District of Pennsylvania.  “In nearly every case of this nature that we have encountered in the Middle District of Pennsylvania, money transfer businesses are used to facilitate the crimes.  Working together with MLARS and the skilled and dedicated investigators of the Postal Inspection Service, we have achieved outstanding results – bringing fraudsters to justice and holding businesses such as Western Union accountable.  In addition to increased fraud detection and protections, an integral part of that accountability involves Western Union making victims whole.  $153 Million is a good start.”

“The losses and the number of victims in this case are staggering.  This initial disbursement will provide relief to more than 100,000 individuals, who lost $153 million,” said Assistant Postal Inspector in Charge John Walker of the U.S. Postal Inspection Service’s Philadelphia Division.  “Some lost their life’s savings as a result of these scammers.  Postal Inspectors continue to be out front when it comes to investigating these con men and in protecting American citizens from them.  Today, we are happy to play a third role — returning money to those who were scammed.  Delivering justice, and in this case, delivering restitution.”

“Western Union turned a blind eye to the fraudulent payments made through its money transfer system,” said Andrew Smith, Director of the Federal Trade Commission’s Bureau of Consumer Protection.  “We’re glad to be returning money to those consumers who were ripped off by fraudsters exploiting the Western Union system, and we will not tolerate Western Union or other payments companies facilitating fraud.”   

In 2017, Western Union entered into a deferred prosecution agreement (DPA) with the United States.  Pursuant to the DPA, Western Union acknowledged responsibility for its criminal conduct, which included violations of the Bank Secrecy Act and aiding and abetting wire fraud, and agreed to forfeit $586 million, which has been made available to compensate victims of the international consumer fraud scheme through the remission process. Western Union simultaneously resolved a parallel civil investigation with the Federal Trade Commission. 

In this case, fraudsters specifically targeted seniors through primarily three distinct scams.  First, in grandparent scams, the fraudster would pose as the victim’s relative, usually a grandchild, in need of immediate money to avoid personal harm such as a payment for medical expenses or ambulatory transportation.  Second, in lottery or sweepstakes scams, victims received phone calls telling them that they had won large cash prizes but had to pay fees such as taxes to claim the prize.  Many of these victims were re-victimized several times, as they were told to transfer large sums of money in multiple transactions on the promise that they would receive their prizes.  Third, romance scams preyed on seniors searching for love or companionship on the internet.  These victims were lulled into believing that their online love interest needed funds for a visit to the United States or some other purpose.

Certain owners, operators or employees of Western Union agent locations were complicit in the schemes.  Western Union aided and abetted the fraud scheme by failing to suspend or terminate complicit agents and by allowing them to continue to process fraud-induced monetary transactions.  Western Union had fulfilled its obligations under the DPA and the government has filed a motion to dismiss the information, which the court granted today.  

This first round of payments is one of several expected to occur in the Western Union remission.  The Department of Justice sent petitions for remission to over 500,000 potential victims of the Western Union fraud and anticipates authorizing compensation for many more victims in the coming months. 

March 11, 2020 in AML | Permalink | Comments (0)

Monday, March 9, 2020

CRS and FATCA Amendment Regulations, CRS Reportable Jurisdictions Now Available

The Department for International Tax Cooperation (DITC) advises industry that the Amendments to the CRS & FATCA Regulations were approved by Cabinet on 18 February 2020 and take immediate effect: Tax Information Authority (International Tax Compliance) (Common Reporting Standard) (Amendment) Regulations, 2020 Tax Information Authority (International Tax Compliance) (United States of America) (Amendment) Regulations, 2020 […]  Download here

The Department for International Tax Cooperation (DITC) advises industry that the Amendments to the CRS & FATCA Regulations were approved by Cabinet on 18 February 2020 and take immediate effect:

  1. Tax Information Authority (International Tax Compliance) (Common Reporting Standard) (Amendment) Regulations, 2020
  2. Tax Information Authority (International Tax Compliance) (United States of America) (Amendment) Regulations, 2020

Additionally, industry is advised that the updated list of 2020 CRS Reportable Jurisdictions was published in Extraordinary Gazette No.14 of 2020:

  1. 020 CRS Reportable Jurisdictions

Please note the following:

  1. The annual reporting deadline for CRS & FATCA is changed to 31st July. However, the reporting deadline for the 2019 reporting period is extended to 18 September 2020 due to development of the new DITC Portal.
  2. The requirement for the Authorising Person (AP) and Principal Point of Contact (PPoC) to be an individual has been removed. A guidance note reflecting the impact of the “Institutional User” can be found on the DITC News & Updates page.
  3. Six jurisdictions have been added to the 2020 list of CRS reportable jurisdictions.
  4. Launch date of the new DITC Portal is June 1st. FAQs and further information can be found on the DITC News & Updates page.
  5. Any questions may be emailed to – CaymanAEOIPortal@gov.ky

March 9, 2020 in GATCA | Permalink | Comments (0)

EXIM Approved 1,585 Small Business Authorizations Totaling More Than $1.4 Billion and Supporting Approximately 12,000 Jobs

he Export-Import Bank of the United States (EXIM) has approved 1,585 authorizations totaling more than $1.42 billion in support of American small businesses that export “Made in the USA” products around the world since May 2019, when a quorum of the Board of Directors was restored, through January 31, 2020.

This total includes $1.28 billion of short-term authorizations and $69.8 million of medium-term authorizations.

EXIM stands ready to help our small businesses, which are the backbone of American commerce,” said EXIM President and Chairman Kimberly A. Reed. “In recent years, nearly 90 percent of EXIM’s authorizations have supported small businesses. As part of our recent reauthorization, Congress has directed EXIM to increase the share of export financing for small businesses, and we are committed to ensuring all U.S. small businesses have the opportunity to export their ‘Made in the U.S.A.’ products around the world.”

These small-business related authorizations have supported an estimated 8,000 U.S. jobs in FY 2019 and a preliminary estimate of 4,000 U.S. jobs to date in FY 2020.

In an effort to build awareness and to increase transparency about EXIM’s commitment to small business, EXIM published a complete list of transactions online. Below is a summary of overall small business activity during this timeframe. To see how small businesses from every state are using EXIM products, view success stories online.

  EXIM Authorizations May 9, 2019 – January 31, 2020  
EXIM Product Total (in millions) Short-Term (in millions) Medium-Term (in millions) Long-Term (in millions)
Export Credit Insurance $ 1,435.3 $ 1,382.9 $ 52.3
Working Capital Guarantees $ 379.1 $ 379.1
Guarantees and Loans $ 5,196.7 $ 169.8 $ 5,026.9
Total $ 7,011.0 $ 1,762.0 $ 222.1 $ 5,026.9
Small Business/MWOB        
Small Business $ 1,425.2 $ 1,284.8 $69.8 $ 70.7
Minority and Women-Owned Business $ 234.3 $ 205.9 $4.1 $ 24.4

ABOUT EXIM:

EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to overseas purchasers of U.S. goods and services. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, 90 percent of the total number of the agency’s authorizations has directly supported small businesses.

March 9, 2020 in Economics | Permalink | Comments (0)