International Financial Law Prof Blog

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

Tuesday, December 22, 2020

U.S. International Transactions, 3rd Quarter 2020

Current Account Deficit Widens by 10.6 Percent in Third Quarter

Current Account Balance, Third 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, widened by $17.2 billion, or 10.6 percent, to $178.5 billion in the third quarter of 2020, according to statistics released by the U.S. Bureau of Economic Analysis. The revised second quarter deficit was $161.4 billion.

The third quarter deficit was 3.4 percent of current dollar gross domestic product, up from 3.3 percent in the second quarter.

The $17.2 billion widening of the current account deficit in the third quarter mostly reflected an expanded deficit on goods that was partly offset by an expanded surplus on primary income.

Quarterly U.S. Current Account and Component Balances
Coronavirus (COVID-19) Impact on Third Quarter 2020 International Transactions
All major categories of current account transactions increased in the third quarter of 2020 following notable declines in the second quarter, reflecting the resumption of trade and other business activities that were postponed or restricted due to COVID-19. In the financial account, most of the currency swaps between the U.S. Federal Reserve System and foreign central banks that remained at the end of the second quarter were ended in the third quarter, contributing to the continued U.S. withdrawal of deposit assets abroad and the continued U.S. repayment of deposit and loan liabilities. A record level of net shipments of U.S. currency abroad to meet the demand for U.S. currency by foreign residents increased U.S. currency liabilities, partly offsetting the net repayment of U.S. deposit liabilities. The full economic effects of the COVID-19 pandemic cannot be quantified in the statistics because the impacts are generally embedded in source data and cannot be separately identified. For more information on the impact of COVID-19 on the statistics, see the technical note that accompanies this release.

Current Account Transactions (tables 1-5)

Exports of goods and services to, and income received from, foreign residents increased $99.4 billion, to $796.0 billion, in the third quarter. Imports of goods and services from, and income paid to, foreign residents increased $116.6 billion, to $974.5 billion.

Quarterly U.S. Current Account Transactions

Trade in Goods (table 2)

Exports of goods increased $68.4 billion, to $357.1 billion, and imports of goods increased $94.4 billion, to $602.7 billion. The increases in both exports and imports reflected increases in all major categories, led by automotive vehicles, parts, and engines, mainly parts and engines and passenger cars.

Trade in Services (table 3)

Exports of services increased $2.8 billion, to $164.8 billion, mainly reflecting an increase in charges for the use of intellectual property, mostly licenses for the use of outcomes of research and development, that was partly offset by a decrease in travel, primarily education-related travel. Imports of services increased $6.5 billion, to $107.7 billion, mainly reflecting increases in charges for the use of intellectual property, mostly licenses for the use of outcomes of research and development; in transport, primarily sea freight transport; and in travel, primarily other personal travel.

Primary Income (table 4)

Receipts of primary income increased $26.8 billion, to $238.7 billion, and payments of primary income increased $11.9 billion, to $190.6 billion. The increases in both receipts and payments mainly reflected increases in direct investment income, primarily earnings.

Secondary Income (table 5)

Receipts of secondary income increased $1.4 billion, to $35.3 billion, reflecting an increase in private transfers, mostly private sector fines and penalties, that was partly offset by a decrease in general government transfers, mainly government sector fines and penalties. Payments of secondary income increased $3.7 billion, to $73.5 billion, reflecting increases in private transfers, primarily private sector fines and penalties, and in general government transfers, mostly international cooperation.

Capital Account Transactions (table 1)

Capital transfer receipts increased $0.3 billion, to $0.4 billion, in the third quarter, reflecting the U.S. Department of State’s sale of a property in Hong Kong.

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

Net financial account transactions were −$221.1 billion in the third quarter, reflecting net U.S. borrowing from foreign residents.

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

Third quarter transactions decreased U.S. residents’ foreign financial assets by $73.0 billion. Transactions decreased other investment assets, mostly currency and deposits, by $288.1 billion. Transactions in deposits included a net withdrawal by the U.S. Federal Reserve of $203.0 billion from deposits abroad related to the ending of currency swaps. Transactions increased direct investment assets, mostly equity, by $71.1 billion; portfolio investment assets, mostly equity securities, by $142.2 billion; and reserve assets by $1.8 billion.

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

Third quarter transactions increased U.S. liabilities to foreign residents by $172.0 billion. Transactions increased direct investment liabilities, both equity and debt, by $70.5 billion and portfolio investment liabilities, mostly equity securities, by $147.5 billion. Transactions decreased other investment liabilities, mostly loans, by $46.0 billion.

Financial Derivatives (table 1)

Net transactions in financial derivatives were $24.0 billion in the third quarter, reflecting net lending to foreign residents.

Updates to Second Quarter 2020 International Transactions Accounts Balances

Billions of dollars, seasonally adjusted
  Preliminary estimate Revised estimate
Current account balance −170.5 −161.4
    Goods balance −219.3 −219.5
    Services balance 54.4 60.9
    Primary income balance 29.2 33.2
    Secondary income balance −34.9 −35.9
Net financial account transactions −82.6 −206.6

*  *  *

Next release: March 23, 2021 at 8:30 A.M. EDT

December 22, 2020 in Economics | Permalink | Comments (0)

Monday, December 21, 2020

Germany and Pakistan deposit their instrument of ratification for the Multilateral BEPS Convention and other updates

Germany and Pakistan have deposited their instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention or MLI), which now covers almost 1700 bilateral tax treaties, thus underlining its strong commitment to prevent the abuse of tax treaties and base erosion and profit shifting (BEPS) by multinational enterprises. For Germany and Pakistan, the MLI will enter into force on 1 April 2021.

With 95 jurisdictions currently covered by the MLI, today’s ratification by Germany and Pakistan now brings to 59 the number of jurisdictions which have ratified, accepted or approved it. The Multilateral Convention will become effective on 1 January 2021 for over 600 treaties concluded among the 59 jurisdictions, with an additional 1200 treaties to become effectively modified once the MLI will have been ratified by all Signatories.

In addition, Switzerland notified in relation to Article 35(7)(a)(i) of the MLI the confirmation of the completion of its internal procedures for the entry into effect of the provisions of the MLI with respect to its treaties with the Czech Republic and Lithuania in accordance with Article 35(7)(b) of the MLI.

The text of the Multilateral Convention, the explanatory statement, background information, database, and positions of each signatory are available at

December 21, 2020 in BEPS, OECD | Permalink | Comments (0)

Saturday, December 19, 2020

OECD publishes information on the state of implementation of the hard-to-value intangibles approach by members of the Inclusive Framework on BEPS

The OECD has published jurisdiction-specific information on the implementation of the hard-to-value intangibles ("HTVI") approach. To date, 40 jurisdictions have provided information on whether their domestic legal system provides for transfer pricing rules aimed at transactions involving HTVI.

The publication of this information is part of the monitoring process of the implementation of the HTVI approach agreed by the OECD/G20 Inclusive Framework on BEPS, whereby participating jurisdictions report on their legislation and administrative practices relevant to the application of the HTVI approach. Importantly, this information provides tax administrations, taxpayers and other stakeholders with a better understanding of the extent to which the HTVI approach has been adopted and applied in practice by countries around the world, with the aim to reduce misunderstandings and disputes between governments. The information published today was provided by those countries to which the information relates.

The HTVI approach was the outcome of the work done under Action 8 of the Action Plan on Base Erosion and Profit Shifting, which is found in the 2015 Final Report for Actions 8-10, Aligning Transfer Pricing Outcomes with Value Creation and it was formally incorporated into the OECD Transfer Pricing Guidelines (Guidelines), as Section D.4 of Chapter VI. The HTVI approach protects tax administrations from the negative effects of information asymmetry by ensuring that they can consider ex post outcomes as presumptive evidence about the appropriateness of ex-ante pricing arrangements. At the same time, the approach permits taxpayers to rebut such presumptive evidence by demonstrating the reliability of the information supporting the pricing methodology adopted at the time the controlled transaction took place. In 2018, the HTVI approach was supplemented with a new annex to Chapter VI of the Guidelines that contains guidance that would ensure a common understanding and practice among tax administrations on how to apply adjustments resulting from the application of the HTVI approach.

Further information on the state of jurisdictions’ transfer pricing legislation and practices can be found in the Transfer Pricing Country Profiles.

William Byrnes’ two-volume 4th Edition Practical Guide to U.S. Transfer Pricing (2021 version forthcoming December 2020) is revised and updated annually to help multinationals cope with the U.S. transfer pricing rules and procedures, taking into account the international norms established by the Organisation for Economic Co-operation and Development (OECD). It is also designed for use by tax administrators, both those belonging to the U.S. Internal Revenue Service and those belonging to the tax administrations of other countries, and tax professionals in and out of government, corporate executives, and their non-tax advisors, both American and foreign.  Professor Byrnes organizes the sixty leading industry advisors form the contributing subject matter expert team that analyzes the highly technical issues faced by tax and risk management counsel, translating them into actionable strategy.

“As the transfer pricing treatise’s primary author, I take an active role in working with each of my subject matter experts within the chapters, as well as developing and cultivating additional subject matter tax experts to contribute to the expansion of country-based and industry-based chapters. I organize the law, create an interpretive framework, clarifies the role of legal rules and the enforcement institutions, and demonstrate what ‘the law’ requires. Moreover, I ensure the most up to date analysis and risk strategy for a business navigating the complexity of intra-group transfer pricing among multiple taxing jurisdictions.” William Byrnes

December 19, 2020 in BEPS | Permalink | Comments (0)

Friday, December 18, 2020

China-Based Executive at U.S. Telecommunications Company Charged with Disrupting Video Meetings

Defendant Coordinated with the People’s Republic of China to Target Dissidents and Disrupt Meetings

A complaint and arrest warrant were unsealed today in federal court in Brooklyn charging Xinjiang Jin, also known as “Julien Jin,” with conspiracy to commit interstate harassment and unlawful conspiracy to transfer a means of identification.  Jin, an employee of a U.S.-based telecommunications company (Company-1) who was based in the People’s Republic of China (PRC), allegedly participated in a scheme to disrupt a series of meetings in May and June 2020 held to commemorate the June 4, 1989 Tiananmen Square massacre in the PRC.  The meetings were conducted using a videoconferencing program provided by Company-1, and were organized and hosted by U.S-based individuals, including individuals residing in the Eastern District of New York.  Jin is not in U.S. custody.

“No company with significant business interests in China is immune from the coercive power of the Chinese Communist Party,” said Assistant Attorney General for National Security John C. Demers.  “The Chinese Communist Party will use those within its reach to sap the tree of liberty, stifling free speech in China, the United States and elsewhere about the Party’s repression of the Chinese people.  For companies with operations in China, like that here, this reality may mean executives being coopted to further repressive activity at odds with the values that have allowed that company to flourish here.”

“The FBI remains committed to protecting the exercise of free speech for all Americans.  As this complaint alleges, that freedom was directly infringed upon by the pernicious activities of Communist China’s Intelligence Services, in support of a regime that neither reflects nor upholds our democratic values,” said FBI Director Christopher Wray. “Americans should understand that the Chinese Government will not hesitate to exploit companies operating in China to further their international agenda, including repression of free speech.” 

“The allegations in the complaint lay bare the Faustian bargain that the PRC government demands of U.S. technology companies doing business within the PRC’s borders, and the insider threat that those companies face from their own employees in the PRC,” said Acting United States Attorney Seth D. DuCharme.  “As alleged, Jin worked closely with the PRC government and members of PRC intelligence services to help the PRC government silence the political and religious speech of users of the platform of a U.S. technology company.  Jin willingly committed crimes, and sought to mislead others at the company, to help PRC authorities censor and punish U.S. users’ core political speech merely for exercising their rights to free expression.  The charges announced today make clear that employees working in the PRC for U.S. technology companies make those companies—and their users—vulnerable to the malign influence of the PRC government.  This Office will continue working tirelessly to protect against threats to the free expression of political views and religious beliefs, regardless whether those threats come from inside or outside the United States.”

Mr. DuCharme and Mr. Demers also extended their thanks and appreciation to Company-1 for its cooperation in the government’s ongoing investigation.

According to the complaint, Jin served as Company-1’s primary liaison with PRC law enforcement and intelligence services.  In that capacity, he regularly responded to requests from the PRC government for information and to terminate video meetings hosted on Company-1’s video communications platform.  Part of Jin’s duties included providing information to the PRC government about Company-1’s users and meetings, and in some cases he provided information – such as Internet Protocol addresses, names and email addresses – of users located outside of the PRC.  Jin was also responsible for proactively monitoring Company-1’s video communications platform for what the PRC government considers to be “illegal” meetings to discuss political and religious subjects unacceptable to the Chinese Communist Party (CCP) and the PRC government.

As alleged in the complaint, between January 2019 to the present, Jin and others conspired to use Company-1’s systems in the United States to censor the political and religious speech of individuals located in the United States and around the world at the direction and under the control of officials of the PRC government.  Among other actions taken at the direction of the PRC government, Jin and others terminated at least four video meetings hosted on Company-1’s networks commemorating the thirty-first anniversary of the Tiananmen Square massacre, most of which were organized and attended by U.S.-based participants, such as dissidents who had participated in and survived the 1989 protests.  Some of the participants who were unable to attend these meetings were Company-1 customers in Queens and Long Island, New York who had purchased subscriptions to Company-1’s services, and therefore entered into service agreements with Company-1 governed by its Terms of Service (TOS). 

Jin, officials from the PRC government and others allegedly collaborated to identify meeting participants and to disrupt meetings hosted on Company-1’s U.S. servers, at times creating pretextual reasons to justify their actions to other employees and executives of Company-1, as well as Company-1’s users themselves.  In particular, in May and June 2020, Jin and others acted to disrupt meetings held on the Company-1 platform to discuss politically sensitive topics unacceptable to the PRC government by infiltrating the meetings to gather evidence about purported misconduct occurring in those meetings.  In fact, there was no misconduct; Jin and his co-conspirators fabricated evidence of TOS violations to provide justification for terminating the meetings, as well as certain participants’ accounts.  Jin then tasked a high-ranking employee of Company-1 in the United States to effect the termination of meetings and the suspension and cancellation of user accounts.

As detailed in the complaint, Jin’s co-conspirators created fake email accounts and Company-1 accounts in the names of others, including PRC political dissidents, to fabricate evidence that the hosts of and participants in the meetings to commemorate the Tiananmen Square massacre were supporting terrorist organizations, inciting violence or distributing child pornography.  The fabricated evidence falsely asserted that the meetings included discussions of child abuse or exploitation, terrorism, racism or incitements to violence, and sometimes included screenshots of the purported participants’ user profiles featuring, for example, a masked person holding a flag resembling that of the Islamic State terrorist group.  Jin used the complaints as evidence to persuade Company-1 executives based in the United States to terminate meetings and suspend or terminate the user accounts of the meeting hosts. 

PRC authorities took advantage of information provided by Jin to retaliate against and intimidate participants residing in the PRC, or PRC-based family members of meeting participants.  PRC authorities temporarily detained at least one person who planned to speak during a commemoration meeting.  In another case, PRC authorities visited family members of a participant in the meetings and directed them to tell the participant to cease speaking out against the PRC government and rather to support socialism and the CCP.

The charges in the complaint are allegations, and the defendant is presumed innocent unless and until proven guilty.  If convicted of both charged conspiracies, Jin faces a maximum sentence of ten years in prison. 

The investigation into this matter was conducted by the FBI’s Washington Field Office.  The government’s case is being handled by the Office’s National Security and Cybercrime Section.  Assistant U.S. Attorneys Alexander A. Solomon, Richard M. Tucker, David K. Kessler and Ian C. Richardson are in charge of the prosecution, with assistance from Trial Attorney Scott A. Claffee of the National Security Division’s Counterintelligence and Export Control Section.

December 18, 2020 in AML | Permalink | Comments (0)

Thursday, December 17, 2020

15 Named In $26 Million International Trade Fraud Scheme

A federal grand jury in Houston, Texas, has returned a criminal indictment against eight individuals, while a related civil complaint has charged 14 individuals and one company relating to international trade fraud violations stemming from a decade-long scheme involving tires from China. Download Stamped Indictment

Law enforcement arrested Zheng “Miranda” Zhou, 53, of Missouri City, and Kun “Bruce” Liu, 40, of Sugar Land, yesterday. They made their initial appearances in Houston federal court today, at which time the criminal indictment was unsealed. 

Also charged in the indictment are Qinghua “Shirley” Song, 44, of Jurupa Valley, California; and Chinese residents Yue “Joanna” Peng, 42, Li “Cathy” Chen, 38, Xin “Devin” Zhang, age unknown, Shaohui “Jasper” Jia, 40, and Deng “David” Yongqiang, 36. They are all considered fugitives and warrants remain outstanding for their arrests.

The Department of Justice’s Civil Division also filed a civil complaint Dec. 11 alleging trade fraud in the U.S. Court of International Trade. The complaint names the eight criminal defendants and six other individuals - Xiaozhen “Jenny” Zhang, 34, Di “Terry” Wang, 34, Liang “Leon” Yu, 49, Lin “Leo” Zhang, 37, Jinbing “David” Wang, 36, and Minglian “Bill” Li, 28, as well as Houston area company Winland International Inc., dba Super Tire Inc. David Wang is a resident of New Jersey, while the remaining civil defendants reside in China.

“The Civil Division, through the Department of Justice’s Trade Fraud Task Force (TFTF), will continue to partner with U.S. law enforcement agencies and U.S. Attorneys’ Offices to aggressively investigate and pursue individuals and companies who attempt to evade U.S. customs laws and target the U.S. manufacturing base with unfair trade practices,” said Acting Assistant Attorney General Jeffery Bossert Clark. “We recognize the importance of ensuring that U.S. manufacturers are competing on a level playing field.” 

“China and its industries want to rob, replicate and replace American made good and technology,” said U.S. Attorney Ryan K. Patrick for the Southern District of Texas. “Illegally importing and dumping these goods is one way to systemically weaken American competitors. Whether direct espionage by the Chinese government or trade fraud like in this case, we will continue to investigate and prosecute every case we can.”

The indictment and complaint allege the defendants conspired to avoid anti-dumping duties associated with off-the-road (OTR) and light vehicle and truck (LVT) tires from China. Working through and with Winland, individuals allegedly imported OTR and LVT tires from companies that were subject to anti-dumping duties associated with Chinese tire manufacturers who had engaged in unfair trade practices in the United States. 

The complaint further alleges U.S.-based defendants conspired with defendants in China to obtain falsified invoices and entry records of Chinese tire companies that were subject to a lower duty rate than the actual manufacturers of these tires. Defendants submitted these falsified records to U.S. Customs officials when importing tires into the United States, so that Winland could avoid paying the higher duty rates, according to the allegations. The indictment and complaint also allege they used these falsified records to understate the value of these tires, further lowering the amount Winland owed in duties.

The value of these tires allegedly exceeded $20.9 million and resulted in the deprivation to the United States of more than $6.5 million in import duties.

“For more than a decade, Zhou and her co-conspirators are alleged to have sought to gain an unfair competitive advantage at the expense of U.S. companies and consumers through a series of schemes in violation of fair trade practices and U.S. import regulations,” said Special Agent in Charge Mark B. Dawson of Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) - Houston. “Working closely with our U.S. and foreign law enforcement partners, and in coordination with the National Intellectual Property Rights Coordination Center, we were able to uncover these alleged deceptive practices leading to the criminal indictment and imposition of almost $21 million in civil penalties.”

“Customs and Border Protection (CBP) takes its trade mission of protecting the U.S. economy very seriously as we strive to maintain fair trade and preserve American jobs from predatory practices,” said CBP’s Director of Detroit Field Operations Christopher Perry. “These civil penalties and criminal indictments should serve as a warning to those who attempt to defraud our government and do harm to our economy and American businesses.”

The Houston Trade/Revenue Interdiction and Enforcement Team conducted the collaborative investigation along with CBP’s Automotive and Aerospace Center of Excellence and Expertise with the assistance of U.S. Citizenship and Immigration Services.

December 17, 2020 in AML | Permalink | Comments (0)

Monday, December 14, 2020

Former CEO and Founder of Technology Company Pleads Guilty to Investment Fraud Scheme

The former chief executive officer (CEO) and co-founder of Trustify, Inc. (Trustify), a privately-held technology company founded in 2015 and based in Arlington, Virginia, pleaded guilty today to his involvement in a fraud scheme resulting in millions of dollars of losses to investors.    

According to admissions made in connection with the plea agreement, beginning in 2015,  Boice fraudulently solicited investments in Trustify, a privately held technology start-up company that connected customers with private investigators.  Boice raised approximately $18.5 million from over 90 investors by, among other things, falsely overstating Trustify’s financial performance.  Despite representing to investors that their funds would go towards operating and growing Trustify’s business, Boice diverted at least $3.7 million for his own benefit and to fund his lifestyle.  This included the purchase of a home in Alexandria, Virginia, travel by private jet, and furnishing a seaside vacation home.         

December 14, 2020 in AML | Permalink | Comments (0)

Thursday, December 10, 2020

Maryland Lawyer Charged with Defrauding Financial Institutions and Other Entities to Obtain Control over $12.5 Million of Somali Sovereign Assets

A Maryland lawyer was charged in an 11-count indictment for his alleged role in a scheme to fraudulently obtain control of more than $12.5 million that was held by financial institutions on behalf of the Somali government, to improperly take part of those funds for fees and expenses, and to launder a portion of those funds to accounts for the benefit of his co-conspirators. Download Schulman Indictment

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Robert K. Hur of the District of Maryland, Special Agent in Charge Jennifer C. Boone of the FBI’s Baltimore Field Office, and Special Agent in Charge Kelly Jackson of the IRS-Criminal Investigation’s Washington D.C. Field Office made the announcement.

Jeremy Schulman, 47, of Bethesda, Maryland, was charged in an indictment filed in the District of Maryland with one count of conspiracy to commit mail fraud, wire fraud and bank fraud; three counts of wire fraud; one count of mail fraud; one count of bank fraud; one count of conspiracy to commit money laundering; and four counts of money laundering. 

The indictment alleges that from 2009 to 2014, Schulman conspired with others to fraudulently obtain control of financial assets held on behalf of the Somali government around the world and enrich himself and his co-conspirators by taking a portion of those assets in fees and expenses. 

To effectuate this scheme, Schulman and others allegedly created false documents regarding Schulman’s authority to recover assets on behalf of the Somali government.  Schulman presented these allegedly false documents to a federally insured bank and other institutions.  In addition to using forged and fraudulent documents, Schulman also allegedly made material misrepresentations and concealed material information from these banks and institutions regarding his authority to act on behalf of the Somali government. 

As a result of this scheme, Schulman, his co-conspirators, and the law firm where Schulman was a shareholder ultimately obtained control of approximately $12.5 million of frozen Somali funds.  Schulman caused his law firm to improperly retain more than $3.3 million of the Somali funds while remitting the rest to the Somali government.  Schulman received hundreds of thousands of dollars of additional compensation from his law firm based on the revenue from the scheme, and allegedly engaged in further fraud and money laundering to cause a portion of the funds retained by his law firm to be wired to accounts for the benefit of his co-conspirators.  

December 10, 2020 in AML | Permalink | Comments (0)

Tuesday, December 8, 2020

Vitol Inc. Agrees to Pay over $135 Million to Resolve Foreign Bribery Case

Vitol Inc. (Vitol), the U.S. affiliate of the Vitol group of companies, which together form one of the largest energy trading firms in the world, has agreed to pay a combined $135 million to resolve the Justice Department’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) and to resolve a parallel investigation in Brazil. 

The resolution arises out of Vitol schemes to pay bribes to officials in Brazil, Ecuador, and Mexico.  Vitol has also agreed to disgorge more than $12.7 million to the Commodity Futures Trading Commission (CFTC) in a related matter and to pay the CFTC a penalty of $16 million related to trading activity not covered by the deferred prosecution agreement with the department. 

“Over a period of 15 years, Vitol paid millions of dollars in bribes to numerous public officials – in three separate countries – to obtain improper competitive advantages that resulted in significant illicit profits for the company,” said Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division.  “Today’s coordinated resolution with Brazil, along with our first coordinated FCPA resolution with the CFTC, underscores the department’s resolve to hold companies accountable for their crimes while, at the same time, avoiding unnecessarily duplicative penalties.”

“Vitol paid bribes to government officials in Brazil, Ecuador and Mexico to win lucrative business contracts and obtain competitive advantages to which they were not fairly entitled,” said Acting U.S. Attorney Seth D. DuCharme of the Eastern District of New York.  “The United States Attorney’s Office for the Eastern District of New York will continue to hold accountable companies and individuals that attempt to defy U.S. law to the detriment of honest competitors.” 

“This resolution demonstrates the FBI's commitment to investigate foreign corruption and hold accountable those who circumvent laws for financial gain at the expense of American consumers,” said Assistant Director in Charge Kristi K. Johnson of the FBI’s Los Angeles Field Office. “We'll continue to work with our partners to root out corruption, whether it occurs domestically or abroad, to ensure trust on the international playing field.”

Vitol entered into a deferred prosecution agreement with the department in connection with a criminal information filed today in the Eastern District of New York charging the company with two counts of conspiracy to violate the anti-bribery provisions of the FCPA.  The case is assigned to Senior U.S. District Judge Eric N. Vitaliano. 

Pursuant to its agreement with the department, Vitol’s total criminal penalty is $135 million.  The department will credit $45 million – approximately one third of the total criminal penalty – against the amount that Vitol will pay to resolve an investigation by the Brazilian Ministério Público Federal for conduct related to the company’s bribery scheme in Brazil.   

As part of the deferred prosecution agreement, Vitol Inc. and Vitol S.A., another company within the Vitol group of companies, have agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals; to enhance their compliance programs; and to report to the department on the implementation of their compliance programs.

According to the company’s admissions and court documents, between 2005 and 2014, Vitol and its co-conspirators paid bribes of more than $8 million to at least four officials at Brazil’s state-owned and controlled oil company Petróleo Brasileiro S.A. – Petrobras (Petrobras).  Vitol paid these bribes in exchange for receiving confidential Petrobras pricing and competitor information.  Vitol concealed the scheme through the use of intermediaries and a fictitious company that facilitated the payments to offshore accounts and, ultimately, to the Petrobras officials.

Vitol also admitted that from 2011 to 2014, it bribed at least five other Petrobras officials in exchange for receiving confidential pricing information that Vitol used to win fuel oil contracts with Petrobras.  During that scheme, a consultant acting on behalf of Vitol engaged in back-channel negotiations with a Houston-based Petrobras official.  The parties would then hold staged negotiations, ultimately settling on the pre-arranged price that allowed for bribes to be paid from Vitol to the Petrobras officials.  Several of the co-conspirators communicated using alias email accounts and code names, including “Batman,” “Tiger,” “Phil Collins,” “Dolphin,” “Popeye,” and “Beb.” 

Vitol also admitted to a second conspiracy to bribe officials in Ecuador and Mexico in order to obtain and retain business in connection with the purchase and sale of oil products.  Between 2015 and July 2020, Vitol agreed to offer and pay more than $2 million in bribes to officials in Ecuador and Mexico.   

In furtherance of this bribery scheme, Vitol and its co-conspirators entered into sham consulting agreements, set up shell companies, created fake invoices for purported consulting services and used alias email accounts to transfer funds to offshore companies involved in the conspiracy – all while knowing that the funds, at least in part, would be used to pay bribes to Ecuadorian and Mexican officials.

In related matters, the department recently unsealed charges against a Houston-based former Petrobras official who received bribes in association with the scheme, and who pleaded guilty to one count of conspiracy to commit money laundering on Feb. 8, 2019, in the Eastern District of New York.  In addition, the department recently unsealed charges against one of the intermediaries involved in the Brazil scheme, who pleaded guilty on Sept. 22, 2017, to one count of conspiracy to violate the FCPA in connection with a related bribery scheme.  Both individuals are awaiting sentencing.  Further, on Sept. 22, 2020, a federal grand jury in the Eastern District of New York returned an indictment against Javier Aguilar, a Vitol trader, for his alleged role in the Ecuador scheme.

December 8, 2020 in AML | Permalink | Comments (0)

Tuesday, December 1, 2020

Venezuelan Business Executive Charged in Connection with International Bribery and Money Laundering Scheme

A dual Venezuelan-Italian citizen who controlled multiple companies via U.S. based bank accounts was charged in an indictment returned Tuesday for his role in laundering the proceeds of inflated contracts that were obtained by making bribe payments to officials at Venezuela’s state-owned and state-controlled energy company Petróleos de Venezuela S.A. (PDVSA). Download D'Amato Indictment

Acting Assistant Attorney General Brian C. Rabbitt of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Special Agent in Charge Anthony Salisbury of the U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Miami Field Office, and Acting Special Agent in Charge Tyler R. Hatcher of the IRS Criminal Investigation’s (IRS-CI) Miami Field Office made the announcement.

Natalino D’Amato, 61, of Venezuela, was charged in an 11-count indictment filed in the Southern District of Florida.  D’Amato was charged with one count of conspiracy to commit money laundering, four counts of international money laundering, three counts of promotional money laundering, and three counts of engaging in transactions involving criminally derived property.

The indictment alleges that, beginning in January 2013 and continuing through  December 2017, D’Amato conspired with others, including officials at joint ventures between PDVSA and various foreign companies in the oil-rich Orinoco belt of Venezuela, to launder the proceeds of an illegal bribery scheme to and from bank accounts located in South Florida.  These joint ventures were majority owned and controlled by PDVSA.  According to the indictment, D’Amato offered and paid bribes to numerous Venezuelan officials who worked at the PDVSA joint ventures in order to obtain highly inflated and lucrative contracts to provide goods and services to the PDVSA joint ventures.  The indictment further alleges that over the course of the conspiracy, companies controlled by D’Amato received approximately $160 million from the PDVSA joint ventures into accounts he controlled in South Florida.  According to the charges, D’Amato used a portion of those funds to make payments to or for the benefit of the Venezuelan officials.

The indictment also includes allegations seeking criminal forfeiture of bank accounts involved in the charged offenses, with funds totaling approximately $45 million.

December 1, 2020 in AML | Permalink | Comments (0)