International Financial Law Prof Blog

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

Saturday, February 27, 2021

Gross Domestic Product, Fourth Quarter and Year 2020

Real gross domestic product (GDP) increased at an annual rate of 4.1 percent in the fourth quarter of 2020 (table 1), according to the "second" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 4.0 percent. With the second estimate, upward revisions to residential fixed investment, private inventory investment, and state and local government spending were partly offset by a downward revision to personal consumption expenditures (PCE) (see Technical Note).

Real GDP: Percent change from preceding quarter

The increase in real GDP reflected increases in exports, nonresidential fixed investment, PCE, residential fixed investment, and private inventory investment that were partly offset by decreases in state and local government spending and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased (table 2).

COVID-19 Impact on the Fourth-Quarter 2020 GDP Estimate
The increase in fourth-quarter GDP reflected both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. The full economic effects of the COVID-19 pandemic cannot be quantified in the GDP estimate for the fourth quarter of 2020 because the impacts are generally embedded in source data and cannot be separately identified. For more information, see the Technical Note and Federal Recovery Programs and BEA Statistics.

The increase in exports primarily reflected an increase in goods (led by industrial supplies and materials). The increase in nonresidential fixed investment reflected increases in all components, led by equipment (mainly transportation equipment). The increase in PCE was more than accounted for by spending on services (led by health care); spending on goods decreased (led by food and beverages). The increase in residential fixed investment primarily reflected investment in new single-family housing. The increase in private inventory investment was more than accounted for by an increase in manufacturing that was partly offset by a decrease in retail trade.

Current dollar GDP increased 6.1 percent at an annual rate, or $317.6 billion, in the fourth quarter to a level of $21.49 trillion. In the third quarter, GDP increased 38.3 percent, or $1.65 trillion (table 1 and table 3). More information on the source data that underlie the estimates is available in the "Key Source Data and Assumptions" file on BEA’s website.

The price index for gross domestic purchases increased 1.8 percent in the fourth quarter, compared with an increase of 3.3 percent in the third quarter (table 4). The PCE price index increased 1.6 percent, compared with an increase of 3.7 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 3.4 percent.

Updates to GDP

In the second estimate for the fourth quarter, real GDP increased 0.1 percentage point more than in the advance estimate issued last month, primarily reflecting upward revisions to residential fixed investment, private inventory investment, and state and local government spending that were partly offset by a downward revision to PCE. For more information, see the Technical Note. For information on updates to GDP, see the "Additional Information" section that follows.

 
Advance Estimate Second Estimate
(Percent change from preceding quarter)
Real GDP 4.0 4.1
Current-dollar GDP 6.0 6.1
Gross domestic purchases price index 1.7 1.8
PCE price index 1.5 1.6
PCE price index excluding food and energy 1.4 1.4

Updates to Third-Quarter Wages and Salaries

In addition to presenting updated estimates for the fourth quarter, today's release presents revised estimates of third-quarter 2020 wages and salaries, personal taxes, and contributions for government social insurance, based on updated data from the Bureau of Labor Statistics Quarterly Census of Employment and Wages program. Wages and salaries are now estimated to have increased $434.5 billion in the third quarter, a downward revision of $66.5 billion. With the incorporation of these new data, real gross domestic income is now estimated to have increased 24.1 percent in the third quarter, a downward revision of 1.7 percentage points from the previously published estimate.

GDP for 2020

Real GDP decreased 3.5 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019 (table 1).

The decrease in real GDP in 2020 reflected decreases in PCE, exports, private inventory investment, nonresidential fixed investment, and state and local government that were partly offset by increases in federal government spending and residential fixed investment. Imports decreased (table 2).

The decrease in PCE in 2020 was more than accounted for by a decrease in services (led by food services and accommodations, health care, and recreation services). The decrease in exports reflected decreases in both services (led by travel) and goods (mainly non-automotive capital goods). The decrease in private inventory investment reflected widespread decreases led by retail trade (mainly motor vehicle dealers) and wholesale trade (mainly durable goods industries). The decrease in nonresidential fixed investment reflected decreases in structures (led by mining exploration, shafts, and wells) and equipment (led by transportation equipment) that were partly offset by an increase in intellectual property products (more than accounted for by software). The decrease in state and local government spending reflected a decrease in consumption expenditures (led by compensation).

The increase in federal government spending reflected an increase in nondefense consumption expenditures (led by an increase in purchases of intermediate services that supported the processing and administration of Paycheck Protection Program loan applications by banks on behalf of the federal government). The increase in residential fixed investment primarily reflected increases in improvements as well as brokers’ commissions and other ownership transfer costs.

Current-dollar GDP decreased 2.3 percent, or $498.3 billion, in 2020 to a level of $20.93 trillion, compared with an increase of 4.0 percent, or $821.3 billion, in 2019 (tables 1 and 3).

The price index for gross domestic purchases increased 1.2 percent in 2020, compared with an increase of 1.6 percent in 2019 (table 4). The PCE price index also increased 1.2 percent in 2020, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 1.7 percent.

Measured from the fourth quarter of 2019 to the fourth quarter of 2020, real GDP decreased 2.4 percent during the period (table 6). That compared with an increase of 2.3 percent during 2019.

The price index for gross domestic purchases, as measured from the fourth quarter of 2019 to the fourth quarter of 2020, increased 1.3 percent during 2020. That compared with an increase of 1.4 percent during 2019. The PCE price index increased 1.2 percent, compared with an increase of 1.5 percent. Excluding food and energy, the PCE price index increased 1.4 percent, compared with an increase of 1.6 percent.

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Next release, March 25, 2021 at 8:30 A.M. EDT

February 27, 2021 in Economics | Permalink | Comments (0)

Friday, February 26, 2021

Serbian Founder of Digital-Asset Companies Indicted in International Cryptocurrency Scheme

A Serbian man was charged in an indictment today for his alleged participation in a coordinated cryptocurrency scheme in which he solicited U.S. investors using two fraudulent online investment platforms. 

Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division, Acting U.S. Attorney Seth D. DuCharme of the Eastern District of New York, Assistant Director in Charge Kristi K. Johnson of the FBI’s Los Angeles Field Office, and Special Agent in Charge Ryan L. Korner of the IRS Criminal Investigation (IRS-CI) Los Angeles Field Office made the announcement.

Kristijan Krstic, 45, was charged in an indictment filed today in the Eastern District of New York with one count of conspiracy to commit securities fraud, one count of securities fraud, one count of conspiracy to commit wire fraud, and one count of conspiracy to commit money laundering.

According to the indictment, Krstic was the founder of two digital-asset investment platforms, “Start Options” and “B2G,” and also served as the chief financial officer of Start Options. As alleged, between approximately 2017 and 2018, Krstic and others fraudulently induced U.S.-based investors to purchase securities in the form of investment contracts in Start Options and B2G. In order to perpetuate the fraud, Krstic allegedly used the alias “Felix Logan” and created the Twitter handle “@felixlogan_cfo” to communicate with investors in Start Options and B2G.    

The indictment alleges that Start Options purported to be an online investment platform that provided cryptocurrency mining and digital-asset trading services, including trading in cryptocurrencies, commodities, stocks, and indices. Start Options also allegedly claimed that it was “the largest Bitcoin exchange in euro volume and liquidity” and that it was “consistently rated the best and most secure Bitcoin exchange by independent news media.” The indictment further alleges that B2G purported to be an “ecosystem” that would allow users to trade B2G tokens, as well as digital and fiat currencies, “on a secure, comprehensive platform.”

As alleged, Krstic and others represented that once investors opened a B2G account, a deposit of B2G “open[ed] a door to all the curtains inside Aladdin’s cave. Dollars buy B2G; B2G tokens can be exchanged back into dollars, or for Euros, or for other national fiat currencies. B2G holdings can be traded for original bitcoin or other altcoins.”

According to the indictment, however, both Start Options and B2G were fraudulent. In truth, the money sent by investors in Start Options and B2G allegedly was never invested and instead was laundered internationally to a Phillippines-based financial account and digital-currency wallet, and diverted to a U.S.-based promoter of the fraud. Subsequently, as alleged, the promoter transferred to Krstic approximately $7 million in investor funds from B2G and Start Options, and Krstic thereafter stopped responding to all communications and absconded with those investors’ funds. A press release issued by Start Options claimed that the company had been sold to Russian venture capitalists.

The former Director of North American Operations for Start Options and B2G, John DeMarr, 55, of Santa Ana, California, was previously charged for his role in the scheme.

February 26, 2021 in AML | Permalink | Comments (0)

Thursday, February 25, 2021

Ending the Shell Game: Cracking down on the Professionals who enable Tax and White Collar Crimes

White collar crimes like tax evasion, bribery, and corruption are often concealed through complex legal structures and financial transactions facilitated by lawyers, accountants, financial institutions and other "professional enablers" of such crimes. These crimes have significant impacts on government revenue, public confidence and economic growth, including the recovery from COVID-19. This report sets out a range of strategies and actions for countries to take to tackle professional intermediaries who enable tax evasion and other financial crimes on behalf of their criminal clients. The report highlights the damaging role played by these intermediaries and the importance of concerted domestic and international action in clamping down on the enablers of crime, and includes recommended counter-strategies for deterring, disrupting, investigating and prosecuting the professionals who enable tax and white collar crimes.

Find 2021 report here

2021 OECD GLOBAL ANTI-CORRUPTION & INTEGRITY FORUM

This report will be presented at the virtual OECD Global Anti-Corruption and Integrity Forum on 23-25 March 2021. You are invited to register to the event and join the session on "Professional Enablers of Tax Crime" taking place on 24 March 2021 at 16:45 (CET). This session will highlight the damaging role played by intermediaries who enable financial crimes on behalf of their criminal clients, and the importance of concerted domestic and international action in clamping down on the enablers of crime.

February 25, 2021 in AML, OECD | Permalink | Comments (0)

Wednesday, February 24, 2021

Harmful Tax Practices: Peer Review Transparency Framework

This document sets out the new terms of reference, methodology and questionnaires for conducting the annual review of jurisdictions’ compliance with the BEPS Action 5 transparency framework for the 2021-2025 period.

Preferential tax regimes

In January 2019, the OECD released Harmful Tax Practices - 2018 Progress Report on Preferential Regimes, approved by the OECD/G20 Inclusive Framework on BEPS. The Progress Report includes the results of the review of preferential tax regimes, which has been undertaken by the Forum on Harmful Tax Practices (FHTP) since the start of the BEPS Project in accordance with the BEPS Action 5 minimum standard. It reflects results as at January 2019. While the consolidated regime results are now contained in the 2018 Progress Report, the 2017 Progress Report includes important guidance on the standards applicable to substantial activities requirements for non-IP regimes, the timelines for amending or abolishing regimes and the monitoring of certain regimes in practice.

The 2018 Progress Report also includes three annexes:

  1. Output of BEPS Action 5 mandate for considering revisions or additions to FHTP framework;
  2. Monitoring data on grandfathered non-IP regimes; and
  3. Key reference documents.

In November 2020, the Inclusive Framework released updated conclusions on the review of preferential regimes.

Transparency framework

On 1 February 2017, the OECD released the Terms of Reference and Methodology for peer reviews on the Action 5 standard for the exchange of information on tax rulings (the "transparency framework"), approved by the Inclusive Framework on BEPS. The peer review and monitoring process will be conducted by the Forum on Harmful Tax Practices (FHTP) in accordance with the Terms of Reference and Methodology, with all members participating on an equal footing.

The Terms of Reference are broken down into four aspects, which capture the key elements of the transparency framework:

  1. Information gathering process;
  2. Exchange of information;
  3. Confidentiality of information received;
  4. Statistics.

The methodology sets out the procedural mechanisms by which jurisdictions will complete the peer review, including the process for collecting the relevant data, the preparation and approval of reports, the outputs of the review and the follow up process. The methodology contemplates collecting the data points relevant to the peer review by using standardised questionnaires, sent to the reviewed jurisdiction as well as the peers (i.e. the other members of the Inclusive Framework on BEPS). 

Peer Review Reports on the Exchange of Information on Tax Rulings

  • 2019 Peer Review Reports - This report reflects the outcome of the fourth annual peer review of the implementation of the Action 5 minimum standard and covers 124 jurisdictions. It assesses implementation for the 1 January - 31 December 2019 period.
  • 2018 Peer Review Reports - This report reflects the outcome of the third annual peer review of the implementation of the Action 5 minimum standard and covers 112 jurisdictions. It assesses implementation for the 1 January 2018 – 31 December 2018 period.
  • 2017 Peer Review Reports - This report reflects the outcome of the second annual peer review of the implementation of the Action 5 minimum standard and covers 92 jurisdictions. It assesses implementation for the 1 January 2017 – 31 December 2017 period.
  • 2016 Peer Review Reports - The first annual report on compliance with the transparency framework covers the jurisdictions which participated in the BEPS Project prior to the creation of the Inclusive Framework. It assesses implementation for the 1 January 2016 – 31 December 2016 period.

Schema for the exchange on tax rulings

The Exchange on Tax Rulings XML Schema and User Guide standardised electronic format for the exchange on tax rulings between jurisdictions.

A dedicated XML Schema and User Guide have also been developed to provide structured feedback on received exchange of tax rulings (ETR) information. The ETR Status Message XML Schema will allow tax administrations to provide structured feedback to the sender on frequent errors encountered, with a view to improving overall data quality and receiving corrected information, where necessary.

The current version of the ETR XML Schema and User Guide, as well as the related Status Message Schema and User Guide, is applicable for all exchanges until 31 March 2020, whereas the second, new version will be in use as from 1 April 2020. 

Global standard on substantial activities in no or only nominal tax jurisdictions

The Inclusive Framework on BEPS has decided to resume the application of the substantial activities requirement for no or only nominal tax jurisdictions. Originally a criteria set out in the harmful tax framework from 1998, it had not been applied to date. However, with the elevation of the substantial activities requirements in preferential regimes, and the broad-based membership of the Inclusive Framework working together on an equal footing, it was considered the right time to ensure that equivalent substance requirements apply in no or only nominal tax jurisdictions. This global standard means that mobile business income cannot be parked in a zero tax jurisdiction without the core business functions having been undertaken by the same business entity, or in the same location. In doing so, the Inclusive Framework will ensure that substantial activities must be performed in respect of the same types of mobile business activities, regardless of whether they take place in a preferential regime or in a no or only nominal tax jurisdiction.

In July 2019, the Inclusive Framework released the results of the review of no or only nominal tax jurisdictions.

In October 2019, the Inclusive Framework released guidance on the framework for the spontaneous exchange of information collected by no or only nominal tax jurisdictions pursuant to the standard. The guidance addresses the practical modalities regarding the exchange of information requirements of the standard, including the exchange timelines, the international legal framework and clarifications on the key definitions. The guidance also contains the standardises IT-format to be used for the exchanges, the NTJ XML Schema.

February 24, 2021 in BEPS, OECD | Permalink | Comments (0)

Tuesday, February 23, 2021

OECD releases the final batch of the stage 1 peer review reports for BEPS Action 14 on dispute resolution mechanisms

The stage 1 peer review assessments for ArubaBahrainBarbadosGibraltarGreenlandKazakhstanOmanQatarSaint Kitts and NevisThailandTrinidad and TobagoUnited Arab Emirates and Viet Nam evaluate the efforts made by each jurisdiction to implement the Action 14 minimum standard of the OECD/G20 BEPS Project, which aims to improve the resolution of tax-related disputes between jurisdictions.

The reports published today contain almost 340 targeted recommendations that will be followed up in stage 2 of the peer review process. The peer review reports incorporate MAP statistics from 2016 to 2019.

These stage 1 peer review reports continue to represent an important step forward to turn the political commitments made by members of the OECD/G20 Inclusive Framework on BEPS into measureable, tangible progress. Many countries are already working to address deficiencies identified in their respective reports.

The OECD has now published stage 1 peer review reports for all batches and stage 2 peer review reports for batches 1-3. The OECD will continue to publish stage 2 peer review reports in batches in accordance with the Action 14 peer review assessment schedule. In total, 82 stage 1 peer reviews and 37 stage 1 and stage 2 peer reviews have been finalised, with the fourth batch of stage 2 report to be released in a few months.

February 23, 2021 in BEPS | Permalink | Comments (0)

Monday, February 22, 2021

63 countries and jurisdictions ratify Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting

Croatia and Malaysia 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 over 1700 bilateral tax treaties, thus underlining their strong commitment to prevent the abuse of tax treaties and base erosion and profit shifting (BEPS) by multinational enterprises. For Croatia and Malaysia, the MLI will enter into force on 1 June 2021.

With 95 jurisdictions currently covered by the MLI, the ratifications today by Croatia and Malaysia now bring to 63 the number of jurisdictions which have ratified, accepted or approved it. The Multilateral Convention became effective on 1 January 2021 for approximately 650 treaties concluded among the 63 jurisdictions, with an additional 1200 treaties to become effectively modified once the MLI will have been ratified by all Signatories.

The text of the Multilateral Convention, the explanatory statement, background information, database, and positions of each signatory are available at http://oe.cd/mli.

February 22, 2021 in BEPS, OECD | Permalink | Comments (0)

Sunday, February 21, 2021

Updated guidance on tax treaties and the impact of the COVID-19 pandemic

This note revisits the guidance issued by the OECD Secretariat in April 2020 on the impact of the COVID-19 pandemic on tax treaties.

Unprecedented measures imposed or recommended by governments, including travel restrictions and curtailment of business operations (broadly referred to in this guidance as public health measures), have been in effect in most jurisdictions in various forms and stages during most of 2020 due to the COVID-19 pandemic and this situation is expected to continue in 2021. This guidance is intended to provide more certainty to taxpayers during this exceptional period.

This guidance represents the Secretariat’s views on the interpretation of the provisions of tax treaties (i.e. each jurisdiction may adopt its own guidance to provide tax certainty to taxpayers). But it reflects the general approach of jurisdictions and illustrates how some jurisdictions have addressed the impact of COVID-19 on the tax situations of individuals and employers.

The guidance is relevant only to circumstances arising during the COVID-19 pandemic when public health measures are in effect. It seeks to avoid instances of double taxation but cannot be relied on to create instances of double non-taxation. Much of the analysis covers circumstances where factual determinations by tax administrations are required and the guidance does not purport to replace the judgement of tax administrations in those cases.

  • Concerns related to the creation of permanent establishments
  • Concerns related to change of residence
  • Concerns related to income from employment

February 21, 2021 in OECD | Permalink | Comments (0)

Saturday, February 20, 2021

Uganda commits to start automatic exchange of financial account information by 2023

Uganda has committed to implement the international Standard for Automatic Exchange of Financial Account Information in Tax Matters (AEOI) by 2023. The commitment made by the Minister of Finance, Planning and Economic Development, the honorable Matia Kasaija, makes Uganda the 116th Global Forum member to commit to start AEOI by a specific date.

Maria José Garde, Chair of the Global Forum, said “I am delighted to welcome Uganda’s commitment to the AEOI Standard. As for the 115 other committed jurisdictions, the Global Forum will monitor Uganda’s progress in delivering its commitment to start exchanging automatically by September 2023 and updates will be provided to our members and the G20. The Global Forum Secretariat will assist Uganda in implementing the Standard and in addressing any challenges that may arise”.

This powerful new tool will help generate additional taxable revenues for Uganda, by allowing it to identify cases of tax evasion, and will certainly increase tax compliance.

The Global Forum is the leading multilateral body mandated to ensure that jurisdictions around the world adhere to and effectively implement both the standard of transparency and exchange of information on request and the standard of automatic exchange of financial account information. These objectives are achieved through a robust monitoring and peer review process. The Global Forum also runs an extensive capacity-building programme to support its members in implementing the standards and help tax authorities make the best use of cross-border information sharing channels.

Background information:

February 20, 2021 in GATCA, OECD | Permalink | Comments (0)

Friday, February 19, 2021

Political Donor to Presidential Campaign Sentenced to 12 Years in Prison for Campaign Crimes as Agent of Foreign Government

A venture capitalist and political fundraiser was sentenced today to 144 months in federal prison for falsifying records to conceal his work as a foreign agent while lobbying high-level U.S. government officials, evading the payment of millions of dollars in taxes, making illegal campaign contributions, and obstructing a federal investigation into the source of donations to a presidential inauguration committee.

Imaad Shah Zuberi, 50, of Arcadia, California, was sentenced by U.S. District Judge Virginia A. Phillips, who also ordered him to pay $15,705,080 in restitution and a criminal fine of $1.75 million.

In November 2019, Zuberi pleaded guilty to a three-count information charging him with violating the Foreign Agents Registration Act (FARA) by making false statements on a FARA filing, tax evasion, and making illegal campaign contributions. In June 2020, Zuberi pleaded guilty in a separate case to one count of obstruction of justice. His sentence today pertains to both cases.

“Zuberi turned acting as an unregistered foreign agent into a business enterprise,” said Assistant Attorney General for National Security John C. Demers. “He used foreign money to fund illegal campaign contributions that bought him political influence, and used that influence to lobby U.S. officials for policy changes on behalf of numerous foreign principals. He not only concealed his lucrative agreements with those foreign principals, but also made false statements about them in a FARA filing. After learning he was under investigation, Zuberi doubled down on his criminal conduct, obstructing justice by creating false records, destroying evidence, and attempting to purchase witnesses’ silence. This sentence should deter others who would seek to corrupt our political processes and compromise our institutions in exchange for foreign cash.”

“Mr. Zuberi flouted federal laws that restrict foreign influences upon our government and prohibit injecting foreign money into our political campaigns. He enriched himself by defrauding his clients and evading the payment of taxes,” said Acting U.S. Attorney Tracy L. Wilkison for the Central District of California. “Today’s sentence, which also accounts for Mr. Zuberi’s attempt to obstruct an investigation into his felonious conduct, underscores the importance of our ongoing efforts to maintain transparency in U.S. elections and policy-making processes.”

"As Mr. Zuberi’s greed and wealth increased, his elaborate influence-peddling scheme collapsed,” said Assistant Director in Charge Kristi K. Johnson of the FBI's Los Angeles Field Office. “By lending a veneer of credibility through name dropping and flashing photos with high-level government officials, Zuberi was able to con foreign donors. Now that he’s been sentenced, he will be held accountable by the United States government which he so recklessly misrepresented.”

“Through myriad international contacts and business partners, Imaad Shah Zuberi was able to raise money and gain influence among the U.S.’s highest political circles. Zuberi used his status to solicit funds for lobbying, campaign contributions, and investments, but ultimately swindled his business partners and pocketed most of the funds for himself,” said Special Agent in Charge Ryan Korner of IRS-Criminal Investigation Los Angeles Field Office. “An opportunist at his core, Zuberi worked with political figures across the aisle, depending on who was in power, to lend an appearance of credibility to his political charades. At the end of the day, IRS Criminal Investigation worked closely with our partner federal agencies to ensure Zuberi’s criminal behavior would not pay off, and that he was held accountable for paying himself rather than using the funds he solicited for their original intended purpose.”

Zuberi operated Avenue Ventures LLC, a San Francisco-based venture capital firm, and solicited foreign nationals and representatives of foreign governments with claims he could use his contacts in Washington, D.C., to change U.S. foreign policy and create business opportunities for his clients and himself.

Clients gave Zuberi money for consulting fees, to make investments, or to fund campaign contributions. As part of his efforts to influence public policy, Zuberi hired lobbyists, retained public relations professionals, and made campaign contributions that gave him access to high-level U.S. officials, some of whom acted in support of his clients. As evidence of his access and influence, Zuberi distributed to his clients photographs of himself discussing policy with elected officials.

While Zuberi had a limited degree of success with some U.S. officials, most of his business efforts failed and his clients suffered significant financial losses. Many of the lobbyists, public relations consultants, and other subcontractors also suffered losses when Zuberi refused to pay them. Meanwhile, Zuberi became wealthy, largely through his theft of client funds and unlawful lobbying on behalf of foreign interests.

For example, Zuberi made efforts to convince the government of Bahrain to lift sanctions on a Bahraini citizen in order to allow the citizen to develop a large resort in that country. The scheme falsely created the appearance that Avenue Ventures had made a major investment in the resort project. Citing this purported investment, Zuberi lobbied members of Congress to apply political pressure on Bahrain to cease its interference in the project, claiming that it was adversely affecting him as a U.S. investor. At Zuberi’s urging, at least a dozen members of Congress sent letters to the government of Bahrain requesting that it stop interfering with the project. In fact, however, Zuberi designed these efforts to benefit the Bahraini citizen, who paid Zuberi consulting fees. Zuberi violated FARA by failing to register as an agent of the Bahraini citizen in connection with this scheme.

Zuberi also siphoned money invested in U.S. Cares, a company set up to export humanitarian aid to Iran. In 2013 and 2014, investors deposited approximately $7 million into U.S. Cares, but Zuberi used more than 90 percent of investor funds for his personal benefit, which included purchasing real estate, paying down debt such as mortgages and credit card bills, remodeling properties, investing in brokerage accounts, and donating $250,000 to a non-profit organization established by a former high-ranking elected official.

In addition, the government of Sri Lanka hired Zuberi in 2014 to rehabilitate the country’s image in the United States, which had suffered because of allegations that its minority Tamil population had been persecuted. Zuberi promised to make substantial expenditures on lobbying efforts, legal expenses, and media buys, which prompted Sri Lanka to agree to pay Zuberi a total of $8.5 million over the course of six months in 2014. Days after Sri Lanka made an initial payment of $3.5 million, Zuberi transferred $1.6 million into his personal brokerage accounts and used another $1.5 million to purchase real estate.

In total, Sri Lanka wired $6.5 million pursuant to the contract, and Zuberi used more than $5.65 million of that money to the benefit of himself and his wife. Zuberi paid less than $850,000 to lobbyists, public relations firms and law firms, and refused to pay certain subcontractors based on false claims that Sri Lanka had not provided sufficient funds to pay invoices.

Relatedly, Zuberi failed to report on his 2014 tax return millions of dollars in income he received from the Sri Lankan government. While his 2014 federal income tax return claimed income of $558,233, Zuberi failed to report more than $5.65 million he received in relation to the Sri Lanka lobbying effort. Zuberi’s tax evasion over the course of four years – 2012 through 2015 – caused tax losses ranging from $3.5 million to as much as $9.5 million.

Zuberi also violated the Federal Election Campaign Act in 2015 by making conduit contributions in the names of other people, reimbursing contributions made by others, and being reimbursed for contributions he made. Over a five-year period – 2012 through 2016 – he made or solicited more than $250,000 in illegal campaign contributions.        

The obstruction charge to which Zuberi pleaded guilty in June 2020 stemmed from a federal investigation into a $900,000 donation from Zuberi through his company to a presidential inaugural committee in late 2016. Some of the funds Zuberi donated to the committee came from other people, including one individual who gave him a $50,000 check.

After media reports that a federal grand jury in the Southern District of New York was investigating donations to the presidential inaugural committee, Zuberi met with the individual at a California restaurant on Feb. 25, 2019. During that meeting, the individual asked Zuberi to refund the $50,000, which Zuberi did, but backdated the check to Feb. 1, 2019, to make it appear the refund was sent before he learned of the federal investigation.

This matter was investigated by the FBI and IRS-Criminal Investigation.

February 19, 2021 in AML | Permalink | Comments (0)

Tuesday, February 16, 2021

Former Florida Resident Indicted for Tax Evasion and Failing to Report Foreign Bank Accounts

A federal grand jury returned an indictment today charging Lucia Andrea Gatta, a former resident of Palm Beach County, Florida, with tax evasion and failing to file Reports of Foreign Bank and Financial Accounts (FBARs), among other offenses, announced Acting Deputy Assistant Attorney General Stuart M. Goldberg of the Justice Department’s Tax Division and U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida.

According to the indictment, Gatta was born in Chile and became a naturalized U.S. Citizen in 2012. The indictment alleges that, for calendar years 2012 through 2014, Gatta failed to disclose her interest in a Swiss bank account on annual FBARs as required by law. Gatta also allegedly evaded assessment of income taxes on the interest and dividend income she earned in her Swiss bank account and failed to file tax returns with the IRS for tax years 2011 through 2014.

The indictment also charges Gatta with naturalization fraud. According to the indictment, Gatta did not disclose to the Department of Homeland Security’s U.S. Citizenship and Immigration Services (USCIS) that she had failed to report foreign dividend and interest income during her citizenship application process, and she allegedly presented misleading documents to USCIS to substantiate the false statements she made during her naturalization interview.

If convicted, Gatta faces a maximum sentence of five years in prison for each count relating to her failure to file an FBAR and tax evasion. She also faces a maximum sentence of one year in prison for each of the counts concerning the failure to file tax returns. If convicted of naturalization fraud, Gatta faces a maximum sentence of ten years in prison and automatic denaturalization.

February 16, 2021 in AML, GATCA | Permalink | Comments (0)

Monday, February 15, 2021

Man Purchased Lamborghini After Receiving $3.9 Million in PPP Loans

A Florida man pleaded guilty today for fraudulently obtaining approximately $3.9 million in Paycheck Protection Program (PPP) loans and using those funds, in part, to purchase a $318,000 Lamborghini sports car for himself.

Authorities seized the Lamborghini and $3.4 million from the bank accounts of David T. Hines, 29, of Miami, at the time of his arrest. Hines pleaded guilty today to one count of wire fraud and is scheduled to be sentenced on April 14.

Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, Special Agent in Charge Kyle A. Myles of the Federal Deposit Insurance Corporation Office of Inspector General (FDIC-OIG), Office of Investigation’s Atlanta Regional Office, Inspector in Charge Antonio Gomez of the U.S. Postal Inspection Service’s Miami Division, Special Agent in Charge Amaleka McCall-Brathwaite of the U.S. Small Business Administration (SBA) OIG, Investigations Division, Eastern Regional Office, Acting Special Agent in Charge Tyler R. Hatcher of the IRS Criminal Investigation (CI) Miami Office, and Acting Special Agent in Charge Stephen Donnelly of the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection OIG, Eastern Region, made the announcement.  

As part of his guilty plea, Hines admitted that he fraudulently sought millions of dollars in PPP loans through applications to an insured financial institution on behalf of different companies. Hines caused to be submitted fraudulent loan applications that made numerous false and misleading statements about the companies’ respective payroll expenses. The financial institution approved and funded approximately $3.9 million in PPP loans.

Hines further admitted that within days of receiving the PPP funds, he used the funds to purchase a 2020 Lamborghini Huracan sports car for approximately $318,000. Plea documents indicate that in the days and weeks following the disbursement of PPP funds, Hines did not make payroll payments that he claimed on his loan applications. He did, however, use the PPP proceeds for personal expenses.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding, and in December 2020, Congress authorized another $284 billion in additional funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1%. Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.

This case was investigated by the FDIC-OIG, U.S. Postal Inspection Service, IRS-CI, the SBA-OIG, and the Board of Governors of the Federal Reserve System and the Bureau of Consumer Financial Protection OIG. Trial Attorney Emily Scruggs of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Michael Berger of the Southern District of Florida are prosecuting the case.

The Fraud Section leads the Department’s prosecution of fraud schemes that exploit the PPP. In the months since the CARES Act passed, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section has also seized more than $60 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds. More information can be found at:  https://www.justice.gov/criminal-fraud/ppp-fraud.

February 15, 2021 in AML | Permalink | Comments (0)

UAE: 11 UAE banks fined Dh45 million for breaking anti-money laundering rules

The UAE Central Bank has imposed financial sanctions of over Dh45.75 million on 11 banks for violating anti-money laundering (AML) regulations. Read the full story here on Ethixbase.

February 15, 2021 in AML | Permalink | Comments (0)

Sunday, February 14, 2021

China: Former Top Banker Executed for Taking $277 Million in Bribes

China on Friday morning executed Lai Xiaomin, a former chairman of one of the country’s four largest state-owned bad-debt managers, according to a news agency under the country’s top court. read the full story here on Ethixbase

February 14, 2021 in AML | Permalink | Comments (0)

Saturday, February 13, 2021

U.S. International Trade in Goods and Services, December 2020

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $66.6 billion in December, down $2.4 billion from $69.0 billion in November, revised.

U.S. International Trade in Goods and Services Deficit
Deficit:

$66.6 Billion

-3.5%°

Exports:

$190.0 Billion

+3.4%°

Imports:

$256.6 Billion

+1.5%°

Next release: March 5, 2021

(°) Statistical significance is not applicable or not measurable. Data adjusted for seasonality but not price changes

Source: U.S. Census Bureau, U.S. Bureau of Economic Analysis; U.S. International Trade in Goods and Services, February 5, 2021

Goods and Services Trade Deficit: Seasonally adjusted
Coronavirus (COVID-19) Impact on International Trade in Goods and Services

Exports and imports in December 2020 reflect both the ongoing impact of the COVID-19 pandemic and the continued economic recovery from the sharp declines earlier in the year. The full economic effects of the pandemic cannot be quantified in the trade statistics because the impacts are generally embedded in source data and cannot be separately identified. The Census Bureau and the Bureau of Economic Analysis continue to monitor data quality and have determined estimates in this release meet publication standards. For more information, see the frequently asked questions on goods from the Census Bureau and on services from BEA.

Exports, Imports, and Balance (exhibit 1)

December exports were $190.0 billion, $6.2 billion more than November exports. December imports were $256.6 billion, $3.8 billion more than November imports.

The December decrease in the goods and services deficit reflected a decrease in the goods deficit of $2.8 billion to $84.2 billion and a decrease in the services surplus of $0.4 billion to $17.5 billion.

For 2020, the goods and services deficit increased $101.9 billion, or 17.7 percent, from 2019. Exports decreased $396.4 billion or 15.7 percent. Imports decreased $294.5 billion or 9.5 percent.

Three-Month Moving Averages (exhibit 2)

The average goods and services deficit increased $1.3 billion to $66.5 billion for the three months ending in December.

  • Average exports increased $4.0 billion to $185.2 billion in December.
  • Average imports increased $5.3 billion to $251.6 billion in December.

Year-over-year, the average goods and services deficit increased $23.2 billion from the three months ending in December 2019.

  • Average exports decreased $25.7 billion from December 2019.
  • Average imports decreased $2.5 billion from December 2019.

Exports (exhibits 3, 6, and 7)

Exports of goods increased $6.0 billion to $133.5 billion in December.

  Exports of goods on a Census basis increased $5.9 billion.

  • Industrial supplies and materials increased $1.8 billion.
    • Crude oil increased $1.3 billion.
  • Foods, feeds, and beverages increased $1.4 billion.
    • Soybeans increased $1.0 billion.
  • Capital goods increased $1.1 billion.
  • Automotive vehicles, parts, and engines increased $0.9 billion.

  Net balance of payments adjustments increased $0.1 billion.

Exports of services increased $0.3 billion to $56.5 billion in December.

  • Travel increased $0.2 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods increased $3.1 billion to $217.7 billion in December.

  Imports of goods on a Census basis increased $3.0 billion.

  • Industrial supplies and materials increased $2.7 billion.
    • Finished metal shapes increased $1.2 billion.
    • Other petroleum products increased $0.4 billion.
    • Crude oil increased $0.4 billion.
  • Automotive vehicles, parts, and engines increased $2.0 billion.
    • Passenger cars increased $1.6 billion.
  • Consumer goods decreased $1.9 billion.
    • Cell phones and other household goods decreased $1.5 billion.
    • Pharmaceutical preparations decreased $1.1 billion.

  Net balance of payments adjustments increased $0.2 billion.

Imports of services increased $0.7 billion to $38.9 billion in December.

  • Travel increased $0.5 billion.
  • Transport increased $0.2 billion.

Real Goods in 2012 Dollars – Census Basis (exhibit 11)

The real goods deficit decreased $2.4 billion to $94.8 billion in December.

  • Real exports of goods increased $4.0 billion to $148.4 billion.
  • Real imports of goods increased $1.6 billion to $243.2 billion.

Revisions

In addition to revisions to source data for the November statistics, the seasonally adjusted goods data were revised for January through November so that the totals of the seasonally adjusted months equal the annual totals.

Revisions to November exports

  • Exports of goods were revised down $0.2 billion.
  • Exports of services were revised down $0.2 billion.

Revisions to November imports

  • Imports of goods were revised up $0.5 billion.
  • Imports of services were revised down less than $0.1 billion.

Goods by Selected Countries and Areas: Monthly – Census Basis (exhibit 19)

The December figures show surpluses, in billions of dollars, with South and Central America ($3.9), Hong Kong ($2.1), OPEC ($1.9), Brazil ($0.8), Saudi Arabia ($0.6), and United Kingdom ($0.2). Deficits were recorded, in billions of dollars, with China ($28.1), European Union ($19.2), Mexico ($10.3), Germany ($5.8), Japan ($5.5), Taiwan ($3.2), Italy ($3.2), India ($2.8), South Korea ($2.7), France ($1.6), Canada ($1.1), and Singapore ($0.9).

  • The deficit with China decreased $2.3 billion to $28.1 billion in December. Exports increased $0.8 billion to $13.5 billion and imports decreased $1.5 billion to $41.7 billion.
  • The deficit with Japan decreased $1.1 billion to $5.5 billion in December. Exports increased $0.3 billion to $5.5 billion and imports decreased $0.8 billion to $11.0 billion.
  • The deficit with the European Union increased $2.5 billion to $19.2 billion in December. Exports decreased $0.7 billion to $19.7 billion and imports increased $1.7 billion to $38.9 billion.

Annual Summary for 2020

Exports, Imports, and Balance (exhibit 1)

For 2020, the goods and services deficit was $678.7 billion, up $101.9 billion from $576.9 billion in 2019. Exports were $2,131.9 billion, down $396.4 billion from 2019. Imports were $2,810.6 billion, down $294.5 billion from 2019.

U.S. International Trade in Goods and Services, Annual 2020

The 2020 increase in the goods and services deficit reflected an increase in the goods deficit of $51.5 billion, or 6.0 percent, to $915.8 billion and a decrease in the services surplus of $50.4 billion, or 17.5 percent, to $237.1 billion.

As a percentage of U.S. gross domestic product, the goods and services deficit was 3.2 percent in 2020, up from 2.7 percent in 2019.

Exports (exhibits 3, 6, and 7)

Exports of goods decreased $217.7 billion to $1,434.8 billion in 2020.

  Exports of goods on a Census basis decreased $211.5 billion.

  • Capital goods decreased $87.5 billion.
    • Civilian aircraft decreased $27.4 billion.
    • Civilian aircraft engines decreased $18.4 billion.
  • Industrial supplies and materials decreased $59.2 billion.
    • Other petroleum products decreased $15.5 billion.
    • Crude oil decreased $14.8 billion.
    • Fuel oil decreased $13.3 billion.
  • Automotive vehicles, parts, and engines decreased $35.3 billion.
    • Automotive parts and accessories decreased $13.3 billion.
    • Passenger cars decreased $10.5 billion.
  • Consumer goods decreased $30.8 billion.
    • Gem diamonds decreased $8.5 billion.
    • Artwork, antiques, and other collectibles decreased $4.5 billion.
    • Jewelry decreased $4.4 billion.

  Net balance of payments adjustments decreased $6.1 billion.

Exports of services decreased $178.7 billion to $697.1 billion in 2020.

  • Travel decreased $117.2 billion.
  • Transport decreased $34.7 billion.

Imports (exhibits 4, 6, and 8)

Imports of goods decreased $166.2 billion to $2,350.6 billion in 2020.

  Imports of goods on a Census basis decreased $161.0 billion.

  • Automotive vehicles, parts, and engines decreased $65.2 billion.
    • Passenger cars decreased $33.4 billion.
    • Automotive parts and accessories decreased $15.3 billion.
    • Trucks, buses, and special purpose vehicles decreased $10.8 billion.
  • Industrial supplies and materials decreased $42.3 billion.
    • Crude oil decreased $50.2 billion.
    • Other petroleum products decreased $16.5 billion.
    • Nonmonetary gold increased $25.1 billion.
    • Finished metal shapes increased $23.7 billion.
  • Capital goods decreased $31.2 billion.
    • Civilian aircraft engines decreased $11.1 billion.
    • Other industrial machinery decreased $6.7 billion.
    • Civilian aircraft parts decreased $6.7 billion.
    • Computers increased $11.5 billion.

  Net balance of payments adjustments decreased $5.3 billion.

Imports of services decreased $128.3 billion to $460.1 billion in 2020.

  • Travel decreased $95.3 billion.
  • Transport decreased $35.9 billion.

Goods by Selected Countries and Areas – Census Basis (exhibits 14 and 14a)

The 2020 figures show surpluses, in billions of dollars, with South and Central America ($39.8), Netherlands ($18.1), Hong Kong ($16.1), OPEC ($15.7), Brazil ($11.7), Australia ($9.1), United Kingdom ($8.8), and Belgium ($6.7). Deficits were recorded, in billions of dollars, with China ($310.8), European Union ($183.4), Mexico ($112.7), Germany ($57.3), Switzerland ($56.7), Ireland ($55.9), Japan ($55.4), Malaysia ($31.7), Taiwan ($29.9), Italy ($29.5), Thailand ($26.4), South Korea ($24.8), India ($23.8), France ($15.6), Canada ($15.0), Indonesia ($12.8), and Russia ($12.0).

  • The deficit with Switzerland increased $30.0 billion to $56.7 billion in 2020. Exports increased $0.1 billion to $18.0 billion and imports increased $30.1 billion to $74.8 billion.
  • The surplus with South and Central America decreased $13.0 billion to $39.8 billion in 2020. Exports decreased $31.2 billion to $130.5 billion and imports decreased $18.2 billion to $90.7 billion.
  • The deficit with China decreased $34.4 billion to $310.8 billion in 2020. Exports increased $18.2 billion to $124.6 billion and imports decreased $16.2 billion to $435.4 billion.

February 13, 2021 in Economics | Permalink | Comments (0)

Friday, February 12, 2021

What drives people and businesses to pay taxes?

Unlocking what drives tax morale – the intrinsic willingness to pay tax – can greatly assist governments in the design of tax policies and their administration, particularly in developing countries where compliance rates are low. However, voluntary compliance is not only determined by tax rates or the threat of penalties, but also by a wide range of socio-economic factors – such as age, gender, education levels – and institutional factors – such as perception of the tax administration and complexity of the tax system – all of which vary across regions and populations. While much remains to be done to build a sustainable taxpaying culture, a greater focus on tax morale can provide a route to increased voluntary compliance, for a tax system that is fair and equitable for all taxpayers around the globe. More information on our work on tax morale: http://oe.cd/tax-morale

 

 

February 12, 2021 in Tax Compliance | Permalink | Comments (0)

Thursday, February 11, 2021

Inclusive Framework on BEPS country membership increases to 139

Belarus and Samoa join international efforts against tax evasion and avoidance

Belarus and Samoa recently joined the Inclusive Framework on BEPS, bringing the total membership up to 139 jurisdictions worldwide.

February 11, 2021 in BEPS | Permalink | Comments (0)

Wednesday, February 10, 2021

Man Charged with $1.9 Million COVID-Relief Fraud

A Nevada man was charged in an indictment Wednesday for his alleged participation in a scheme to defraud multiple financial institutions by filing bank loan applications that fraudulently sought more than $1.9 million dollars in forgivable loans guaranteed by the Small Business Administration (SBA) under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  Download Abramovs indictment

Nicholas L. McQuaid, Acting Assistant Attorney General of the Justice Department’s Criminal Division; Nicholas A. Trutanich, U.S. Attorney of the District of Nevada; Aaron C. Rouse, Special Agent in Charge of the FBI’s Las Vegas Field Office; and Weston King, Special Agent in Charge of the SBA Office of the Inspector General’s (OIG) Western Region Office made the announcement.

Jorge Abramovs, 40, of Las Vegas, was charged in an indictment filed in the District of Nevada with five counts of bank fraud, one count of making false statements to a bank, and five counts of money laundering. Abramovs had been charged initially with bank fraud in a criminal complaint and was arrested on Jan. 17, 2021. On Jan. 22, 2021, U.S. Magistrate Judge Cam Ferenbach ordered that Abramovs be detained pending trial.

The indictment alleges that Abramovs obtained nearly $2 million in Paycheck Protection Program (PPP) loans from seven different lenders by, among other things, submitting multiple loan applications in the names of three different businesses while falsely claiming to have numerous employees earning wages. The indictment further alleges that Abramovs used the PPP funds for personal (rather than business) purposes, including purchasing a Tesla, a Bentley, two condominiums, and paying his home mortgage.

The CARES Act is a federal law enacted on March 29, 2020, designed to provide emergency financial assistance to the millions of Americans who are suffering the economic effects caused by the COVID-19 pandemic. One source of relief provided by the CARES Act was the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses, through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding, and in December 2020, Congress authorized another $284 billion in additional funding.

The PPP allows qualifying small-businesses and other organizations to receive loans with a maturity of two years and an interest rate of 1 percent. PPP loan proceeds must be used by businesses on payroll costs, interest on mortgages, rent, and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses. 

A federal criminal indictment is merely an accusation. A defendant is presumed innocent unless and until proven guilty.

The FBI and SBA-OIG investigated the case. Trial Attorney Joseph McFarlane of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Jessica Oliva of the U.S. Attorney’s Office for the District of Nevada are prosecuting the case.     

The Fraud Section leads the department’s prosecution of fraud schemes that exploit the PPP. In the nine months since the PPP began, Fraud Section attorneys have prosecuted more than 100 defendants in more than 70 criminal cases. The Fraud Section has also seized more than $60 million in cash proceeds derived from fraudulently obtained PPP funds, as well as numerous real estate properties and luxury items purchased with such proceeds. More information can be found at:  https://www.justice.gov/criminal-fraud/ppp-fraud.

February 10, 2021 in AML | Permalink | Comments (0)

Tuesday, February 9, 2021

Six Charged in Connection with a $3 Million Paycheck Protection Program Fraud Scheme

Six individuals were charged in an indictment with fraudulently obtaining approximately $1.5 million in Paycheck Protection Program (PPP) loans on behalf of five businesses based in Georgia and South Carolina. Download Thompson et al indictment

Acting Assistant Attorney General Nicholas L. McQuaid of the Justice Department’s Criminal Division; Acting U.S. Attorney Bobby L. Christine of the Northern District of Georgia; Special Agent in Charge Chris Hacker of the FBI’s Atlanta Field Office; Special Agent in Charge Kevin Kupperbusch of the Small Business Association Office of Inspector General (SBA OIG) Eastern Region; and Special Agent in Charge Mark Maroni of the Treasury Inspector General for Tax Administration (TIGTA) Southeast Field Division made the announcement.

Rodericque Thompson, 43, of Atlanta, Georgia, Micah K. Baisden, 30, of Doraville, Georgia, Travis C. Crosby, 31, of Wellford, South Carolina, Keith A. Maloney Jr., 33, of Port Wentworth, Georgia, Tabronx W. Smith, 43, of Buford, Georgia, and Thomas D. Wilson, 30, of Atlanta, were charged in an indictment filed in the Northern District of Georgia with conspiracy to commit bank fraud, bank fraud, false statements to a financial institution, and money laundering.

These individuals were allegedly part of a larger group that together have fraudulently obtained approximately $3.0 million in PPP loans. To date, authorities have recovered approximately $1,195,784.98 of the stolen money.

The indictment alleges that Thompson recruited Baisden, Crosby, Maloney, Smith, and Wilson to apply for PPP loans on behalf of their respective businesses, PowerHouse Sports Academy LLC, Faithful Transport Services LLC, KMJ Transport LLC, Market Yourself LLC, and Rare Breed Nation LLC. With Thompson’s help, Baisden, Crosby, Maloney, Smith, and Wilson each allegedly obtained a $300,000 PPP loan by submitting loan applications containing numerous false and misleading statements about their businesses. Thompson allegedly aided the applicants in submitting the fraudulent loan applications in exchange for a percentage of the loan proceeds.

The following five individuals have pleaded guilty in connection with this alleged scheme: 

  • Antonio D. Hosey, of Atlanta, Georgia, pleaded guilty to a one-count information charging conspiracy to commit wire fraud and money laundering(20-CR-396-LMM);
     
  • Timothy Williams, of Atlanta, Georgia, pleaded guilty to a two-count information charging conspiracy to commit wire fraud and making false statements(20-CR-339-LMM);
     
  • Stanley Dorceus, of Marietta, Georgia, pleaded guilty to a two-count information charging conspiracy to commit wire fraud and making false statements (20-CR-320-LMM);
     
  • Kenneth L. Wright, Jr., of Atlanta, Georgia, pleaded guilty to a two-count information charging conspiracy to commit wire fraud and making false statements (20-CR-285-LMM); and
     
  • Mark A. Stewart, of Greenville, South Carolina, pleaded guilty to a two-count information charging conspiracy to commit wire fraud and making false statements (20-CR-319-LMM).

The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal law enacted March 29, 2020. It is designed to provide emergency financial assistance to millions of Americans who are suffering the economic effects resulting from the COVID-19 pandemic. One source of relief provided by the CARES Act is the authorization of up to $349 billion in forgivable loans to small businesses for job retention and certain other expenses through the PPP. In April 2020, Congress authorized over $300 billion in additional PPP funding.

The PPP allows qualifying small businesses and other organizations to receive loans with a maturity of two years and an interest rate of one percent. Businesses must use PPP loan proceeds for payroll costs, interest on mortgages, rent and utilities. The PPP allows the interest and principal to be forgiven if businesses spend the proceeds on these expenses within a set time period and use at least a certain percentage of the loan towards payroll expenses.

February 9, 2021 in AML | Permalink | Comments (0)

Monday, February 8, 2021

Businessman Sentenced for Foreign Bribery and Money Laundering Scheme Involving PetroEcuador Officials

An Ecuadorian businessman living in Miami was sentenced today to 35 months in prison for his role in a $4.4 million bribery and money laundering scheme that funneled bribes to then-public officials of Empresa Pública de Hidrocarburos del Ecuador (PetroEcuador), the state-owned and state-controlled oil company of Ecuador.

Nicholas L. McQuaid, Acting Assistant Attorney General of the Justice Department’s Criminal Division and George L. Piro, Special Agent in Charge of the FBI’s Miami Field Office made the announcement.

According to his plea, Armengol Alfonso Cevallos Diaz, 58, admitted that from 2012 through 2015 he conspired to solicit, intermediate, and pay bribes of $4.4 million from an oil services company and companies associated with or controlled by Cevallos to PetroEcuador officials by using U.S.-based companies and U.S.-based bank accounts in order to obtain and retain business from PetroEcuador. Cevallos also admitted to conspiring to conceal and promote the bribe scheme by laundering the funds through Miami-based shell companies and bank accounts that were used to acquire properties in the Miami area for the benefit of certain PetroEcuador officials. 

Cevallos is the latest individual to be sentenced in the Justice Department’s ongoing investigation into bribery and money laundering involving PetroEcuador. The individuals prosecuted include former PetroEcuador officials who received and concealed the bribe payments, businessmen and contractors who paid the bribes to obtain contracts from PetroEcuador, and intermediaries who enabled and facilitated the bribery through the use of U.S. and offshore companies and bank accounts.  

The FBI’s International Corruption Squad in Miami is investigating the case.

Trial Attorneys Jonathan Robell and Katherine Raut of the Criminal Division’s Fraud Section and Trial Attorney Randall Warden of the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) prosecuted the case.

IRS-Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, the U.S. Marshals Service and the Justice Department’s Office of International Affairs provided significant assistance in this case, as have public authorities in, among other countries, Ecuador and Panama.

MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.

February 8, 2021 in AML | Permalink | Comments (0)

Sunday, February 7, 2021

FTC cases returned $483 million to people in 2020

You may know the FTC for its consumer information, and for taking action against shady companies that violate the law. But did you know the FTC returns millions of dollars to people as a result of those actions? In fact, last year, 1.7 million people nationwide and in 64 countries received payments totaling $483 million because of the FTC’s enforcement actions. People got refunds resulting from more than 50 FTC cases. The most money — around $300 million — went back to about 142,000 people because of a settlement with Western Union.

When the FTC sends refunds, it usually uses customer lists and contact information it gets from the defendants. If that information isn’t available, the agency may ask people to file a claim or use its Consumer Sentinel database to find people who are eligible for a refund. The database includes reports people make to the FTC, Better Business Bureaus, and federal, state, and local law enforcement offices. When you report a scam or fraud, you may help law enforcement, and yourself. For example, many people who reported sending money to lottery, romance, sweepstakes or other online scammers through Western Union got full refunds in 2020.

The FTC will never require you to pay fees in advance, or ask for sensitive information, like your bank account information. If someone contacts you and says they’re from the FTC but they want you to send money, it’s a scam. Even if they claim to be FTC Chairman Joe Simons — like some scammers have — if they ask for money, it’s a scam.

February 7, 2021 in AML | Permalink | Comments (0)