International Financial Law Prof Blog

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

Sunday, January 6, 2019

Patrick Ho, Former Secretary of Home Affairs (Hong Kong) and Former Head Of Organization Backed By Chinese Energy Conglomerate, Convicted Of International Bribery, Money Laundering Offenses

Geoffrey S. Berman, United States Attorney for the Southern District of New York, and Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division announced that CHI PING PATRICK HO, a/k/a “Patrick C.P. Ho,” a/k/a “He Zhiping,” was found guilty today after a jury trial before U.S. District Judge Loretta A. Preska of participating in a multi-year, multimillion-dollar scheme to bribe top officials of Chad and Uganda in exchange for business advantages for CEFC China Energy Company Limited (“CEFC China”).  HO was convicted of violations of the Foreign Corrupt Practices Act (“FCPA”), international money laundering, and conspiracy to commit both.  HO is scheduled to be sentenced before Judge Preska on March 14, 2019, at 10:00 a.m.

Manhattan U.S. Attorney Geoffrey S. Berman said:  “Patrick Ho now stands convicted of scheming to pay millions in bribes to foreign leaders in Chad and Uganda, all as part of his efforts to corruptly secure unfair business advantages for a multibillion-dollar Chinese energy company.  As the jury’s verdict makes clear, Ho’s repeated attempts to corrupt foreign leaders were not business as usual, but criminal efforts to undermine the fairness of international markets and erode the public’s faith in its leaders.”

Assistant Attorney General Brian A. Benczkowski:  “Patrick Ho paid millions of dollars in bribes to the leaders of two African countries to secure contracts for a Chinese conglomerate.  Today’s trial conviction demonstrates the Criminal Division’s commitment to prosecuting those who seek to utilize our financial system to secure unfair competition advantages through corruption and bribery.”

According to the Indictment, evidence presented at trial, and other public proceedings in the case:           

Overview 

HO was involved in two bribery schemes to pay top officials of Chad and Uganda in exchange for business advantages for CEFC China, a Shanghai-based multibillion-dollar conglomerate that operates internationally in multiple sectors, including oil, gas, and banking.  At the center of both schemes was HO, the head of a non-governmental organization based in Hong Kong and Arlington, Virginia, the China Energy Fund Committee (the “CEFC NGO”), which held “Special Consultative Status” with the United Nations (“UN”) Economic and Social Council.  CEFC NGO was funded by CEFC China.

In the first scheme (the “Chad Scheme”), HO, on behalf of CEFC China, offered a $2 million cash bribe, hidden within gift boxes, to Idriss Déby, the President of Chad, in an effort to obtain valuable oil rights from the Chadian government.  In the second scheme (the “Uganda Scheme”), HO caused a $500,000 bribe to be paid, via wires transmitted through New York, New York, to an account designated by Sam Kutesa, the Minister of Foreign Affairs of Uganda, who had recently completed his term as the President of the UN General Assembly.  HO also schemed to pay a $500,000 cash bribe to Yoweri Museveni, the President of Uganda, and offered to provide both Kutesa and Museveni with additional corrupt benefits by “partnering” with them in future joint ventures in Uganda.

The Chad Scheme

The Chad Scheme began in or about September 2014 when HO flew into New York, New York to attend the annual UN General Assembly.  At that time, CEFC China was working to expand its operations to Chad and wanted to meet with President Déby as quickly as possible.  Through a connection, HO was introduced to Cheikh Gadio, the former Minister of Foreign Affairs of Senegal, who had a personal relationship with President Déby.  HO and Gadio met at CEFC China’s suite at Trump World Tower in midtown Manhattan, where HO enlisted Gadio to assist CEFC China in obtaining access to President Déby.

Gadio connected HO and CEFC China to President Déby.  In an initial meeting in Chad in November 2014, President Déby described to HO and CEFC China executives certain lucrative oil rights that were available for CEFC China to acquire.  Following that meeting, Gadio advised HO and CEFC China to send a technical team to Chad to investigate the oil rights and make an offer to President Déby.  Instead, HO insisted on a prompt second meeting with the President.  The second meeting took place a few weeks later, in December 2014.  HO led a CEFC China delegation, which flew into Chad on a corporate jet with $2 million cash concealed within several gift boxes.  At the conclusion of a business meeting with President Déby, HO and the CEFC China executives presented President Déby with the gift boxes.

To the surprise of HO and the CEFC China executives, President Déby rejected the $2 million bribe offer.  HO subsequently drafted a letter to President Déby claiming that the cash had been intended as a donation to Chad.  Ultimately, HO and CEFC China did not obtain the unfair advantage that they had sought through the bribe offer, and by mid-2015, HO had turned his attention to a different “gateway to Africa”: Uganda.

The Uganda Scheme

The Uganda Scheme began around the same time as the Chad Scheme, when HO was in New York, New York for the annual UN General Assembly.  HO met with Sam Kutesa, who had recently begun his term as the 69th President of the UN General Assembly (“PGA”).  HO, purporting to act on behalf of CEFC NGO, met with Kutesa and began to cultivate a relationship with him.  During the year that Kutesa served as PGA, HO and Kutesa discussed a “strategic partnership” between Uganda and CEFC China for various business ventures, to be formed once Kutesa completed his term as PGA and returned to Uganda.

In or about February 2016 – after Kutesa had returned to Uganda and resumed his role as Foreign Minister, and Yoweri Museveni (Kutesa’s relative) had been reelected as the President of Uganda – Kutesa solicited a payment from HO, purportedly for a charitable foundation that Kutesa wished to launch.  HO agreed to provide the requested payment, but simultaneously requested, on behalf of CEFC China, an invitation to Museveni’s inauguration, business meetings with President Museveni and other high-level Ugandan officials, and a list of specific business projects in Uganda that CEFC China could participate in.

In May 2016, HO and CEFC China executives traveled to Uganda.  Prior to departing, HO caused the CEFC NGO to wire $500,000 to the account provided by Kutesa in the name of the so-called “foundation,” which wire was transmitted through banks in New York, New York.  HO also advised his boss, the Chairman of CEFC China, to provide $500,000 in cash to President Museveni, ostensibly as a campaign donation, even though Museveni had already been reelected.  HO intended these payments as bribes to influence Kutesa and Museveni to use their official power to steer business advantages to CEFC China.

HO and CEFC China executives attended President Museveni’s inauguration and obtained business meetings in Uganda with President Museveni and top Ugandan officials, including at the Department of Energy and Mineral Resources.  After the trip, HO requested that Kutesa and Museveni assist CEFC China in acquiring a Ugandan bank, as an initial step before pursuing additional ventures in Uganda.  HO also explicitly offered to “partner” with Kutesa and Museveni and/or their “family businesses,” making clear that both officials would share in CEFC China’s future profits.  In exchange for the bribes offered and paid by HO, Kutesa thereafter steered a bank acquisition opportunity to CEFC China.

*                      *                      *

HO, 69, of Hong Kong, China, was convicted of one count of conspiring to violate the FCPA, four counts of violating the FCPA, one count of conspiring to commit international money laundering, and one count of committing international money laundering.  The maximum penalties for these charges are as follows: five years in prison for conspiring to violate the FCPA; five years in prison for each violation of the FCPA; 20 years in prison for conspiring to commit international money laundering; and 20 years in prison for committing international money laundering.  HO was acquitted of one count of international money laundering.

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

Mr. Berman praised the outstanding work of the Federal Bureau of Investigation and Internal Revenue Service-Criminal Investigation.  He also thanked the Department of Homeland Security, Homeland Security Investigations, and the Department of Justice, Criminal Division’s Office of International Affairs.

This case is being prosecuted by the Office’s Public Corruption Unit and the Criminal Division’s Fraud Section, FCPA Unit.  Assistant U.S. Attorneys Douglas S. Zolkind, Daniel C. Richenthal, and Catherine E. Ghosh, and Trial Attorney Paul A. Hayden of the Fraud Section, are in charge of the prosecution.

January 6, 2019 in AML | Permalink | Comments (0)

Thursday, January 3, 2019

Wells Fargo to Pay States About $575 Million to Settle Customer Harm Claims

The Wall Street Journal reported that:

Wells Fargo & Co. has agreed to pay $575 million to all 50 states and the District of Columbia to settle claims that a fake-account scandal in its retail bank and improper auto-loan and mortgage charges harmed customers.

read the story here

The Consumer Financial Protection Bureau (CFPB) fined Wells Fargo Bank, N.A. $100 million for the widespread illegal practice of secretly opening unauthorized deposit and credit card accounts. Spurred by sales targets and compensation incentives, employees boosted sales figures by covertly opening accounts and funding them by transferring funds from consumers’ authorized accounts without their knowledge or consent, often racking up fees or other charges. According to the bank’s own analysis, employees opened more than two million deposit and credit card accounts that may not have been authorized by consumers. 

Wells Fargo settlement FAQs here

January 3, 2019 in AML | Permalink | Comments (0)

Wednesday, January 2, 2019

UK’s first Deferred Prosecution Agreement, between the SFO and Standard Bank, successfully ends

Today the Serious Fraud Office announced the end of the UK’s first Deferred Prosecution Agreement, confirming that Standard Bank PLC (now known as ICBC Standard Bank PLC) had fully complied with its terms.

The DPA required Standard Bank to pay nearly $26m in fines and disgorgement of profits, and to pay $6m in compensation to the Government of Tanzania.

Under the DPA terms, Standard Bank was required to commission an external consultant to report on its anti-bribery and corruption controls, policies and procedures, and to recommend improvements to strengthen its controls, with regular reports issued to the SFO.

Since their introduction in 2014, the SFO has secured four DPAs, which have seen more than £670m of financial penalties paid to the Treasury.

Lisa Osofsky, Director of the Serious Fraud Office said: 

“I welcome this successful conclusion of the UK’s first Deferred Prosecution Agreement.”

“DPAs are a way of holding companies to account without punishing innocent employees, and are an important tool in changing corporate culture for the better.”

“Under the terms of the DPA, the SFO alleged that Standard Bank had failed to prevent its associated person(s) from committing to secure a contract to raise sovereign debt for Tanzania.”   

The six terms imposed on Standard Bank to secure a DPA were:

  1. Cooperation– Standard Bank was required to fully and honestly cooperate with the SFO and other authorities investigating the bribes, including disclosing information and material relating to activities by individuals involved.  This has occurred throughout the term of the DPA.
  2. Compensation– $6m of compensation, plus interest of $1,046,196.58 to be paid to the Government of Tanzania, this was paid in full in May 2016.
  3. Disgorgement of profits– All $8.4m fees paid to Stanbic Tanzania and Standard Bank through the secured contract to be confiscated by the SFO and passed to the UK Treasury, this occurred in May 2016.
  4. Financial Penalty– $16.8m in fines were imposed on Standard Bank by the SFO and passed to the UK Treasury, this occurred in May 2016.
  5. Corporate Compliance Programme– Standard Bank agreed to commission a review by Price Waterhouse Coopers on the bank’s internal anti-bribery and corruption compliance procedures, in agreement with the SFO, who advised on the scope and extent of that review. On completion of that review, Standard Bank was required to implement any recommendations and act on advice received within 12 months of the review completing, with PWC verifying their implementation with regular reports provided to the SFO for certification.  This was completed in August 2017.
  6. Costs– SFO costs of £330,000 to be paid by Standard Bank, this occurred in May 2016.

The Deferred Prosecution Agreement between Standard Bank and the Serious Fraud Office expired on Friday 30th November 2018, three years after it was initially imposed, with formal notification sent to the Court.

 

Notes to Editors 

1. Deferred Prosecution Agreements were introduced by the Crime and Courts Act 2013, which came into effect in 2014 and are available to the Serious Fraud Office and Crown Prosecution Service.

2. Since their introduction four DPAs have been agreed, all by the SFO, these are:

    • Standard Bank PLC (2015)
    • XYZ (the company cannot be named due to ongoing criminal proceedings) (2016)
    • Rolls-Royce (2017)
    • Tesco (2017)

Further information on DPAs and their use by the SFO can be found here.

3. Standard Bank PLC’s Deferred Prosecution Agreement with the SFO came into force on 30th November 2015.

    • The DPA was approved by the President of the Queen’s Bench Division, the Rt. Hon. Sir Brian Leveson at Southwark Crown Court.
    • A separate bill of indictment was preferred by the SFO on the same day, charging Standard Bank with one offence of failing to prevent bribery contrary to Section 7 of the Bribery Act 2010 and proceedings were automatically suspended in accordance with paragraph 2(2) of Schedule 17 to the Crime and Courts Act 2013. Further information on the Standard Bank DPA can be found here.

4. The SFO has formally notified the courts of its decision to conclude its Deferred Prosecution Agreement without restarting prosecution proceedings within 15 days of the expiry of this agreement.

5. A ‘Details of Compliance’ outlining how Standard Bank has met the terms of the DPA will be published on the SFO’s website.

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January 2, 2019 in AML | Permalink | Comments (0)

Tuesday, January 1, 2019

9 convicted in £16m and $21m FH Bertling bribery cases

Stephen Emler and Giuseppe Morreale pleaded guilty for their part in a corrupt scheme to secure a ConocoPhillips freight forwarding contract, eventually worth over £16m, for FH Bertling as part of the ‘Jasmine’ North Sea oil exploration project, it can now be reported.

Christopher Lane pleaded guilty to a separate bribery scheme involving overcharging.  Colin Bagwell was convicted by the jury of the same offence.

Paying over £350,000 in bribes and facilitation payments, FH Bertling executives made these corrupt payments to ensure their bid for the ConocoPhillips ‘Jasmine’ shipping contract was successful and separately to obtain assurance that inflated prices it charged for additional services were waved through by ConocoPhillips staff.

These convictions add to the seven already secured by the SFO against former FH Bertling Group senior executives and the company, including Stephen Emler and Giuseppe Morreale, for a separate Angola bribery scheme.

In related proceedings, Georgina Ayres, Robert McNally and Peter Smith were acquitted of charges relating to the ‘Jasmine’ case on 27th November 2018. Colin Bagwell was found guilty of conspiring with Christopher Lane in the overcharging scheme.

SFO Director, Lisa Osofsky said:

“These senior executives failed to show any integrity, resorting to bribery to secure lucrative contracts and hide their illicit activities. It is our mission to bring criminals like these to justice.

“Bribery has no place in business in Britain or abroad. It undermines the rule of law, distorts our economy and damages the reputation of the UK.”

The criminal investigation into corruption at FH Bertling began in September 2014, with the first charges announced in July 2016. In total, 13 individuals were charged as part of the SFO’s case, with 9 convicted of one or more charges and 4 individuals acquitted.

The SFO’s ‘Jasmine’ case focused on two bribery schemes created to secure a freight forwarding contract dishonestly from ConocoPhillips eventually worth £16m. The second scheme targeted Christopher Lane to ensure ConocoPhillips would wave through inflated prices FH Bertling charged for additional freight services without complaint.

A separate investigation into FH Bertling’s business in Angola revealed that senior executives had conspired to pay bribes to an Angola state oil company agent to secure around $21m worth of shipping contracts. The company, Stephen Emler, Giuseppe Morreale, Jorg Blumberg, Ralf Petersen, Dirk Juergensen and Marc Schweiger also pleaded guilty prior to the trial. One defendant, Peter Ferdinand was acquitted.

Further information on our investigation, trial and the FH Bertling cases can be found here and here.

A sentencing hearing has been scheduled for Tuesday 11th December 2018.

Notes to editors:

1. Giuseppe Morreale and Stephen Emler both pleaded guilty to two counts (one on the Angola Indictment and one on the Jasmine Indictment) of:

  • Conspiracy to make corrupt payments, contrary to section 1 of the Prevention of Corruption Act 1906.

2. Christopher Lane pleaded guilty to one count of:

  • Conspiracy to make corrupt payments, contrary to section 1 of the Prevention of Corruption Act 1906

3. Colin Bagwell, Robert McNally and Georgina Ayres were acquitted of:

  • Conspiracy to make corrupt payments, contrary to section 1 of the Prevention of Corruption Act 1906

4. Colin Bagwell was convicted on one count of

  • Conspiracy to make corrupt payments, contrary to section 1 of the Prevention of Corruption Act 1906 in relation to his conspiracy with Christopher Lane

5. Peter Smith was acquitted of two counts of:

  • Conspiracy to make corrupt payments, contrary to section 1 of the Prevention of Corruption Act 1906

6. Stephen Emler was Chief Financial Officer at FH Bertling

7. Giuseppe Morreale was Managing Director of FH Bertling’s London, Caspian and Kazakhstan operational regions

8. Colin Bagwell was Managing Director/Chief Commercial Officer of FH Bertling

9. Robert McNally was the Managing Director of Oil & Gas Associates UK LLP

10. Peter Smith was a Business Development Manager at FH Bertling, later engaged on a retainer via his own company Keady Computer Services

11. Christopher Lane was the Logistics Lead at ConocoPhillips

12. Georgina Ayres was the Deputy Contract & Procurement Manager at ConocoPhillips

13. FH Bertling Ltd was a shipping and freight forwarding services company based in the UK. It has since ceased trading and is in Liquidation

14. Further information can be found on our FH Bertling case page

15. Information about the previous FH Bertling trial can be found here

January 1, 2019 in AML | Permalink | Comments (0)

Monday, December 31, 2018

Five convictions in SFO’s Alstom investigation into bribery & corruption to secure €325 million of contracts

Nicholas Reynolds was found guilty of conspiracy to corrupt today at Blackfriars Crown Court following an extensive investigation and prosecution brought by the Serious Fraud Office.

The conviction brings to four the number of total convictions in relation to this conspiracy to bribe officials in a Lithuanian power station and senior Lithuanian politicians in order to win two contracts worth €240 million. These individuals falsified records to avoid checks in place to prevent bribery and between them, the Alstom companies paid more than €5 million in bribes to secure the contracts.

The conviction of Nicholas Reynolds who is a UK national and former Global Sales Director for Alstom Power Ltd’s Boiler Retrofits unit followed a guilty plea from former Business Development Manager at Alstom Power Ltd John Venskus on 2 October 2017 and former Regional Sales Director at Alstom Power Sweden AB Göran Wikström on 22 June 2018 on the same charge. Alstom Power Ltd entered a guilty plea to conspiracy to corrupt on 10 May 2016.

In sentencing Göran Wikström HHJ Martin Beddoe said:

“This was a very serious example of bribery and corruption that beleaguers the civilised, commercial world and is a cancer upon it”

Venskus was sentenced to 3 years and 6 months imprisonment on 4 May 2018. Wikström was sentenced to 2 years and 7 months imprisonment on 9 July 2018. He was also ordered to pay £40,000 in costs.

Alstom Power Ltd was ordered to pay a total of £18,038,000 which included:

  • A fine of £6,375,000
  • Compensation to the Lithuanian government of £10,963,000
  • Prosecution costs of £700,000

Nicholas Reynolds is due to be sentenced at Blackfriars Crown Court on 21 December 2018.

Lisa Osofsky, Director of the Serious Fraud Office said:

“The culture of corruption evident within the Alstom Group was widespread. Their illicit activities to win lucrative contracts were calculated and sustained, undermining legitimate business and public trust.

“These convictions were a result of a truly global investigation and I thank our case team for their effort and persistence in bringing the individuals and companies involved to justice.”

The SFO’s investigation involved cooperation with more than 30 countries including France, Canada, Hungary, Denmark, Austria, Slovakia, Czech Republic, Lichtenstein, Cyprus, Singapore, the Seychelles, India, Sweden, Lithuania, Switzerland and Tunisia.

Due to the lifting of reporting restrictions, the conviction of Alstom Network UK Ltd in a linked case can also now be reported.

Alstom Network UK Ltd were found guilty of one count of conspiracy to corrupt on 10 April 2018 for making corrupt payments to win a tram and infrastructure contract in Tunisia.

In return for its work in securing the €85 million contract, Alstom Network UK Ltd paid €2.4 million to a company called Construction et Gestion Nevco Inc, which Alstom Network UK Ltd itself acknowledged was a front for corruption when it decided not to make a final payment of €240,000 in its contract.

Staff within the Alstom Group helped the consultants produce paperwork to satisfy internal compliance checks, cobbling together ‘evidence’ of the services provided, which at best were of a nominal nature because the company was, in reality, just a conduit for bribes.

Graham Hill, Robert Hallett and Alstom Network UK Ltd were acquitted of other charges in this case, relating to alleged corruption to win transport contracts in India and Poland, on 10 April 2018.

Alstom Network UK Ltd will be sentenced at Southwark Crown Court on a date to be determined.

Alstom Network UK Ltd along with Michael Anderson, Terence Watson and Jean-Daniel Lainé were acquitted of a charge in a linked investigation into alleged corruption relating to a Budapest Metro rolling stock contract.

Notes to Editors

  1. The SFO investigation commenced in 2009 as a result of information provided by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.
  2. The charges brought against the companies and individuals across all three linked cases were conspiracy to corrupt, contrary to s1 of the Criminal Law Act 1977 and s1 of the Prevention of Corruption Act 1906.
  3. Nicholas Reynolds (DOB 17 August 1965) was Global Sales Director for Alstom Power Ltd’s Boiler Retrofits unit, based in Derby.
  4. John Venskus (DOB 1 June 1943) was employed by Alstom Power Ltd as a Business Development Manager and on retirement by Alstom Power Sweden AB as a Relations Manager in Lithuania. He pleaded guilty on 2 October 2017.
  5. Göran Wikström (DOB 19 July 1950) was employed by Alstom Power Sweden AB as Regional Sales Director in Växjö, Sweden. He pleaded guilty on 22 June 2018.
  6. Alstom Power Ltd entered a guilty plea to one count of conspiracy to corrupt in relation to a contract to upgrade the burners at the Lithuanian Power Plant on 10 May 2016.
  7. Michael Anderson (DOB 18 January 1961) was Business Development Manager at Alstom Transport SA with responsibility for Eastern Europe, based in Paris.
  8. Jean-Daniel Lainé (DOB 7 April 1948) was, from 2006, Senior Vice President for Ethics and Compliance within Alstom International Network and a Director of Alstom Network UK, based in Paris.
  9. Terence Watson (DOB 13 November 1959) was, from 2006, Senior Vice-President for Europe and Central Asia within Alstom International Network, based near Paris.
  10. Alstom Network UK Ltd, Terence Watson and Jean-Daniel Laine were acquitted of a charge of conspiracy to corrupt on 28 November 2018.
  11. Michael Anderson was acquitted of the same charge on 29 November 2018.
  12. Graham Hill (DOB 13 July 1944) was Senior Vice President in Alstom’s Country Network based in Paris and a Director of Alstom International Ltd.
  13. Robert Hallett (DOB 31 May 1963) was Managing Director of Alstom Transport India.

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December 31, 2018 in AML | Permalink | Comments (0)

Sunday, December 30, 2018

Former Alstom Power Global Sales Director sentenced to 4.5 years for corruption

Today, Nicholas Reynolds received 4 years and 6 months imprisonment for his part in a conspiracy to bribe officials in Lithuania’s Elektrenai power station and senior Lithuanian politicians in order to win two contracts worth €240 million.

He was also ordered to pay costs of £50,000.

In sentencing the former Global Sales Director for Alstom Power Ltd’s Boiler Retrofits unit, HHJ Beddoe said:

“This was sophisticated corruption, planned and executed under your direction over many years. This was a very serious example of the bribery and corruption that beleaguers the civilised commercial world and is a cancer upon it. Even if you do not create the disease but help it spread, you bear a very heavy responsibility, and the more senior your position, the more serious it obviously is.”

Lisa Osofsky, Director of the Serious Fraud Office said:

“The substantial prison sentences imposed in this case reflect the seriousness of the bribery and corruption. We can only hope that this may deter others tempted to resort to illicit means to win contracts.

“We are grateful for the assistance provided by our international partners across more than 30 countries for helping us deliver these results.”

Reynolds’ sentencing follows the conviction and sentencing of Alstom Power Ltd, its former Business Development Manager John Venskus and former Regional Sales Director at Alstom Power Sweden AB Göran Wikström for their part in the conspiracy.

John Venskus was sentenced to 3 years and 6 months imprisonment on 4 May 2018. Göran Wikström was sentenced to 2 years and 7 months imprisonment on 9 July 2018, and was also ordered to pay £40,000 in costs.

Alstom Power Ltd was ordered to pay a total of £18,038,000 which included:

  • A fine of £6,375,000
  • Compensation to the Lithuanian government of £10,963,000
  • Prosecution costs of £700,000

Notes to Editors

  1. The SFO investigation commenced in 2009 as a result of information provided by the Office of the Attorney General in Switzerland concerning the Alstom Group, in particular Alstom Network UK Ltd.
  2. Nicholas Reynolds was convicted of conspiracy to corrupt at Blackfriars Crown Court on 19 December 2018 – see press release.
  3. Charges brought in relation to the SFO’s Alstom investigation related to:
    1. Alleged corruption in trams and signalling equipment contracts in Tunisia, India and Poland
    2. Alleged corruption in two power station contracts in Lithuania; and
    3. Alleged corruption in a Budapest Metro rolling stock contract in Hungary. Full details on the case available here.
  4. Counsel for the Prosecution
    1. Martin Evans QC
    2. Janet Weeks
  5. Counsel for Nicholas Reynolds
    1. David Spens QC
    2. Philip Evans QC

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December 30, 2018 in AML | Permalink | Comments (0)

Saturday, December 29, 2018

charge against individual in SFO’s Unaoil investigation

The Serious Fraud Office has further charged Stephen Whiteley with conspiracy to make corrupt payments in relation to the SFO’s Unaoil investigation.

The SFO alleges Mr Whiteley assisted Unaoil Limited to be engaged as a subcontractor for an oil pipeline project in Iraq.  The alleged conduct took place between March 2009 and May 2010.

Stephen Whiteley has been charged with one offence of conspiracy to make corrupt payments, contrary to section (1) of the Criminal Law Act 1977 and contrary to section 1 of the Prevention of Corruption Act 1906.

Stephen Whiteley was charged by requisition and will appear before Westminster Magistrates’ Court at 10am on Wednesday, 9 January 2019.

Notes to editors:

  1. The SFO opened its investigation into Unaoil in March 2016.
  2. Mr Whiteley was previously charged with one count of the same offence for alleged corrupt payments to secure the award of contracts in Iraq to Unaoil’s client SBM Offshore. He faces two counts altogether.
  3. Details of other individuals charged in relation to this investigation can be found here.
  4. The strict liability rule in the Contempt of Court Act 1981 applies.

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December 29, 2018 in AML | Permalink | Comments (0)

Wednesday, December 26, 2018

Two Chinese Hackers Associated With the Ministry of State Security Charged with Global Computer Intrusion Campaigns Targeting Intellectual Property and Confidential Business Information

Defendants Were Members of the APT 10 Hacking Group Who Acted in Association with the Tianjin State Security Bureau and Engaged in Global Computer Intrusions for More Than a Decade, Continuing into 2018, Including Thefts from Managed Service Providers and

The unsealing of an indictment charging Zhu Hua (朱华), aka Afwar, aka CVNX, aka Alayos, aka Godkiller; and Zhang Shilong (张士龙), aka Baobeilong, aka Zhang Jianguo, aka Atreexp, both nationals of the People’s Republic of China (China), with conspiracy to commit computer intrusions, conspiracy to commit wire fraud, and aggravated identity theft was announced today.

The announcement was made by Deputy Attorney General Rod J. Rosenstein, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Director Christopher A. Wray of the FBI, Director Dermot F. O’Reilly of the Defense Criminal Investigative Service (DCIS) of the U.S. Department of Defense, and Assistant Attorney General for National Security John C. Demers.

Zhu and Zhang were members of a hacking group operating in China known within the cyber security community as Advanced Persistent Threat 10 (the APT10 Group).  The defendants worked for a company in China called Huaying Haitai Science and Technology Development Company (Huaying Haitai) and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau. 

Through their involvement with the APT10 Group, from at least in or about 2006 up to and including in or about 2018, Zhu and Zhang conducted global campaigns of computer intrusions targeting, among other data, intellectual property and confidential business and technological information at managed service providers (MSPs), which are companies that remotely manage the information technology infrastructure of businesses and governments around the world, more than 45 technology companies in at least a dozen U.S. states, and U.S. government agencies.  The APT10 Group targeted a diverse array of commercial activity, industries and technologies, including aviation, satellite and maritime technology, industrial factory automation, automotive supplies, laboratory instruments, banking and finance, telecommunications and consumer electronics, computer processor technology, information technology services, packaging, consulting, medical equipment, healthcare, biotechnology, pharmaceutical manufacturing, mining, and oil and gas exploration and production.  Among other things, Zhu and Zhang registered IT infrastructure that the APT10 Group used for its intrusions and engaged in illegal hacking operations.

“The indictment alleges that the defendants were part of a group that hacked computers in at least a dozen countries and gave China’s intelligence service access to sensitive business information,” said Deputy Attorney General Rosenstein.  “This is outright cheating and theft, and it gives China an unfair advantage at the expense of law-abiding businesses and countries that follow the international rules in return for the privilege of participating in the global economic system.”

“It is galling that American companies and government agencies spent years of research and countless dollars to develop their intellectual property, while the defendants simply stole it and got it for free” said U.S. Attorney Berman.  “As a nation, we cannot, and will not, allow such brazen thievery to go unchecked.”

“Healthy competition is good for the global economy, but criminal conduct is not.  This is conduct that hurts American businesses, American jobs, and American consumers,” said FBI Director Wray.  “No country should be able to flout the rule of law – so we’re going to keep calling out this behavior for what it is: illegal, unethical, and unfair.  It's going to take all of us working together to protect our economic security and our way of life, because the American people deserve no less."

“The theft of sensitive defense technology and cyber intrusions are major national security concerns and top investigative priorities for the DCIS,” said DCIS Director O’Reilly.  “The indictments unsealed today are the direct result of a joint investigative effort between DCIS and its law enforcement partners to vigorously investigate individuals and groups who illegally access information technology systems of the U.S. Department of Defense and the Defense Industrial Base.  DCIS remains vigilant in our efforts to safeguard the integrity of the Department of Defense and its enterprise of information technology systems.”

According to the allegations in the Indictment unsealed today in Manhattan federal court:

Overview

Zhu Hua (朱华), aka Afwar, aka CVNX, aka Alayos, aka Godkiller, and Zhang Shilong (张士龙), aka Baobeilong, aka Zhang Jianguo, aka Atreexp, the defendants, both nationals of China, were members of a hacking group operating in China known within the cyber security community as the APT10 Group, or alternatively as “Red Apollo,” “CVNX,” “Stone Panda,” “MenuPass,” and “POTASSIUM.”  The defendants worked for Huaying Haitai in Tianjin, China, and acted in association with the Chinese Ministry of State Security’s Tianjin State Security Bureau.  From at least in or about 2006 up to and including in or about 2018, members of the APT10 Group, including Zhu and Zhang, conducted extensive campaigns of intrusions into computer systems around the world.  The APT10 Group used some of the same online facilities to initiate, facilitate and execute its campaigns during the conspiracy.

Most recently, beginning at least in or about 2014, members of the APT10 Group, including Zhu and Zhang, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of MSPs for businesses and governments around the world (the MSP Theft Campaign).  The APT10 Group targeted MSPs in order to leverage the MSPs’ networks to gain unauthorized access to the computers and computer networks of the MSPs’ clients and to steal, among other data, intellectual property and confidential business data on a global scale.  For example, through the MSP Theft Campaign, the APT10 Group obtained unauthorized access to the computers of an MSP that had offices in the Southern District of New York and compromised the data of that MSP and certain of its clients involved in banking and finance, telecommunications and consumer electronics, medical equipment, packaging, manufacturing, consulting, healthcare, biotechnology, automotive, oil and gas exploration, and mining.

Earlier, beginning in or about 2006, members of the APT10 Group, including Zhu and Zhang, engaged in an intrusion campaign to obtain unauthorized access to the computers and computer networks of more than 45 technology companies and U.S. government agencies, in order to steal information and data concerning a number of technologies (the Technology Theft Campaign).  Through the Technology Theft Campaign, the APT10 Group stole hundreds of gigabytes of sensitive data and targeted the computers of victim companies involved in aviation, space and satellite technology, manufacturing technology, pharmaceutical technology, oil and gas exploration and production technology, communications technology, computer processor technology, and maritime technology.

In furtherance of the APT10 Group’s intrusion campaigns, Zhu and Zhang, among other things, worked for Huaying Haitai and registered malicious domains and infrastructure.  In addition, Zhu, a penetration tester, engaged in hacking operations on behalf of the APT10 Group and recruited other individuals to the APT10 Group, and Zhang developed and tested malware for the APT10 Group.

The MSP Theft Campaign

In furtherance of the MSP Theft Campaign, Zhu, Zhang, and their co-conspirators in the APT10 Group engaged in the following criminal conduct:

  • First, after the APT10 Group gained unauthorized access into the computers of an MSP, the APT10 Group installed multiple variants of malware on MSP computers around the world. To avoid antivirus detection, the malware was installed using malicious files that masqueraded as legitimate files associated with the victim computer’s operating system.  Such malware enabled members of the APT10 Group to monitor victims’ computers remotely and steal user credentials. 
  • Second, after stealing administrative credentials from computers of an MSP, the APT10 Group used those stolen credentials to connect to other systems within an MSP and its clients’ networks. This enabled the APT10 Group to move laterally through an MSP’s network and its clients’ networks and to compromise victim computers that were not yet infected with malware. 
  • Third, after identifying data of interest on a compromised computer and packaging it for exfiltration using encrypted archives, the APT10 Group used stolen credentials to move the data of an MSP client to one or more other compromised computers of the MSP or its other clients’ networks before exfiltrating the data to other computers controlled by the APT10 Group.

Over the course of the MSP Theft Campaign, Zhu, Zhang, and their co-conspirators in the APT10 Group successfully obtained unauthorized access to computers providing services to or belonging to victim companies located in at least 12 countries, including Brazil, Canada, Finland, France, Germany, India, Japan, Sweden, Switzerland, the United Arab Emirates, the United Kingdom, and the United States.  The victim companies included at least the following:  a global financial institution, three telecommunications and/or consumer electronics companies; three companies involved in commercial or industrial manufacturing; two consulting companies; a healthcare company; a biotechnology company; a mining company; an automotive supplier company; and a drilling company. 

The Technology Theft Campaign

Over the course of the Technology Theft Campaign, which began in or about 2006, Zhu, Zhang, and their coconspirators in the APT10 Group successfully obtained unauthorized access to the computers of more than 45 technology companies and U.S. Government agencies based in at least 12 states, including Arizona, California, Connecticut, Florida, Maryland, New York, Ohio, Pennsylvania, Texas, Utah, Virginia and Wisconsin.  The APT10 Group stole hundreds of gigabytes of sensitive data and information from the victims’ computer systems, including from at least the following victims: seven companies involved in aviation, space and/or satellite technology; three companies involved in communications technology; three companies involved in manufacturing advanced electronic systems and/or laboratory analytical instruments; a company involved in maritime technology; a company involved in oil and gas drilling, production, and processing; and the NASA Goddard Space Center and Jet Propulsion Laboratory.  In addition to those victims who had information stolen, Zhu, Zhang, and their co-conspirators successfully obtained unauthorized access to computers belonging to more than 25 other technology-related companies involved in, among other things, industrial factory automation, radar technology, oil exploration, information technology services, pharmaceutical manufacturing, and computer processor technology, as well as the U.S. Department of Energy’s Lawrence Berkeley National Laboratory. 

Finally, the APT10 Group compromised more than 40 computers in order to steal sensitive data belonging to the Navy, including the names, Social Security numbers, dates of birth, salary information, personal phone numbers, and email addresses of more than 100,000 Navy personnel.

*                *                *

Zhu and Zhang are each charged with one count of conspiracy to commit computer intrusions, which carries a maximum sentence of five years in prison; one count of conspiracy to commit wire fraud, which carries a maximum sentence of 20 years in prison; and one count of aggravated identity theft, which carries a mandatory sentence of two years in prison. 

The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the assigned judge.  The charges contained in the Indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

The case was investigated by the FBI, including the New Orleans, New Haven, Houston, New York, Sacramento, and San Antonio Field Offices; DCIS; and the U.S. Naval Criminal Investigative Service (NCIS).  Mr. Rosenstein, Mr. Berman and Mr. Demers praised the outstanding investigative work of, and collaboration among, the FBI, DCIS, and NCIS.  They also thanked the U.S. Attorney’s Office for the District of Connecticut, and the Department of Defense’s Computer Forensic Laboratory for their assistance in the investigation.

Assistant U.S. Attorney Sagar K. Ravi of the Southern District of New York’s Complex Frauds and Cybercrime Unit is in charge of the prosecution, with assistance provided by Trial Attorney Matthew Chang of the National Security Division’s Counterintelligence and Export Control Section.

December 26, 2018 in AML | Permalink | Comments (0)

Monday, December 24, 2018

What source of money do corrupt officials prefer: revenue form taxes or transfers (e.g. development aid)?

The capacity of Brazilian local governments to source tax revenue has a greater impact on education and on corruption than external transfers.

In developing countries, new sources of government revenue are often channeled into corrupt hands. A study in Brazil explored whether revenues sourced from taxes, as opposed to external transfers, was spent differently.

Tax Me, But Spend Wisely? Sources of Public Finance and Government Accountability American Economic Journal: Applied Economics, 2017, Vol 9 (1).

Online Appendix Data and replication code Working Paper Version Non technical summary (VoxDev)

Existing evidence suggests that extra grant revenues lead to little improvements in public services in developing countries--but would governments spend tax revenues differently? This paper considers a program that invests in the tax capacity of Brazilian municipalities. Using variations in the timing of program uptake, I find that it raises local tax revenues and that the increase in taxes is used to improve both the quantity and quality of municipal education infrastructure. In contrast, increases in grants over which municipalities have the same discretion as taxes have no impact on any measure of local public infrastructure. These results suggest that the way governments are financed matters: governments spend increases in tax revenues more toward expenditures that benefit citizens than increases in grant revenues.

Hat Tip: above provided by Dean Andrew Morriss of Texas A&NM University School of Innovation.

December 24, 2018 in AML | Permalink | Comments (0)

Saturday, December 22, 2018

Alleged Nigerian Ringleader of International Investment Scam Charged with Fraud, Money Laundering and Identity Theft

A Nigerian national was charged in court documents unsealed for his role as the alleged ringleader of an international advance-fee scheme that allegedly involved false promises of investment funding by individuals who impersonated U.S. bank officials in person and over the internet to victims around the world, who were told they had to make certain payments before they could supposedly receive their funding.  Proceeds of the scheme were allegedly laundered through U.S. bank accounts and diverted back to the scheme’s perpetrators in Nigeria.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan Patrick of the Southern District of Texas, Special Agent in Charge Perrye K. Turner of the FBI’s Houston Field Office and Special Agent in Charge Robert Smolich of the U.S. Department of State Office of Inspector General made the announcement. 

Osondu Victor Igwilo, 49, of Lagos, Nigeria, was charged in a complaint filed in the Southern District of Texas in December 2016 and unsealed today.  The complaint charges Igwilo with one count of wire fraud conspiracy, one count of money laundering conspiracy and one count of aggravated identity theft.  Igwilo remains a fugitive.

As alleged in the complaint, Igwilo was the leader of a criminal network of “catchers,” who sent phishing emails to potential victims falsely offering investment funding on behalf of BB&T Corporation, a U.S. bank headquartered in North Carolina.  When victims were interested in the supposed investment funding, Igwilo allegedly dispatched U.S. citizens whom he had recruited over the internet to pose as “representatives” of BB&T to meet in person with the victims and sign a supposed investment agreement on behalf of BB&T.  When traveling to the countries where the victims resided, these representatives, at Igwilo’s direction, would visit the local U.S. embassy or consulate and employ fake documents with fraudulent seals of the U.S. government to deceive the victims into believing that the investment agreement was sponsored by the U.S. government, the complaint alleges.  Igwilo then allegedly used the representatives and catchers to convince victims to make wire payments to bank accounts in the United States on the false belief that such payments were necessary to effectuate the investment agreements.  The holders of the U.S. bank accounts were “money movers,” who disposed of the funds as directed by Igwilo, including by purchasing luxury vehicles, from brands such as Mercedes Benz and Range Rover, and shipping them to Nigeria, the complaint alleges.

Uche Diuno, 52, also of Lagos, was charged in a separate case in a second superseding indictment filed on Oct. 3, 2018 with one count of wire fraud conspiracy, one count of money laundering conspiracy and one count of concealment money laundering.  Diuno was arrested in Paris, France on Sept. 29, 2018 and is awaiting extradition.

As alleged in the second superseding indictment, Diuno was a “chairman” or leader in the scheme, who operated his own network of catchers and money movers alongside Igwilo’s, which he used in furtherance of the same BB&T investment scam. 

Seven other individuals have been charged to date as part of the same investigation including Uju Okigbo, 49, of Houston, Texas, an alleged money mover; Chioma Okafor, 29, of Houston, an alleged money mover; Marita Ranalan Underwood, 62, of Manila, Philippines, an alleged representative; John Christian Rutledge, 65, of Yaphank, New York, an alleged representative; Osa May Martin, 69, of Carthage, Missouri, an alleged representative; Tochukwu Nwosisi, 47, of Indianapolis, Indiana, an alleged money mover and Tiffany Sourjohn, 48, of Miami, Oklahoma, an alleged representative.

Okigbo, Okafor, Rutledge and Sourjohn have pleaded guilty and are awaiting sentencing.  Underwood remains a fugitive.  Martin and Nwosisi are pending trial.     

The charges in the complaint and second superseding indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The case was investigated by the FBI and Department of State Office of Inspector General.  The case is being prosecuted by Trial Attorney William E. Johnston of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Suzanne Elmilady of the Southern District of Texas.  Forfeiture aspects of the case are being handled by Assistant U.S. Attorney Kristine Rollinson of the Southern District of Texas.

December 22, 2018 in AML | Permalink | Comments (0)

Wednesday, December 19, 2018

Brazil: Brazil’s Andrade Gutierrez to pay $381 million fine to settle graft charges

BRASILIA (Reuters) - Andrade Gutierrez Engenharia, a construction company, has signed a 1.49 billion reais ($381.49 million) deal to settle corruption allegations against it, federal authorities said on Tuesday, as part of the so-called “Car Wash” graft investigation. 

Carwash involved billions of dollars of bribes and graft pilfered by politicians from the state oil company, Petrobras.

read the full story on Reuters here

December 19, 2018 in AML | Permalink | Comments (0)

Monday, December 17, 2018

Two Men Charged with Conspiracy and Acting as Agents of a Foreign Government

An indictment was unsealed today charging Bijan Rafiekian, aka Bijan Kian, 66, of San Juan Capistrano, California, and Kamil Ekim Alptekin, 41, of Istanbul, and a Turkish national, with conspiracy, acting in the United States as illegal agents of the government of Turkey, and making false statements to the FBI.

Assistant Attorney General for National Security John C. Demers, U.S. Attorney G. Zachary Terwilliger for the Eastern District of Virginia, and Assistant Director in Charge Nancy McNamara of the FBI’s Washington Field Office, made the announcement.

According to allegations in the indictment, the two men were involved in a conspiracy to covertly influence U.S. politicians and public opinion against a Turkish citizen living in the United States whose extradition had been requested by the Government of Turkey. The plot included using a company founded by Rafiekian and a person referred to as “Person A” in the indictment. The company, referred to as “Company A” in the indictment, provided services based upon Person A’s national security expertise.

The indictment charges that the purpose of the conspiracy was to use Company A to delegitimize the Turkish citizen in the eyes of the American public and United States politicians, with the goal of obtaining his extradition, which was meeting resistance at the U.S. Department of Justice. At the same time, the conspirators sought to conceal that the Government of Turkey was directing the work. However, not only did Turkish cabinet-level officials approve the budget for the project, but Alptekin provided the Turkish officials updates on the work, and relayed their directions on the work to Rafiekian, Person A, and others at Company A.

According to allegations in the indictment, the scheme included using a Dutch company owned by Alptekin to appear to be the “client” of Company A and to pay the company’s fee of $600,000, which was to be paid in three installments. Alptekin made the payments from an account in Turkey. The indictment alleges that after Alptekin made the payments to Company A, it was to kick back 20 percent of the payments to Alptekin’s company in the Netherlands, and two such kickbacks were made.

Rafiekian is charged with conspiracy and acting in the United States as an illegal agent of the government of Turkey.  If convicted, he faces a maximum penalty of 5 years in prison for the conspiracy charge, and 10 years in prison for the charge of acting as an agent of a foreign government.

Alptekin is charged with conspiracy, acting in the United States as an illegal agent of the government of Turkey, and four counts of making false statements to the FBI.  If convicted, he faces a maximum penalty of 5 years in prison for the conspiracy charge, 10 years in prison for the charge of acting as an agent of a foreign government, and 5 years in prison for each of the four false statement charges.

Assistant U.S. Attorney James P. Gillis of the Eastern District of Virginia and Trial Attorney Evan N. Turgeon of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

December 17, 2018 in AML | Permalink | Comments (0)

Saturday, December 15, 2018

The United Kingdom's measures to fight money laundering and the financing of terrorism and proliferation

The United Kingdom has a well-developed and robust regime to effectively combat money laundering and terrorist financing. However, it needs to strengthen its supervision, and increase the resources of its financial intelligence unit. 

The FATF has conducted an assessment of the United Kingdom’s anti-money laundering and counter terrorist financing (AML/CFT) system. The assessment is a comprehensive review of the effectiveness of the UK’s measures and their level of compliance with the FATF Recommendations.

The UK is the largest financial services provider in the world. As a result of the exceptionally large volume of funds that flows through its financial sector, the country also faces a significant risk that some of these funds have links to crime and terrorism.  This is reflected in the country’s strong understanding of these risks, as well as national AML/CFT policies, strategies and proactive initiatives to address them.

The UK aggressively pursues money laundering and terrorist financing investigations and prosecutions, achieving 1400 convictions each year for money laundering. UK law enforcement authorities have powerful tools to obtain beneficial ownership and other information, including through effective public-private partnerships, and make good use of this information in their investigations. However, the UK financial intelligence unit needs a substantial increase in its resources and the suspicious activity reporting regime needs to be modernised and reformed.

The country is a global leader in promoting corporate transparency and it is using the results of its risk assessment to further strengthen the reporting and registration of corporate structures. Financial institutions as well as all designated non-financial businesses and professions such as lawyers, accountants and real estate agents are subject to comprehensive AML/CFT requirements. Strong features of the system include the outreach activities conducted by supervisors and the measures to prevent criminals or their associates from being professionally accredited or controlling a financial institution. However, the intensity of supervision is not consistent across all of these sectors and UK needs to ensure that supervision of all entities is fully in line with the significant risks the UK faces.

The UK has been highly effective in investigating, prosecuting and convicting a range of terrorist financing activity and has taken a leading role in designating terrorists at the UN and EU level.  The UK is also promoting global implementation of proliferation-related targeted financial sanctions, as well as achieving a high level of effectiveness in implementing targeted financial sanctions domestically

The UK’s overall AML/CFT regime is effective in many respects. It needs to address certain areas of weakness, such as supervision and the reporting and investigation of suspicious transactions.  However, the country has demonstrated a robust level of understanding of its risks, a range of proactive measures and initiatives to counter the significant risks identified and plays a leading role in promoting global effective implementation of AML/CFT measures.

FATF adopted this report at its Plenary meeting in October 2018.

Outcomes FATF Plenary, 17-19 October 2018

 

Download the report: 

Mutual Evaluation Report of the United Kingdom - 2018

Mutual Evaluation Report, United Kingdom 2018 - Executive Summary

More information:  

FATF Recommendations

Methodology for assessing technical compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems

Consolidate assessment ratings - an overview of ratings that assessed countries obtained for effectiveness and technical compliance.

December 15, 2018 in AML | Permalink | Comments (0)

Friday, December 14, 2018

Israel’s measures to fight money laundering and the financing of terrorism and proliferation

Israel is achieving good results in identifying and responding to its money-laundering and terrorist financing risks, but needs more focus on supervision and preventive measures.

The FATF and FATF-Style Regional Body MONEYVAL jointly assessed Israel’s anti-money laundering and counter terrorist financing (AML/CFT) system. The assessment is a comprehensive review of the effectiveness of Israel’s measures and their level of compliance with the FATF Recommendations. 

Due to its geographic location, Israel faces a particularly high terrorist financing risk from sources outside Israel, while fraud, tax offences, organised crime, public sector corruption and the use of cash are among the sources of money laundering risk for the country. Israel has successfully identified and understood these risks, which is reflected in the country’s anti-money laundering and counter terrorist financing (AML/CFT) policies and activities.

Israel has demonstrated its ability to identify, investigate and disrupt terrorist financing activity at an early stage using a wide range of effective instruments and mechanisms, as well as effectively prosecuting, and convicting those involved. However, it must improve its coordination on preventing the misuse of non-profit organisations for terrorist financing, in particular by increasing its resources to register and supervise these organisations.

Israeli authorities, including the financial intelligence unit and law enforcement, are successfully co-operating and using financial intelligence and other information to pursue money laundering and terrorist financing investigations and prosecutions. Authorities also co-operate well with international counterparts, given that most of the large domestic money laundering cases have international links and the country faces a high terrorist financing threat from abroad. Israel actively makes and responds to requests for international cooperation although some issues have arisen with delays to execute such requests.

Israel has made it a high-level priority to deprive criminals of their illicit gains and has demonstrated that it is doing so effectively with an average of over EUR 24 million per year in confiscations. 
Financial institutions and their supervisors have a good understanding of the money laundering and terrorist financing risks they face, but this understanding is weaker in the money service business sector. However, there has recently been a significant increase in this sector’s reporting of unusual activity. Financial supervisors generally have not yet developed a full risk-based AML/CFT-specific supervision. Israel has not included real estate agents, dealers in precious metals, and trust and company service providers in its AML/CFT system, and lawyers and accountants are not required to report suspicious transactions. The supervisors of designated non-financial businesses and professions are at an early stage in the development of a risk-based model for supervision.

Israel has developed an AML/CFT system that is sound and effective in many areas, and achieves good results in tackling money laundering and terrorist financing. The country has also achieved good results in understanding the risks it is exposed to, investigating and prosecuting money laundering and terrorist financing, including through the effective use of financial intelligence, depriving criminals of the proceeds of crime, and depriving terrorists and terrorist organisations of assets and instrumentalities. However, Israel needs to introduce major improvements to strengthen supervision and implementation of preventive measures.

With the publication of this assessment, Israel has met the FATF’s membership requirements and has become an official member of the FATF with immediate effect.

FATF adopted this report at its Plenary meeting In October 2018. MONEYVAL adopted the report at its meeting in December 2018.

Download the report: 

Mutual Evaluation Report Israel - 2018

Mutual Evaluation Israel, 2018 - Executive Summary

More information:  

FATF Recommendations

Methodology for assessing technical compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems

Consolidate assessment ratings - an overview of ratings that assessed countries obtained for effectiveness and technical compliance.

December 14, 2018 in AML | Permalink | Comments (0)

Wednesday, December 12, 2018

Texas Businessman Pleads Guilty to Conspiracy to Obstruct Justice in Connection with Venezuela Bribery Scheme

A former procurement officer of Venezuela’s state-owned and state-controlled energy company, Petroleos de Venezuela S.A. (PDVSA), pleaded guilty for his role in a scheme to obstruct an investigation relating to bribes paid by the owner of U.S.-based companies to Venezuelan government officials in exchange for securing additional business with PDVSA and payment priority on outstanding invoices.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Patrick of the Southern District of Texas and Special Agent in Charge Mark Dawson of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in Houston made the announcement.

Alfonso Eliezer Gravina Munoz (Gravina), 56, of Katy, Texas, who previously worked for PDVSA in Houston, Texas, pleaded guilty before U.S. District Judge Kenneth M. Hoyt of the Southern District of Texas in Houston to one count of conspiracy to obstruct an official proceeding.  Gravina is scheduled to be sentenced on Feb. 19, 2019 before Judge Gary H. Miller.  He was charged by indictment on Nov. 15.

Gravina pleaded guilty on Dec. 10, 2015 to one count of conspiracy to launder money and one count of making false statements on his federal income tax return.  Gravina’s plea agreement in that case was a cooperation plea agreement, and it contemplated the possibility that the United States would make a motion to reduce his sentence based on his cooperation.  Under the terms of the plea agreement, Gravina agreed to participate in interviews as requested by the United States, and to provide “truthful, complete and accurate information” to government agents and attorneys. 

According to admissions made in connection with Gravina’s plea in this case, after his plea in December 2015, Gravina met periodically with HSI special agents to provide information regarding corruption at PDVSA.  Despite knowing that U.S. government authorities were investigating corruption at PDVSA, and, specifically, that at the beginning of 2018 the government was focusing on bribes paid by companies controlled by an individual referred to as Co-Conspirator 1 in the indictment in this case, Gravina concealed facts about Co-Conspirator 1’s bribe payments to PDVSA officials in his interviews with the government.  In addition, Gravina informed Co-Conspirator 1 that U.S. government authorities were investigating Co-Conspirator 1, and provided Co-Conspirator 1 with information about the investigation, including the topics discussed in Gravina’s meetings with the government.  This passing of information led to the destruction of evidence by Co-Conspirator 1 and others, and to Co-Conspirator 1’s attempt to flee the country in July 2018.

Gravina becomes the latest individual to plead guilty as part of a larger, ongoing investigation by the U.S. government into bribery at PDVSA.  Including Gravina, the Justice Department has announced the guilty pleas of a total of 15 individuals in connection with the investigation.

December 12, 2018 in AML | Permalink | Comments (0)

Tuesday, December 11, 2018

The Marriott data breach

Marriott International says that a breach of its Starwood guest reservation database exposed the personal information of up to 500 million people. If your information was exposed, there are steps you can take to help guard against its misuse.

According to Marriott, the hackers accessed people’s names, addresses, phone numbers, email addresses, passport numbers, dates of birth, gender, Starwood loyalty program account information, and reservation information. For some, they also stole payment card numbers and expiration dates. Marriott says the payment card numbers were encrypted, but it does not yet know if the hackers also stole the information needed to decrypt them.

The hotel chain says the breach began in 2014 and anyone who made a reservation at a Starwood property on or before September 10, 2018 could be affected. Starwood brands include W Hotels, St. Regis, Sheraton Hotels & Resorts, Westin Hotels & Resorts, Le Méridien Hotels & Resorts, and other hotel and timeshare properties.

The company set up an informational website, https://answers.kroll.com, and a call center, 877-273-9481, to answer questions. It says affected customers also can sign up for a year of free services that will monitor websites that criminals use to share people’s personal information. Marriott says the service will alert customers if their information shows up on the websites, and will also include fraud loss reimbursement and other services.

If your information was exposed, take advantage of the free monitoring service, and consider taking these additional steps:

  • Check your credit reports from Equifax, Experian, and TransUnion — for free — by visiting annualcreditreport.com. Accounts or activity that you don’t recognize could signal identity theft. Visit IdentityTheft.gov to find out what to do.
  • Review your payment card statements carefully. Look for credit or debit card charges you don’t recognize. If you find fraudulent charges, contact your credit card company or bank right away, report the fraud, and request a new payment card number.
  • Place a fraud alert on your credit files. A fraud alert warns creditors that you may be an identity theft victim and that they should verify that anyone seeking credit in your name really is you. A fraud alert is free and lasts a year.
  • Consider placing a free credit freeze on your credit reports.A credit freeze makes it harder for someone to open a new account in your name. Keep in mind that it won’t stop a thief from making charges to your existing accounts.

Marriott says it will send some customers emails with a link to its informational website. Often, phishing scammers try to take advantage of situations like this. They pose as legitimate companies and send emails with links to fake websites to try to trick people into sharing their personal information. Marriott says its email will not have any attachments or request any information. Still, the safest bet is to access the informational website by typing in the address, https://answers.kroll.com.

To learn more about protecting yourself after a data breach, visit IdentityTheft.gov/databreach.

December 11, 2018 in AML | Permalink | Comments (0)

Monday, December 10, 2018

Former Justice Department Employee Pleads Guilty to Conspiracy to Deceive U.S. Banks about Millions of Dollars in Foreign Lobbying Funds

A former employee with the U.S. Department of Justice pleaded guilty for his role in a conspiracy to deceive banks in the United States about the source and purpose of millions of dollars sent from overseas to finance a lobbying campaign on behalf of foreign interests, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.

George Higginbotham, 46, of Washington, D.C., who was employed at the Justice Department as a Senior Congressional Affairs Specialist from July 2016 to August 2018, pleaded guilty to one count of conspiracy to make false statements to a bank before U.S. District Judge Colleen Kollar-Kotelly of the District of Columbia.

According to admissions made in connection with his plea, in 2017 Higginbotham helped facilitate the transfer of tens of millions of dollars from foreign bank accounts to accounts in the United States to finance a lobbying campaign to resolve civil and criminal matters related to the Department of Justice’s investigation of the embezzlement and bribery scheme concerning 1Malaysia Development Berhad (1MDB).  Higginbotham admitted that the foreign principal behind the lobbying campaign was alleged to be the primary architect of the 1MDB scheme.  Higginbotham, as a Justice Department employee, played no role in any aspect of the investigation and failed to influence any aspect of the Department’s investigation of 1MDB.  Higginbotham further admitted that another purpose of the lobbying campaign was an attempt to persuade high-level U.S. government officials to have a separate foreign national, who was residing in the United States on a temporary visa at the time, removed from the United States and sent back to his country of origin. 

In order to conceal the identity of the foreign principal behind the lobbying campaign, Higginbotham admitted to conspiring to make false statements to financial institutions in the United States concerning the source and purpose of the funds.  Higginbotham also admitted to working on various fake loan and consulting documents in order to deceive banks and other regulators about the true source and purpose of the money. 

December 10, 2018 in AML | Permalink | Comments (0)

Sunday, December 9, 2018

U.S. Seeks to Recover over $73 Million in Proceeds Traceable to Bank Fraud to Conceal the Involvement of Jho Taek Low

The Department of Justice announced the filing of a civil forfeiture action in the U.S. District Court for the District of Columbia seeking to forfeit and recover more than $73 million in funds associated with an international conspiracy to defraud U.S. financial institutions and to launder funds controlled by Jho Taek Low, also known as “Jho Low,” an individual who is the subject of an indictment filed in the Eastern District of New York, alleging that Low and others conspired to launder billions of dollars embezzled from 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund, and pay hundreds of millions of dollars in bribes to foreign officials, among other things.  Download Higginbotham_forfeiture_complaint_0

The announcement was made by Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office, and Special Agent in Charge Keith A. Bonanno of the Department of Justice Office of the Inspector General (DOJ-OIG) Cyber Investigations Office.

As alleged in the forfeiture complaint, multiple bank accounts were opened at U.S. financial institutions by Prakazrel (“Pras”) Michel and former Justice Department employee George Higginbotham in 2017 to receive tens of millions of dollars in funds from overseas accounts controlled by Jho Low.  In opening these accounts, Michel and Higginbotham allegedly made false and misleading statements to U.S. financial institutions that housed the accounts in order to mislead these institutions about the source of the funds and to obscure Jho Low’s involvement in these transactions.  Michel and Higginbotham allegedly intended to use these funds to attempt to influence the Justice Department’s investigation of Jho Low and 1MDB.  As alleged in the complaint, Higginbotham, as a Justice Department employee, played no role in any aspect of the investigation and failed to influence any aspect of the Department’s investigation of Low or 1MDB.

“According to the allegations in the complaint, Michel and Higginbotham defrauded U.S. financial institutions and laundered millions of dollars into the United States as part of an effort to improperly influence the Department’s investigation into the massive embezzlement and bribery scheme involving 1MDB,” said Assistant Attorney General Benczkowski. “The Criminal Division and our law enforcement partners will do everything we can to trace, seize, and forfeit the proceeds of foreign corruption that flow through the U.S. financial system.”

“Corruption is often at the root of national security, terrorism, and criminal threats, and those who seek to take advantage of our financial systems to perpetuate fraud and abuse will not be tolerated,” said FBI Assistant Director in Charge Sweeney.  “The FBI is committed to investigating and uncovering corruption no matter where it occurs, in conjunction with our domestic and international partners.”

“Ensuring the integrity of Department of Justice employees is of paramount importance,” said DOJ-OIG Special Agent in Charge Bonanno.  “An employee who facilitates or participates in this type of illicit activity will be thoroughly investigated by the OIG, including situations where attempts are made to influence the Department’s independence.”

December 9, 2018 in AML | Permalink | Comments (0)

Thursday, December 6, 2018

Four Defendants Charged in Panama Papers Investigation for Their Roles in Panamanian-Based Global Law Firm’s Decades-Long Scheme to Defraud the United States

Four individuals have been charged in an indictment unsealed in the Southern District of New York with wire fraud, tax fraud, money laundering and other offenses in connection with their alleged roles in a decades-long criminal scheme perpetrated by Mossack Fonseca & Co. (“Mossack Fonseca”), a Panamanian-based global law firm, and related entities.  Download Ramses Owens et al Indictment

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Geoffrey S. Berman for the Southern District of New York, Chief Don Fort of IRS Criminal Investigation (IRS-CI), and Special Agent in Charge Angel M. Melendez of U.S. Immigrations and Customs Enforcement’s Homeland Security Investigations (HSI) New York made the announcement today.

Ramses Owens, 50, a Panamanian citizen; Dirk Brauer, 54, a German citizen; Richard Gaffey, 74, a U.S. citizen, of Medfield, Massachusetts; and Harald Joachim Von Der Goltz, 81, a German citizen, have been charged in an 11-count indictment.  Owens, Gaffey and Von Der Goltz are charged with one count of conspiracy to commit tax evasion, one count of wire fraud, and one count of money laundering conspiracy.  Owens and Brauer have been charged with one count of conspiracy to defraud the United States and one count of conspiracy to commit wire fraud.  Gaffey and Von Der Goltz are additionally charged with four counts of willful failure to file an FBAR.  Von Der Goltz has been additionally charged with two counts of making false statements.

Three of the four defendants named in the indictment have been arrested.  Brauer, who worked as an investment manager for Mossfon Asset Management, S.A. (“Mossfon Asset Management”), an asset management company closely affiliated with Mossack Fonseca, was arrested in Paris, France, on Nov. 15.  Von Der Goltz, a former U.S. resident and taxpayer, was arrested in London, United Kingdom, on Dec. 3.  Gaffey, a U.S.-based accountant, was arrested in Boston, Massachusetts earlier today.  Owens, a Panamanian attorney who worked for Mossack Fonseca, remains at large.   

“Law firms, asset managers, and accountants play key roles enabling entry into the global financial system,” said Assistant Attorney General Benczkowski.  “The charges announced today demonstrate our commitment to prosecute professionals who facilitate financial crime across international borders and the tax cheats who utilize their services.” 

"As alleged, these defendants went to extraordinary lengths to circumvent U.S. tax laws in order to maintain their wealth and the wealth of their clients,” said Manhattan U.S. Attorney Berman.  “For decades, the defendants, employees and a client of global law firm Mossack Fonseca allegedly shuffled millions of dollars through offshore accounts and created shell companies to hide fortunes.  In fact, as alleged, they had a playbook to repatriate un-taxed money into the U.S. banking system.  Now, their international tax scheme is over, and these defendants face years in prison for their crimes.”

“The unsealing of this indictment sends a clear message that IRS-CI is actively engaged in international tax enforcement, and more investigations are on the way,” said IRS-CI Chief Don Fort.  “IRS-CI specializes in unraveling these intricate offshore tax schemes and following the money around the globe wherever it may lead.  Cases like this help maintain the public’s confidence in our tax system by letting them know that we investigate and prosecute those who evade their tax obligation.”

“Today we announce the indictment of four individuals who allegedly defrauded the U.S. government through a large scale, intercontinental money laundering and wire fraud scheme, associated with Mossack Fonseca and its affiliates,” said HSI Special Agent-in-Charge Angel M. Melendez.  “HSI’s El Dorado Task Force, together with the IRS, built a case that uncovered an alleged complex trail of offshore shell corporations and bogus foundations used to disguise the beneficial ownership of huge amounts of money.  These efforts reflect the commitment of U.S. law enforcement to follow that trail and apprehend these criminals regardless of where they are in the world.”

According to the indictment, from at least in or about 2000 through in or about 2017, Owens and Brauer conspired with others to help U.S. taxpayer clients of Mossack Fonseca conceal assets and investments, and the income generated by those assets and investments, from the IRS through fraudulent, deceitful, and dishonest means.  To conceal their clients’ assets and income from the IRS, Owens and Brauer allegedly worked to establish and manage opaque offshore trusts and undeclared bank accounts on behalf of U.S. taxpayers who were clients of Mossack Fonseca.  Owens and Brauer allegedly marketed, created, and serviced sham foundations and shell companies formed under the laws of countries such as Panama, Hong Kong, and the British Virgin Islands, to conceal from the IRS and others the ownership by U.S. taxpayers of accounts established at overseas banks, as well as the income generated in those accounts.  As structured by Mossack Fonseca, the sham foundations typically “owned” the shell companies that nominally held the undeclared assets on behalf of the U.S. taxpayer clients of Mossack Fonseca.  The names of Mossack Fonseca’s clients generally did not appear anywhere on the incorporation paperwork for the sham foundations or related shell companies, although the clients in fact beneficially owned, and had complete access to, the assets of those sham entities and accounts.

In furtherance of the scheme, and in exchange for additional fees, Owens and Brauer allegedly provided support to clients who had purchased the sham foundations and related shell companies by providing corporate meeting minutes, resolutions, mail forwarding, and signature services.  Moreover, Owens and Brauer are alleged to have purposefully established the bank accounts in locations with strict bank secrecy laws, which impeded the ability of the United States to obtain bank records for the accounts.  Owens and Brauer also allegedly instructed U.S. taxpayer clients of Mossack Fonseca about how to repatriate funds to the United States from their offshore bank accounts in a manner designed to keep the undeclared bank accounts concealed.  Among other things, Owens and Brauer instructed clients to use debit cards and fictitious sales to repatriate their funds covertly, the indictment alleges.

Von Der Goltz was allegedly one of Mossack Fonseca’s U.S. taxpayer clients.  At all relevant times, Von Der Goltz was a U.S. resident and was subject to U.S. tax laws, which required him to report and pay income tax on worldwide income, including income and capital gains generated in domestic and foreign bank accounts.  U.S. citizens, resident aliens, and permanent legal residents with a foreign financial interest in or signatory authority over a foreign financial account worth more than $10,000 are required to file a Report of Foreign Bank and Financial Accounts, commonly known as an FBAR, disclosing the account.  Von Der Goltz is alleged to have evaded his tax reporting obligations by setting up a series of shell companies and bank accounts, and hiding his beneficial ownership of the shell companies and bank accounts from the IRS.  These shell companies and bank accounts allegedly made investments totaling tens of millions of dollars.  According to the indictment, Von Der Goltz was assisted in this scheme by Owens and by Gaffey, a partner at a U.S.-based accounting firm.  In furtherance of Von Der Goltz’s fraudulent scheme, Von Der Goltz, Gaffey, and Owens are alleged to have falsely claimed that Von Der Goltz’s elderly mother was the sole beneficial owner of the shell companies and bank accounts at issue because, at all relevant times, she was a Guatemalan citizen and resident, and — unlike Von Der Goltz — was not a U.S. taxpayer. 

As alleged in the indictment, Gaffey, in addition to assisting Von Der Goltz evade U.S. income taxes and reporting requirements, also worked closely with Owens to help another U.S. taxpayer client (“Client-1”) of Mossack Fonseca defraud the IRS.  Client-1 allegedly maintained a series of offshore bank accounts, which Mossack Fonseca helped Client-1 conceal from the IRS for years.    The indictment further alleges that, upon the advice of Owens and Gaffey, Client-1 covertly repatriated approximately $3 million of Client-1’s offshore money to the United States by falsely stating on Client-1’s federal tax return that the money represented proceeds from the sale of a company.  After Client-1 repatriated approximately $3 million in this manner, approximately $1 million still remained in Client-1’s offshore account, the existence of which remained hidden from the IRS.  

The charges in the indictment are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

The investigation was conducted by IRS-CI and HSI with significant assistance by the Justice Department’s Tax Division and the FBI.  The Justice Department’s Office of International Affairs and law enforcement partners in France and the United Kingdom secured the arrests of the defendants located overseas.                                                                                                                                                                                                                                                     

December 6, 2018 in AML | Permalink | Comments (0)

Friday, November 30, 2018

Former Charter Airline Executive Sentenced to Nearly Eight Years in Prison for Orchestrating Multimillion Dollar Scheme to Steal Passenger Money from Escrow

The former vice president of a now-bankrupt public air charter operator was sentenced to 94 months in prison for her role in a scheme to steal millions of dollars in passenger money for future travel from an escrow account, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and Regional Special Agent in Charge Douglas Shoemaker of the U.S. Department of Transportation Office of the Inspector General’s (DOT-OIG).

Kay Ellison, 58, of Edenton, North Carolina, was sentenced by U.S. District Judge Susan D. Wigenton of the District of New Jersey, who presided over the trial.  Judge Wigenton also ordered the defendant to pay $19.6 million in restitution.  Ellison and her co-defendant, Judy Tull, 73, also of Edenton, were both convicted on March 28, after a seven-day trial, of one count of conspiracy to commit wire fraud affecting financial institutions and to commit bank fraud, four counts of wire fraud affecting financial institutions and three counts of bank fraud.  Ellison is the former vice president and managing partner of Myrtle Beach Direct Air and Tours (Direct Air), which was headquartered in Myrtle Beach, South Carolina, with operations in Daniels, West Virginia, and Tull is its former CEO.  Tull is scheduled to be sentenced at a later date.

“Kay Ellison stole tens of millions of dollars of passenger money in a brazen scheme that put a veneer of success on a failing company, and left others holding the bag—until today,” said Assistant Attorney General Benczkowski.  “Her sentence sends a powerful deterrent message—especially to corporate executives—and demonstrates the commitment of the Criminal Division and its law enforcement partners to uncovering and vigorously prosecuting corporate fraud wherever it is found.”

“The sentencing in this investigation demonstrates that the Department of Transportation Office of Inspector General is committed to stopping charter flight operators who intentionally mislead and defraud the traveling public for personal gain,” said DOT-OIG Regional Special Agent in Charge Shoemaker.  “Together with the Department of Justice, we will continue to vigorously pursue and prosecute fraud that erodes consumer confidence in the integrity of transportation-related goods and services.”

According to evidence presented at trial, from October 2007 through March 2012, Ellison and Tull engaged in a scheme to steal passengers’ money for future travel from an escrow account by artificially inflating the amount of money that the defendants claimed they were entitled to receive, and by sending this falsified amount in a letter to the escrow bank telling the escrow bank to release the money.  The evidence further established that to cover up their fraud, the defendants falsified profit and loss statements to make the company look like it was making money rather than losing money, and sent these falsified documents to credit card companies and banks to trick them into continuing to do business with the company.

Testimony at trial established that two financial institutions incurred losses of nearly $30 million for having to refund thousands of passengers their money that should have been held for them in escrow, but was actually stolen by the defendants as part of their fraud.

Robert Keilman, 73, of Marlboro, New Jersey, Direct Air’s former chief financial officer, pleaded guilty to charges stemming from his role in this scheme and will be sentenced separately. 

This case was investigated by DOT-OIG.  Trial Attorneys Cory E. Jacobs and Michael T. O’Neill of the Criminal Division’s Fraud Section are prosecuting the case. 

November 30, 2018 in AML | Permalink | Comments (0)