International Financial Law Prof Blog

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

Sunday, April 14, 2019

Univar USA Inc. to Pay U.S. $62.5 Million to Resolve Allegations that it Evaded $36 Million in Antidumping Duties on Imported Chinese Saccharin

Univar USA Inc. (Univar), a subsidiary of Univar Inc., of Downers Grove, Illinois, has agreed to pay the United States $62.5 million to settle allegations under the customs penalty statute that it was grossly negligent or negligent when it imported 36 shipments of transshipped saccharin between 2007 and 2012. The saccharin was manufactured in China and transshipped through Taiwan to evade a 329 percent antidumping duty that applied to saccharin from China.  The antidumping duty was a remedial measure in response to injury sustained by the domestic saccharin industry by reason of dumping of Chinese saccharin. The transshipment resulted in the evasion of approximately $36 million in antidumping duties. 

“Transshipment of merchandise through third countries to evade antidumping duties undermines the integrity of our trade laws and puts domestic manufacturers at risk from unfairly traded merchandise,” said Assistant Attorney General Jody Hunt for the Department of Justice’s Civil Division. “We enforce our laws against importers who fail to take all reasonable steps to vet their suppliers and determine the true country of origin of their merchandise.” 

The settlement resolves a lawsuit brought in the United States Court of International Trade seeking recovery of unpaid antidumping duties and penalties under 19 U.S.C. § 1592 totaling $84 million plus interest. In that action, the government alleged that Univar was grossly negligent or negligent in failing to determine that its supplier in Taiwan was not a manufacturer but, instead, imported saccharin into Taiwan from China for transshipment to the United States. This is the largest recovery under section 1592 ever reached in the Court of International Trade.      

“We are committed to ensuring the laws that protect legitimate trade and US domestic industry, including anti-dumping and countervailing duties laws, are vigorously enforced,” said CBP’s Office of Trade Executive Assistant Commissioner Brenda Smith. “And to that end, we applaud the agencies that came together to settle this case.”

“I applaud the outcome of this investigation and commend the efforts of the special agents and CBP personnel who worked so diligently on this,” said Homeland Security Investigations (HSI) Executive Associate Director Derek Benner. “This is a tremendous example of the agencies’ collaborative commitment to enforce the trade laws of the United States.”

The settlement announced today was the result of an investigation by the U.S. Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and the Commercial Litigation Branch of the Justice Department’s Civil Division.  The investigating ICE agent was Special Agent Patrick C. Deas. The case was handled by Commercial Litigation Branch Attorneys Patricia M. McCarthy, Stephen C. Tosini and Reta E. Bezak, and CBP Assistant Chief Counsel Currita C. Waddy.

April 14, 2019 in AML | Permalink | Comments (0)

Saturday, April 13, 2019

BiPartisan STATES Act To Effectively Legalize Marijuana at Federal Level (other than for the Tax Code)

Today, 46 states have laws permitting or decriminalizing marijuana or marijuana-based products. Washington D.C., Puerto Rico, Guam, and a number of tribes have similar laws. (Previous version of the bipartisan bill is here)

 As states began developing their own approaches to marijuana enforcement the Department of Justice issued guidance to support these state actions and focus law enforcement resources.

 However, this guidance was withdrawn in 2018, causing legal uncertainty that severely limits these state laboratories of democracy, creates public health and safety issues, and undermines the state regulatory regimes.

 As more states, territories, and tribes thoughtfully consider updates to marijuana regulations, often through voter-initiated referendums, it is critical that Congress take immediate steps to safeguard their right to do so.

The Strengthening the Tenth Amendment Through Entrusting States (STATES) Act ensures that each State has the right to determine for itself the best approach to marijuana within its borders.

 Amends the Controlled Substances Act (21 U.S.C. § 801 et seq.) (CSA) so that -- as long as states and tribes comply with a few basic protections -- its provisions no longer apply to any person acting in compliance with State or tribal laws relating to the manufacture, production, possession, distribution, dispensation, administration, or delivery of marijuana.

 Amends the definition of “marihuana” under the CSA (21 U.S.C. § 802(16)) to exclude industrial hemp, as defined in section 7606(b) of the Agricultural Act of 2014 (7 U.S.C. §

 The bill does not alter CSA Section 417 (prohibition on endangering human life while manufacturing a controlled substance) and maintains the prohibition on employing persons under age 18 in marijuana operations, two federal requirements with which states, territories, and tribes must continue to comply.

 The bill prohibits the distribution of marijuana at transportation safety facilities such as rest areas and truck stops (Section 409).

 The bill does not allow for the distribution or sale of marijuana to persons under the age of 21 (Section 418) other than for medical purposes.

 To address financial issues caused by federal prohibition, the bill clearly states that compliant transactions are not trafficking and do not result in proceeds of an unlawful transaction.

April 13, 2019 in AML | Permalink | Comments (0)

Friday, April 12, 2019

Federal Indictments in Health Care Fraud Scheme Involving 24 Telemedicine and Durable Medical Equipment (DME) Marketing Executives Responsible for Over $1.2 Billion Billings

Hundreds of Thousands of Elderly and/or Disabled Patients Nationwide and Abroad Lured into Criminal Scheme; Center for Program Integrity, Center for Medicare Services, Takes Administrative Action Against 130 DME Companies That Submitted Over $1.7 Billion

One of the largest health care fraud schemes investigated by the FBI and the U.S. Department of Health and Human Services Office of the Inspector General (HHS-OIG) and prosecuted by the Department of Justice resulted in charges against 24 defendants, including the CEOs, COOs and others associated with five telemedicine companies, the owners of dozens of durable medical equipment (DME) companies and three licensed medical professionals, for their alleged participation in health care fraud schemes involving more than $1.2 billion in loss, as well as the execution of over 80 search warrants in 17 federal districts.  In addition, the Center for Medicare Services, Center for Program Integrity (CMS/CPI) announced today that it took adverse administrative action against 130 DME companies that had submitted over $1.7 billion in claims and were paid over $900 million.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Sherri A. Lydon of the District of South Carolina, U.S. Attorney Craig Carpenito of the District of New Jersey, U.S. Attorney Maria Chapa Lopez of the Middle District of Florida, Assistant Director Robert Johnson of the FBI’s Criminal Investigative Division, Deputy Inspector General for Investigations Gary Cantrell of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG), Chief Don Fort of the IRS Criminal Investigation (CI) and Deputy Administrator and Director of CPI Alec Alexander of the CMS/CPI made the announcement.

The charges announced today target an alleged scheme involving the payment of illegal kickbacks and bribes by DME companies in exchange for the referral of Medicare beneficiaries by medical professionals working with fraudulent telemedicine companies for back, shoulder, wrist and knee braces that are medically unnecessary.  Some of the defendants allegedly controlled an international telemarketing network that lured over hundreds of thousands of elderly and/or disabled patients into a criminal scheme that crossed borders, involving call centers in the Philippines and throughout Latin America.  The defendants allegedly paid doctors to prescribe DME either without any patient interaction or with only a brief telephonic conversation with patients they had never met or seen.  The proceeds of the fraudulent scheme were allegedly laundered through international shell corporations and used to purchase exotic automobiles, yachts and luxury real estate in the United States and abroad.

“These defendants — who range from corporate executives to medical professionals — allegedly participated in an expansive and sophisticated fraud to exploit telemedicine technology meant for patients otherwise unable to access health care,” said Assistant Attorney General Benczkowski.  “This Department of Justice will not tolerate medical professionals and executives who look to line their pockets by cheating our health care programs.  I commend the Criminal Division prosecutors and our partners from U.S. Attorney’s Offices and law enforcement agencies across the country for their unrelenting efforts to stop this alleged fraud before more money was stolen from American taxpayers.”

“Simply put, the law applies equally to all in South Carolina,” said U.S. Attorney Sherri Lydon.  “The same spoon that serves indictments on drug dealers, felons in possession of firearms, and corrupt officials will also feed those companies and individuals who engage in Medicare fraud.  White collar crime is not victimless.  All taxpayers will endure the rising cost of health care premiums and out-of-pocket costs as a result of fraud on our Medicare system.  I am honored to stand with our partners at the FBI, HHS-OIG, and IRS-CI, who led this outstanding and nationally significant investigation from right here in South Carolina.”

“The indictments we are unsealing today charge the defendants with running a complex, multilayered scheme to defraud our Medicare system and avoid detection by government regulators,” said U.S. Attorney Craig Carpenito.  “The defendants took advantage of unwitting patients who were simply trying to get relief from their health concerns.  Instead, the defendants preyed upon their weakened state and pushed millions of dollars’ worth of unnecessary medical devices, which Medicare paid for, and then set up an elaborate system for laundering their ill-gotten proceeds. We are proud to join our law enforcement partners in New Jersey and around the country to put a stop to this unscrupulous criminal activity.”

“Protecting the integrity of America’s health care programs is necessary to ensure that our citizens receive the care they have paid for and deserve,” said U.S. Attorney Chapa Lopez.  “The mammoth coordination and cooperation demonstrated among the various offices, districts, and agencies involved in this case leaves no doubt. We will leverage the full weight of our resources to combat fraud and abuse, wherever it is found.”

“Today, one of the largest health care fraud schemes in U.S. history came to an end thanks to close collaboration and coordination between the FBI and partners including HHS-OIG and IRS-CI,” said FBI Assistant Director Robert Johnson.  “Health care fraud causes billions of dollars in losses, it deprives real patients of the critical health care services they need, and it can endanger the lives of real patients so individuals like those arrested today can profit from their criminal activity.  Through today’s coordinated national effort, we put an end to this egregious and costly health care fraud scheme, and the public can rest assured the FBI will continue to make health care fraud investigations a top priority.”

“Our law enforcement officers are focused on preventing and uprooting health care fraud schemes like those alleged today,” said Deputy Inspector General for Investigations Gary Cantrell.  “These schemes divert money from taxpayer-funded federal health care programs into the hands of criminals.  Working closely with our law enforcement partners, our agency will continue to investigate and disrupt attempts to undermine Medicare and target beneficiaries.”

“The breadth of this nationwide conspiracy should be frightening to all who rely on some form of healthcare,” said IRS-CI Chief Don Fort.  “The conspiracy described in this indictment was not perpetrated by one individual.  Rather, it details broad corruption, massive amounts of greed, and systemic flaws in our healthcare system that were exploited by the defendants.  We all suffer when schemes like this go undiscovered and I’m proud of the work our agents did in working with our partners to uncover this complex scheme.”

“The Centers for Medicare & Medicaid Services (CMS) Center for Program Integrity (CPI) is proud to work very closely everyday with our law enforcement partners to stop exploitation of vulnerable patients and misuse of taxpayer dollars,” said Deputy Administrator and CPI Director Alec Alexander.  “In this case CMS has taken swift administrative action and has suspended payments to 130 distinct providers thereby likely preventing billions of additional dollars in losses.  CMS remains committed to protecting the millions of beneficiaries we are honored to serve and to preventing fraud of all sorts in the Medicare and Medicaid programs.”

According to allegations in court documents, some of the defendants obtained patients for the scheme by using an international call center that advertised to Medicare beneficiaries and “up-sold” the beneficiaries to get them to accept numerous “free or low-cost” DME braces, regardless of medical necessity.  The international call center allegedly paid illegal kickbacks and bribes to telemedicine companies to obtain DME orders for these Medicare beneficiaries.  The telemedicine companies then allegedly paid physicians to write medically unnecessary DME orders.  Finally, the international call center sold the DME orders that it obtained from the telemedicine companies to DME companies, which fraudulently billed Medicare.  Collectively, the CEOs, COOs, executives, business owners and medical professionals involved in the conspiracy are accused of causing over $1 billion in loss.

The Fraud Section leads the Medicare Fraud Strike Force.  Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.  In addition, the HHS Centers for Medicare & Medicaid Services, working in conjunction with the HHS-OIG, are taking steps to increase accountability and decrease the presence of fraudulent providers.


Amongst those charged by Strike Force attorneys include:

In the District of New Jersey, charges were brought against Creaghan Harry, 51, of Highland Beach, Florida; Lester Stockett, 51, of Deefield Beach, Florida; and Elliot Loewenstern, 56, of Boca Raton, Florida; the owner, CEO and VP of marketing, respectively, of purported call centers and telemedicine companies, for their alleged participation in a $454 million illegal health care kickback and international money laundering scheme related to the solicitation of illegal kickbacks and bribes in exchange for the referral of DME orders to DME providers.  In addition, Joseph DeCoroso, M.D., 62, of Toms River, New Jersey, was charged in a $13 million conspiracy to commit health care fraud and separate charges of health care fraud for writing medically unnecessary orders for DME, in many instances without ever speaking to the patients, while working for two telemedicine companies.  The cases are being prosecuted by Fraud Section Acting Assistant Chief Jacob Foster and Trial Attorney Darren Halverson.

In the Middle District of Florida, charges were brought against Willie McNeal, 42, of Spring Hill, Florida, the owner and CEO of two purported telemedicine companies, for his alleged participation in a $250 million scheme related to the solicitation of illegal kickbacks and bribes in exchange for the referral of DME orders to DME providers.  The case is being prosecuted by Fraud Section Acting Assistant Chief Jacob Foster and Trial Attorneys John Michelich, Catherine Wagner and Sara Clingan.

In the Northern District of Texas, charges were brought against Leah Hagen, 48, and Michael Hagen, 51, of Dalworthington Gardens, Texas, owners and operators of two DME companies, for their alleged participation in a $17 million illegal health care kickback scheme related to the payment of kickbacks in exchange for the referral of medically unnecessary DME orders.  The case is being prosecuted by Fraud Section Trial Attorneys Brynn Schiess and Carlos Lopez.

In the Western District of Texas, Christopher O’Hara, 54, of Kingsbury, Texas, the owner of a purported telemedicine company, was charged in an $40 million scheme related to the alleged solicitation of illegal kickbacks and bribes in exchange for the referral of DME orders to DME providers.  The case is being prosecuted by Fraud Section Trial Attorney Kevin Lowell.

In the Eastern District of Pennsylvania, Randy Swackhammer, M.D., 60, of Goldsboro, North Carolina, was charged for an alleged $5 million conspiracy to commit health care fraud that involved writing medically unnecessary orders for DME while working for a telemedicine company, in many instances with only a brief telephonic conversation with the patients.  The case is being prosecuted by Fraud Section Trial Attorney Adam Yoffie.

In the Central District of California, charges were brought against Darin Flashberg, 41, of Glendora, California, and Najib Jabbour, 47, of Glendora, California, owners of seven DME companies, for their alleged participation in a $34 million scheme related to their payment of kickbacks and bribes in exchange for medically unnecessary DME orders.  The case is being prosecuted by Fraud Section Trial Attorney Robyn Pullio.


In addition to the Strike Force prosecutions, other enforcement actions were taken, including the execution of search warrants to support related investigative efforts in seven additional U.S. Attorney’s Offices to include in various investigations conducted by the District of New Jersey, District of South Carolina, Southern District of California, District of Nebraska, Middle District of Florida, Eastern District of Missouri and Western District of Washington. 

In the District of South Carolina, charges were brought against Andrew Chmiel, 43, of Mt. Pleasant, South Carolina, owner of over a dozen companies involved in the scheme, for his alleged participation in a $200 million scheme related to the payment of kickbacks and bribes in exchange for medically unnecessary DME orders.  The cases are being prosecuted by Assistant U.S. Attorneys Jim May and Will Lewis of the District of South Carolina.

In the District of New Jersey, charges were brought against Neal Williamsky 59, of Marlboro, New Jersey, and Nadia Levit, 39, of Englishtown, New Jersey, owners of approximately 25 DME companies, for their alleged participation in a $150 million scheme related to the payment of kickbacks and bribes in exchange for medically unnecessary DME orders.  Albert Davydov, 26, of Rego Park, New York, was also charged for his alleged participation in a $35 million scheme related to the payment of kickbacks and bribes in exchange for medically unnecessary DME orders.  The cases are being prosecuted by Assistant U.S. Attorneys Brian Urbano and Stephen Ferketic of the District of New Jersey.

In the Middle District of Florida, search and seizure warrants are being executed at 20 different business locations, including numerous DME companies and a fraudulent telemarketing company. The search and seizures are being executed by over 100 law-enforcement officers from six federal agencies, including HHS-OIG, FBI, IRS-CI, VA-OIG, SSA-OIG, and USPS-OIG.  In addition to the 20 search warrants, millions of dollars and other assets tied to the conspiracy are being seized and/or frozen, including through a civil injunction naming 13 defendants as authorized under 18 U.S.C. § 1345.

Any doctors or medical professionals who have been involved with alleged fraudulent telemedicine and DME marketing schemes – including Video Doctor USA, AffordADoc, Web Doctors Plus, Integrated Support Plus and First Care MD – should call to report this conduct to the FBI hotline at 1-800-CALL-FBI.

Additional documents related to this announcement will shortly be available here:

April 12, 2019 in AML | Permalink | Comments (0)

Thursday, April 11, 2019

Obama's White House Counsel Indicted For Lying As Agent of Russia's Ukrainian Government

A federal grand jury returned an indictment charging Gregory B. Craig, President Obama's White House Counsel, a Washington-based lawyer, with making false statements and concealing material information about his activities on behalf of the Russian backed government of Ukraine from the Department of Justice, National Security Division’s Foreign Agents Registration Act Unit (FARA Unit). Download Craig Indictment

Craig, 74, of Washington, D.C., was indicted by a grand jury in the U.S. District Court for the District of Columbia for willfully falsifying and concealing material facts from the FARA Unit, in violation of Title 18, United States Code, Section 1001(a)(1), and for making false and misleading statements to the FARA Unit, in violation Title 22, United States Code, Section 618(a)(2).

An indictment is merely a formal charge that a defendant has committed a violation of criminal laws and is not evidence of guilt.  Every defendant is presumed innocent until, and unless, proven guilty.

The maximum penalties for the charged offenses are, respectively, five years’ imprisonment and a $250,000 fine, and five years’ imprisonment and a $10,000 fine.  The maximum statutory sentence for federal offenses is prescribed by Congress and is provided here for informational purposes.  The sentencing will be determined by the court based on the advisory Sentencing Guidelines and other statutory factors.

This case is being investigated by the FBI’s New York Field Office. It is being prosecuted by Assistant U.S. Attorneys Fernando Campoamor-Sanchez and Molly Gaston of the U.S. Attorney’s Office for the District of Columbia and Trial Attorney Jason McCullough of the Justice Department’s National Security Division.

April 11, 2019 in AML | Permalink | Comments (0)

Tuesday, April 9, 2019

Standard Chartered Bank Admits to Illegally Processing Transactions in Violation of Iranian Sanctions and Agrees to Pay More Than $1 Billion

Iranian National Indicted and Former SCB Employee Pleaded Guilty for Criminal Conspiracy to Violate Iranian Sanctions

Standard Chartered Bank (SCB), a global financial institution headquartered in London, England, has agreed to forfeiture of $240 million, a fine of $480 million, and to the amendment and extension of its deferred prosecution agreement (DPA) with the Justice Department for an additional two years for conspiring to violate the International Emergency Economic Powers Act (IEEPA).  This criminal conspiracy, lasting from 2007 through 2011, resulted in SCB processing approximately 9,500 financial transactions worth approximately $240 million through U.S. financial institutions for the benefit of Iranian entities. 

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Jessie K. Liu of the District of Columbia, Assistant Director in Charge William F. Sweeney, Jr. of the FBI’s New York Field Office, Chief Don Fort of the IRS Criminal Investigation (CI), and District Attorney Cyrus R. Vance Jr. of New York County made the announcement.

The New York County District Attorney’s Office (DANY) is also announcing today that SCB has agreed to amend its DPA with DANY and extend for two additional years, and to pay an additional financial penalty of $292,210,160.  Under the amended DPA with DANY, SCB has admitted that it violated New York State law by, among other things, falsifying the records of New York financial institutions.  SCB has also entered into separate settlement agreements with the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC), the Board of Governors of the Federal Reserve System (the Federal Reserve), the New York State Department of Financial Services (DFS), and the United Kingdom’s Financial Conduct Authority (FCA) under which SCB shall pay additional penalties totaling more than $477 million.  The Justice Department has agreed to credit a portion of these related payments and, after crediting, will collect $52,210,160 of the fine, in addition to SCB’s $240 million forfeiture.

In connection with the conspiracy, a former employee of SCB’s branch in Dubai, United Arab Emirates (UAE), referred to as Person A, pleaded guilty in the District of Columbia for conspiring to defraud the United States and to violate IEEPA.  A two-count criminal indictment was unsealed today in federal court in the District of Columbia charging Mahmoud Reza Elyassi, an Iranian national, 49, and former customer of SCB Dubai, with participating in the conspiracy.

“Today’s resolution sends a clear message to financial institutions and their employees: if you circumvent U.S. sanctions against rogue states like Iran—or assist those who do—you will pay a steep price,” said Assistant Attorney General Benczkowski.  “When a global bank processes transactions through the U.S. financial system, its compliance program must be up to the task of detecting and preventing sanctions violations—and when it is not, banks have an obligation to identify, report, and remediate any shortcomings.  The Justice Department is committed to protecting our U.S. financial system and will continue to hold financial institutions and individuals to account when they violate U.S. sanctions laws.” 

“SCB and the individuals whose charges were unsealed today undermined the integrity of our financial system and harmed our national security by deliberately providing Iranians with coveted access to the U.S. economy,” said U.S. Attorney Liu.  “The financial penalty announced today leaves no doubt that repeat corporate offenders with deficient compliance programs will pay a steep price.  When bank employees and customers conspire to violate U.S. sanctions and subvert our national security, we will bring them to justice no matter where they reside or operate.”

“U.S. sanctions laws exist to protect our national security and the integrity of our financial systems,” said FBI Assistant Director in Charge Sweeney.  “Global banks that facilitate transactions through our financial institutions have to play by these rules, plain and simple.  Allowing hostile nations access to our economy is dangerous business.  The deferred prosecution agreement and charges announced today make it abundantly clear that any alleged violation of IEEPA, whether on behalf of an individual or entity, will not be taken lightly.”

“The financial penalty announced today should dissuade other financial institutions around the world from thinking they can circumvent U.S. sanctions by moving money around the world through various institutions and in various forms,” said IRS-CI Chief Fort.  “Following complex money trails is what we do—so too is holding those accountable who try to avoid following the law.”

“Our office’s unique jurisdiction and expert personnel have again enabled us to deliver hundreds of millions in ill-gotten gains to the People of New York while contributing to America’s longstanding effort to promote democratic values around the world,” said Manhattan District Attorney Vance.  “We are honored and privileged to collaborate in this shared endeavor with the supremely talented public servants of the U.S. Departments of Justice and Treasury, the New York Department of Financial Services, and the Federal Reserve Bank of New York.”

A two-count felony criminal information was filed today in the District of Columbia charging SCB with illegally conspiring to violate IEEPA.  The first count alleges SCB’s participation in a criminal conspiracy from 2001 through 2007; the United States first charged SCB with this illegal conduct on Dec. 10, 2012, and under the terms of a DPA entered the same day, the government agreed to defer prosecution and SCB agreed to pay a financial penalty of $227 million.  The second count alleges SCB’s participation in a criminal conspiracy to violate IEEPA from 2007 through 2011.  This latter conspiracy resulted in SCB intentionally processing U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities worth approximately $240 million.  In the amended DPA, SCB admitted and accepted responsibility for its criminal conduct, agreed to extend the term of the agreement for an additional two years and, among other things, agreed to additional cooperation, compliance and disclosure obligations. 

As part of the amended DPA announced today, SCB admitted that, from 2007 through 2011, two former employees of its branch in Dubai, willfully conspired to help Iran-connected customers conduct U.S. dollar transactions through the U.S. financial system for the benefit of Iranian individuals and entities.  One of these Iran-connected customers was Elyassi, an Iranian national who operated business accounts with SCB’s Dubai branch while residing in Iran.  SCB’s former employees helped Elyassi manage these accounts, concealed their Iranian connections, and facilitated foreign currency transactions in U.S. dollars.  SCB’s former employees knew that Elyassi’s business organizations operated from Iran and conducted U.S. dollar transactions for the benefit of Iranian interests, and helped Elyassi disguise his Iranian connections to avoid suspicion.

According to the indictment unsealed today, Elyassi and his co-conspirators registered numerous supposed general trading companies in the UAE, and used those companies as fronts for a money exchange business located in Iran.  Between November 2007 and August 2011, Elyassi used a business account at SCB’s Dubai branch to cause U.S. dollar transactions to be sent and received through the U.S. financial system for the benefit of individuals and entities ordinarily resident in Iran in violation of U.S. economic sanctions.  The charges in the indictment as to Elyassi are merely allegations, and Elyassi is presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

SCB admitted to processing approximately 9,500 U.S. dollar transactions through the United States totaling approximately $240 million on behalf of Elyassi’s companies between 2007 and 2011.  More than half of these U.S. dollar transactions were the result of deficiencies in SCB’s compliance program which allowed customers to request U.S. dollar transactions from within sanctioned countries, including Iran.

Since mid-2013, SCB has engaged in significant remediation, including the comprehensive enhancement of its U.S. economic sanctions compliance program and significant improvements to its financial crime compliance program.  Once presented with evidence of potential post-2007 sanctions violations, SCB provided substantial cooperation in the government’s investigation, including by producing significant evidence of criminal wrongdoing perpetrated by its employees and customers.

This matter was investigated by the FBI’s New York Field Office and the IRS-CI’s Washington D.C. Field Division.  The cases are being prosecuted by the Criminal Division’s Money Laundering and Asset Recovery Section’s Bank Integrity Unit and the U.S. Attorney’s Office for the District of Columbia.  Trial Attorney Jennifer Wine of the Bank Integrity Unit and Assistant U.S. Attorneys Michael Friedman and Peter Lallas of the District of Columbia are handling the matters.

The Bank Integrity Unit investigates and prosecutes complex, multi-district, and international criminal cases involving financial institutions.  The Unit’s prosecutions focus on 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.

The New York County District Attorney’s Office conducted its own investigation in conjunction with the Justice Department, including Assistant District Attorneys Jose Fanjul and Kevin Wilson serving as Special Assistant U.S. Attorneys in the District of Columbia.  The Justice Department expressed its gratitude to OFAC, the Federal Reserve, DFS, and the FCA.  The Justice Department’s Office of International Affairs provided assistance.


April 9, 2019 in AML | Permalink | Comments (0)

Congressional Staffer Sentenced to Prison for Extensive Fraud and Election Crimes Scheme

A former congressional staffer was sentenced to 18 months in prison followed by three years of supervised release and ordered to pay $564,718.65 in restitution and $156,855.29 in forfeiture, for participating in a multi-year scheme to defraud charitable donors of hundreds of thousands of dollars and secretly funnel the proceeds to pay for personal expenses and illegally finance campaigns for federal office. 

Jason T. Posey, 48, of Tupelo, Mississippi, was sentenced in the U.S. District Court for the Southern District of Texas by Chief U.S. District Judge Lee H. Rosenthal.  Posey pleaded guilty on Oct. 11, 2017, to one count of mail fraud, one count of wire fraud and one count of money laundering.  As part of his plea, Posey admitted that he participated in a scheme led by former U.S. Representative Stephen E. Stockman, 62, who was convicted by a federal jury in Houston on April 12, 2018, of 23 counts of mail fraud, wire fraud, conspiracy to make conduit contributions and false statements to the Federal Election Commission (FEC), making false statements to the FEC, making excessive coordinated campaign contributions, money laundering and filing a false tax return.  Another of Stockman’s former congressional staffers, Thomas Dodd, 40, of Houston, Texas, pleaded guilty on March 20, 2017, to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to make conduit contributions and false statements.  On Dec. 12, 2018, Dodd was sentenced to serve 18 months in prison and ordered to pay $800,000 in restitution, to be followed by three years of supervised release.

According to the admissions made by Posey in connection with his guilty plea, from January 2013 to February 2014, Posey assisted Stockman in fraudulently soliciting $800,571.65 in donations from charitable organizations and the individuals who ran those organizations based on false pretenses, then using a series of sham nonprofit organizations and dozens of bank accounts to launder the money before it was spent on a variety of personal and campaign expenses. 

Specifically, Posey admitted that shortly after Stockman took office as a member of the U.S. House of Representatives in 2013, Stockman and Dodd used the name of one sham nonprofit entity, Life Without Limits, to solicit and receive a $350,000 charitable donation, to be used to create an educational center called the Freedom House.  Stockman, Dodd, and Posey instead used this donation for a variety of personal and campaign expenses, including illegal conduit campaign contributions, and payments for hundreds of thousands of robocalls and mailings promoting Stockman’s candidacy for U.S. Senate in early 2014.

In addition, Posey admitted that, in connection with Stockman’s Senate campaign, Stockman and Posey used another sham nonprofit entity called Center for the American Future to secure a $450,571.65 donation in order to fund a purportedly legitimate independent expenditure promoting Stockman’s candidacy.  Posey admitted that the purportedly independent expenditure was in fact secretly controlled by Stockman, who directed his campaign and Posey to file false affidavits with the FEC covering up Stockman’s involvement. 

In addition, Posey admitted that during the early stages of the investigation, Stockman directed Posey to flee to Cairo, Egypt, for two and a half years so that Posey could not be questioned by law enforcement.

April 9, 2019 in AML | Permalink | Comments (0)

Monday, April 8, 2019

The Founder and Chairman of a Multinational Investment Company, a Company Consultant and Two North Carolina Political Figures are Charged with Public Corruption and Bribery

A federal criminal indictment unsealed in the Western District of North Carolina charges the founder and Chairman of a multinational investment company, a company consultant and two North Carolina political figures with public corruption and bribery, for their alleged participation in a bribery scheme involving independent expenditure accounts and improper campaign contributions.

The indictment charges Greg E. Lindberg, 48, of Durham, North Carolina, and founder and Chairman of Eli Global LLC (Eli Global) and the owner of Global Bankers Insurance Group (GBIG); John D. Gray, 68, of Chapel Hill, North Carolina and a consultant for Lindberg; North Carolina state political party Chairman Robert Cannon Hayes, 73, of Concord, North Carolina; and Chairman of a Chatham County political party and an Eli Global executive John V. Palermo, 63, of Pittsboro, North Carolina, with conspiracy to commit honest services wire fraud, and bribery concerning programs receiving federal funds and aiding and abetting.  Hayes is also charged with three counts of making false statements to the FBI.

The defendants made their initial appearances today before U.S. Magistrate Judge David C. Keesler in federal court in Charlotte.

“The indictment unsealed today outlines a brazen bribery scheme in which Greg Lindberg and his coconspirators allegedly offered hundreds of thousands of dollars in campaign contributions in exchange for official action that would benefit Lindberg’s business interests,” said Assistant Attorney General Benczkowski.  “Bribery of public officials at any level of government undermines confidence in our political system.  The Criminal Division will use all the tools at our disposal—including the assistance of law-abiding public officials—to relentlessly investigate and prosecute corruption wherever we find it.”

“Thanks to the voluntary reporting of the North Carolina Commissioner of Insurance, we have uncovered an alleged scheme to violate our federal public corruption laws,” said U.S. Attorney Murray.  “Improper campaign contributions erode the public’s trust in our political institutions.  We will work with our law enforcement partners to investigate allegations of public corruption, safeguard the integrity of the democratic process, and prosecute those who compromise it.”

“These men crossed the line from fundraising to felonies when they devised a plan to use their connections to a political party to attempt to influence the operations and policies of the North Carolina Department of Insurance,” said Special Agent in Charge Strong.  “The FBI will root out any and all forms of public corruption.  We remain committed to ensuring those who violate the public’s sacred trust are held accountable.”

The criminal indictment alleges that in January 2018, the elected Commissioner of Insurance (Commissioner) of the North Carolina Department of Insurance (NCDOI) reported concerns to federal law enforcement about political contributions and other requests made by Lindberg and Gray, and agreed to cooperate with the federal investigation that was initiated. 

According to allegations in the indictment, from April 2017 to August 2018, Lindberg, Gray, Palermo and Hayes devised a scheme to defraud and deprive the citizens of North Carolina of the honest services of the Commissioner, an elected State official, through bribery.  As alleged in the indictment, the defendants engaged in a bribery scheme involving independent expenditure accounts and improper campaign contributions, for the purpose of causing the Commissioner to take official action favorable to Lindberg’s company, GBIG.  As the indictment alleges, the defendants gave, offered, and promised the Commissioner millions of dollars in campaign contributions and other things of value, in exchange for the removal of NCDOI’s Senior Deputy Commissioner, who was responsible for overseeing regulation and the periodic examination of GBIG. 

During the time frame relevant to the indictment, Lindberg, Gray, Palermo and the Commissioner held numerous in-person meetings at different locations, including in Statesville, North Carolina, and had telephonic and other communications with each other, and with Hayes, to discuss Lindberg’s request for the personnel change in exchange for millions of dollars, and to devise a plan on how to funnel campaign contributions to the Commissioner anonymously.  In order to conceal the bribery scheme, Palermo allegedly set up, at the direction of Lindberg, two corporate entities to form an independent expenditure committee with the purpose of supporting the Commissioner’s re-election campaign, and funded the entities with $1.5 million as promised to the Commissioner.  Also, at Lindberg and Gray’s direction, Hayes allegedly caused the transfer of $250,000 from monies Lindberg had previously contributed to a North Carolina state party of which Hayes was Chairman, to the Commissioner’s re-election campaign.

On or about Aug. 28, 2018, FBI agents interviewed Hayes about his involvement with and knowledge of the alleged improper campaign contributions.  During the interview, Hayes allegedly lied to FBI agents about directing funds, at Lindberg’s request, from Lindberg’s campaign contribution to the North Carolina state political party to the Commissioner’s re-election campaign; about having any discussions with the Commissioner about Lindberg or Gray; and about discussing with the Commissioner personnel issues related to the Commissioner’s office.  

April 8, 2019 in AML | Permalink | Comments (0)

Sunday, April 7, 2019

Texas Men Arrested for Bribery, Attorney Laundered Via IOLTA Account

Three Texas men, including a former Weslaco City Commissioner and a former Hidalgo County Commissioner, were arrested on charges of conspiracy to commit honest services wire fraud and conspiracy to commit money laundering. Download Cuellar Criminal Complaint

Criminal complaints were filed in the Southern District of Texas against former Weslaco City Commissioner John Cuellar, 56, of Weslaco, Texas, and former Hidalgo County Commissioner Arturo Cuellar Jr., 65, of Hidalgo County, Texas.  They are charged with conspiring to bribe a Weslaco City Commissioner in exchange for official actions favorable to three engineering companies and conspiracy to commit money laundering.  Daniel Garcia, 40, an attorney based in Rio Grande City, Texas, was also charged with conspiracy to commit money laundering.

According to the complaint, starting in approximately March 2008, Cuellar agreed to accept bribes from three engineering companies that were funneled through Cuellar Jr. and others. Cuellar and another Weslaco City Commissioner would then allegedly take actions favorable to the three companies in relation to contracts to rehabilitate and rebuild Weslaco’s water treatment facilities. 

According to the complaint, from approximately April 2008 through December 2015, Lopez received approximately $3.7 million from two engineering companies, and shared approximately $1.398 million with Cuellar Jr.  The complaint further alleges that Cuellar Jr. used a company he controlled to pay Cuellar approximately $405,000, disguised as legitimate legal expenses.  In exchange for these payments, Cuellar allegedly took several official actions to benefit the three construction companies, including the award of a $38.5 million contract to rehabilitate Weslaco’s water treatment plant.

The complaint further alleges that Lopez and Cuellar, Jr. enlisted Garcia, an attorney, to launder approximately $90,000 in bribe payments to Cuellar through Garcia’s interest on lawyers trust (IOLTA) account.

April 7, 2019 in AML | Permalink | Comments (0)

Saturday, April 6, 2019

South Florida Health Care Facility Owner Convicted for Role in Largest Health Care Fraud Scheme Ever Charged by The Department of Justice, Involving $1.3 Billion in Fraudulent Claims

A federal jury found a South Florida health care facility owner guilty for his role in the largest health care fraud scheme ever charged by the Justice Department, involving over $1.3 billion in fraudulent claims to Medicare and Medicaid for services that were not provided, were not medically necessary or were procured through the payment of kickbacks. 

After an eight-week trial, Philip Esformes, 50, of Miami Beach, Florida, was convicted of one count of conspiracy to defraud the United States, two counts of receipt of kickbacks in connection with a federal health care program, four counts of payment of kickbacks in connection with a federal health care program, one count of conspiracy to commit money laundering, nine counts of money laundering, two counts of conspiracy to commit federal program bribery, and one count of obstruction of justice before U.S. District Judge Robert N. Scola Jr. of the Southern District of Florida.  Sentencing has not yet been scheduled.

“Philip Esformes orchestrated one of the largest health care fraud schemes in U.S. history, defrauding Medicare and Medicaid to the tune of over a billion dollars,” said Assistant Attorney General Benczkowski.  “I commend our dedicated prosecutors and law enforcement partners for their professionalism and unyielding pursuit of justice on behalf of American taxpayers and vulnerable beneficiaries who, as a result of Esformes’s crimes, were denied the level of care that they needed and deserved.”

“Philip Esformes’ criminal scheme defrauded America’s health care system out of millions of dollars, that would have otherwise provided quality care to patients in need,” said U.S. Attorney Fajardo Orshan.  “I commend the Assistant U.S. Attorneys from the Southern District of Florida, who worked tirelessly alongside their partners at the Department’s Criminal Division, the FBI and HHS-OIG to bring this case to justice.  This massive fraud scheme, perpetuated in nursing and assisted living facilities in our South Florida communities, compromised the integrity of our local health care system.  We remain united in our commitment to root out health care fraud and support quality patient care.”

“Philip Esformes is a man driven by almost unbounded greed,” said Assistant Special Agent in Charge Denise M. Stemen of FBI Miami.  “The illicit road Esformes took to satisfy his greediness led to over $800 million in fraudulent health care claims, the largest amount ever charged by the Department of Justice.  Along that road, Esformes cycled patients through his facilities in poor condition where they received inadequate or unnecessary treatment, then improperly billed Medicare and Medicaid.  Taking his despicable conduct further, he bribed doctors and regulators to advance his criminal conduct and even bribed a college official in exchange for gaining admission for his son to that university.  The FBI and its partners are constantly investigating health care fraudsters, big and small, who steal money from taxpayers at the expense of patients in need of quality medical care.”

“This largest ever healthcare fraud conviction highlights the awful toll criminal schemes take on federal health programs,” said HHS-OIG Special Agent in Charge Richmond.  “Even beyond the vital dollars lost though, Esformes exploited and victimized patients by providing inadequate medical care and poor conditions in his nursing homes.  Along with our law enforcement partners, we will continue the fight against such parasites.”

According to evidence presented at trial, from approximately January 1998 through July 2016, Esformes led an extensive health care fraud conspiracy involving a network of assisted living facilities and skilled nursing facilities that he owned.  Esformes bribed physicians to admit patients into his facilities, and then cycled the patients through his facilities, where they often failed to receive appropriate medical services, or received medically unnecessary services, which were then billed to Medicare and Medicaid, the evidence showed.  Several witnesses testified to the poor conditions in the facilities and the inadequate care patients received, which Esformes was able to conceal from authorities by bribing an employee of a Florida state regulator for advance notice of surprise inspections scheduled to take place at his facilities.  The evidence further showed that Esformes used his criminal proceeds to make a series of extravagant purchases, including luxury automobiles and a $360,000 watch.  Esformes also used criminal proceeds to bribe the basketball coach at the University of Pennsylvania in exchange for his assistance in gaining admission for his son into the university.  Altogether, the evidence established that Esformes personally benefited from the fraud and received in excess of $37 million. 

Esformes’s coconspirator, physician’s assistant Arnaldo Carmouze, previously pleaded guilty to conspiracy to commit health care fraud and is scheduled to be sentenced on April 10.  Esformes’s coconspirator Odette Barcha also pleaded guilty to one count of conspiring to violate the anti-kickback statute.  Barcha was sentenced on April 3 to serve 15 months in prison followed by three years of supervised release.  She was also ordered to pay $704,516.00 in restitution.

This case was investigated by the FBI and HHS-OIG and was brought as part of the Medicare Fraud Strike Force, under the supervision of the Criminal Division’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Florida with assistance from Florida Attorney General’s Office Medicaid Fraud Control Unit  The case was prosecuted by Fraud Section Assistant Chiefs Allan Medina and Drew Bradylyons and Trial Attorneys James Hayes, Elizabeth Young and Jeremy Sanders, as well as Assistant U.S. Attorneys John Shipley and Dan Bernstein of the Southern District of Florida.  Assistant U.S. Attorneys Alison Lehr, Nalina Sombuntham and Daren Grove of the Southern District of Florida are handling the forfeiture aspects of the case.

The Fraud Section leads the Medicare Fraud Strike Force, which is part of a joint initiative between the Department of Justice and HHS to focus their efforts to prevent and deter fraud and enforce current anti-fraud laws around the country.  Since its inception in March 2007, the Medicare Fraud Strike Force, which maintains 14 strike forces operating in 23 districts, has charged nearly 4,000 defendants who have collectively billed the Medicare program for more than $14 billion.

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

Saturday, March 30, 2019

Former Lobbyist Guilty - 5 Year Multi-Million High-Yield Investment Fraud Scheme

A former lobbyist pleaded guilty today to making a false statement to U.S. Postal Inspectors in connection with an ongoing federal investigation and proceedings concerning a five-year multi-million dollar high-yield investment fraud scheme, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  

Christopher Petrella, 51, of Greer, South Carolina, pleaded guilty before U.S. Magistrate Judge David S. Cayer of the Western District of North Carolina to one count of making a false statement.  Sentencing, which has not yet been scheduled, will be before U.S. District Judge Robert J. Conrad of the Western District of North Carolina.

Petrella was indicted in October 2018 for one count of obstruction of justice. Under the plea agreement, the government will move to dismiss the indictment at sentencing.   

As part of his guilty plea, Petrella admitted that, in an attempt to mislead federal law enforcement about his involvement in a high-yield investment scheme involving Niyato Industries Inc (Niyato), he knowingly and willfully made the false claim that he had filed a “quarterly report” with U.S. Congress pursuant to certain requirements applicable to federal lobbyists, such as himself.  The “quarterly report” purportedly disclosed to authorities that certain individuals had made false and misleading statements about Niyato’s business and operations on Niyato’s Twitter and Facebook pages. 

Ten individuals had been previously indicted by a Charlotte grand jury for their alleged roles in a high-yield investment scheme involving Niyato.  The charges in that case allege that the defendants raised money from investors by representing that Niyato manufactured electric and compressed natural gas automobiles when, in truth, the company had no facilities, no operations and no capability to manufacture anything.  Two defendants were recently found guiltyof conspiracy to commit mail and wire fraud, mail fraud, wire fraud, and money laundering, following a three-week trial and are awaiting sentencing.  Four other defendants have pleaded guilty and are awaiting sentencing.  One additional defendant has pleaded guilty and received a sentence of 102 months in prison in connection with his role in the Niyato case and in an unrelated Costa Rican sweepstakes fraud.  Daniel Thomas Broyles, Sr., 61, of Beverly Hills, California, was also charged and remains a fugitive.  An indictment is merely an allegation and all defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

March 30, 2019 in AML | Permalink | Comments (0)

Friday, March 29, 2019

Resolving Foreign Bribery Cases with Non-Trial Resolutions

Settlements and Non-Trial Agreements by Parties to the Anti-Bribery Convention

Ever since the entry into force of the OECD Anti-Bribery Convention, bribery offences, including the bribery of foreign public officials, have increasingly been resolved through non-trial resolutions. Of the 890 cases concluded under the Anti-Bribery Convention to date, close to 80% have been through non-trial resolutions. Download Resolving-foreign-bribery-cases-with-non-trial-resolutions

Non-trial resolutions, commonly known as “settlements”, are generally viewed as a pragmatic and efficient way to resolve cases that would otherwise require tremendous time and resources to investigate and prosecute before reaching a court. Advocates for settlements argue that their compromising rather than adversarial nature constitute an incentive for wrongdoers to self-report to prosecutors and increase the prospects of corporate governance reforms. However, they also present legal, institutional and procedural challenges and some experts question their ability to fairly and effectively deliver justice. Questions of transparency, the level of deterrence and victims’ compensation are generally at the heart of these concerns.

This Study is the first cross-country examination of the different types of resolutions that can be used to resolve foreign bribery cases. Covering 27 of the 44 Parties to the Anti-Bribery Convention, the Study documents the non-trial resolution mechanisms available to resolve foreign bribery cases with individuals and/or legal persons with the imposition of sanctions and/or confiscation. The Study was undertaken by the OECD Working Group on Bribery in International Business Transactions. It relies on governmental data gathered through both the rigourous country monitoring process, and a comprehensive survey circulated to all Parties to the Convention. It also relies on the OECD database of concluded foreign bribery cases and specific case studies of the most prominent multi-jurisdictional cases.

March 29, 2019 in AML | Permalink | Comments (0)

Tuesday, March 26, 2019

Former Candidate for U.S. House Guilty for Fraud PAC "Keeping America in Republican Control" (KAIRC), Spending $1 Million on Personal Expenses

A former candidate for the U.S. House of Representatives pleaded guilty today to wire fraud and willfully violating the Federal Election Campaign Act (FECA) by operating fraudulent and unregistered political action committees.

Harold Russell Taub, 30, of Cranston, Rhode Island, pleaded guilty to one count of wire fraud and one count of willfully violating FECA before U.S. District Judge William E. Smith for the District of Rhode Island.  Sentencing is set for July 12, 2019.

According to the Information, in late 2016, Taub began soliciting donations to an organization he called Keeping America in Republican Control (KAIRC), which he represented to be a legitimate political committee, organized in accordance with federal law to support Republican candidates at the state and federal level.  In March 2018, Taub began soliciting donations to another purported political action committee, Keeping Ohio in Republican Control (KOIRC), with the stated purpose of supporting Republican candidates in Ohio.  Taub collected a total of approximately $1,630,439 in contributions to KAIRC and KOIRC, but never registered either entity with the FEC or made required reports to the FEC, as required by FECA.

Taub admitted as part of the plea that he held KAIRC and KOIRC out as legitimate, federally-registered political actions committees on his website, in social media posts, and in email solicitations that reached hundreds of donors.  Taub represented that all of KAIRC and KOIRC’s staff were volunteers and that “100 percent” of donations were used to support candidates.  However, of the more than $1.6 million in contributions to KAIRC and KOIRC, Taub used more than $1 million for purely personal expenses.  In furtherance of his fraudulent scheme, Taub also repeatedly used the name of a former Ambassador and high-level military officer without the knowledge or permission of the person, even after being instructed not to do so. 

The FBI investigated the case.  Trial Attorney Peter M. Nothstein of the Criminal Division’s Public Integrity Section is prosecuting the case.

March 26, 2019 in AML | Permalink | Comments (0)

Saturday, March 23, 2019

New Beneficial Ownership Toolkit will help tax administrations tackle tax evasion more effectively

The first ever beneficial ownership toolkit was released today in the context of the OECD’s Global Integrity and Anti-Corruption Forum. The toolkit, prepared by the Secretariat of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes in partnership with the Inter-American Development Bank, is intended to help governments implement the Global Forum’s standards on ensuring that law enforcement officials have access to reliable information on who the ultimate beneficial owners are behind a company or other legal entity so that criminals can no longer hide their illicit activities behind opaque legal structures. 

Download Beneficial-ownership-toolkit

The toolkit was developed to support Global Forum members and in particular developing countries because the current beneficial ownership standard does not provide a specific method for implementing it.  To assist policy makers in assessing different implementation options,  the toolkit contains policy considerations that Global Forum members can use in implementing the legal and supervisory frameworks to identify, collect and maintain the necessary beneficial ownership information.

“Transparency of beneficial ownership information is essential to deterring, detecting and disrupting tax evasion and other financial crimes.  The Global Forum’s standard on beneficial ownership offers jurisdictions flexibility in how they implement the standard to take account of different legal systems and cultures.  However, that flexibility can pose challenges particularly to developing countries.” said Pascal Saint-Amans, Head of the OECD’s Centre for Tax Policy and Administration. “This new toolkit is an invaluable new resource to help them find the best approach.”

The toolkit covers a variety of important issues regarding beneficial ownership, including:

  • the concepts of beneficial owners and ownership, the criteria used to identify them, the importance of the matter for transparency in the financial and non-financial sectors;
  • technical aspects of beneficial ownership requirements, distinguishing between legal persons and legal arrangements (such as trusts), and measures being taken internationally to ensure the availability of information on beneficial ownership a series of checklists that may be useful in pursuing a specific beneficial ownership framework;
  • ways in which the principles on beneficial ownership can play out in practice in Global Forum EOIR peer reviews;
  • why beneficial ownership information is also a crucial component of the automatic exchange of information  regimes being adopted by jurisdictions around the world.

With 154 members, a majority of whom are developing countries, the Global Forum has been heavily engaged in providing technical assistance on the new beneficial ownership requirements, often with the support of partner organisations including the IDB. The Toolkit offers another means to further equip members to  comply with the international tax transparency standards.

The Toolkit is the first practical guide freely available for countries implementing the international tax transparency standards. It will be frequently updated to incorporate new lessons learned from the second-round EOIR peer reviews conducted by the Global Forum, as well as best practices seen and developed by supporting organisations.

March 23, 2019 in AML | Permalink | Comments (0)

Friday, March 22, 2019

Cayman Islands Responds to Evaluation Deficiencies in its Money Laundering Prevention

The Cayman Islands is committed to the implementation of international standards on Anti-Money Laundering (AML) and the Countering the Financing of Terrorism (CFT) as set out in  the Financial Action Task Force (FATF) Recommendations. In the Cayman Islands, we are constantly refining the regulatory regime to address emerging threats and vulnerabilities.
Although we have made significant progress, the Government recognizes the need to take ongoing measures to update the AML/CFT regime to address the full range of risks relating to money laundering, the financing of terrorism and proliferation to the Cayman Islands and to communicate its strategy to relevant stakeholders.

The goals identified in the Strategy arise out of a year-long evaluation of the risks identified in the NRA
and an assessment of the measures to be taken to address them. The goals include:

  • Enhancing the jurisdiction’s AML/CFT legal and regulatory framework;
  • Implementing a comprehensive risk-based supervisory framework;
  • Strengthening of sanctions, intelligence and enforcement;
  • Enhancing domestic cooperation and coordination;
  • Ensuring an efficient and effective system for international cooperation; and
  • Raising AML/CFT awareness among all stakeholders and the general public.

Download Full Cayman Response to CFATF Evaluation

Download Cayman National Risk Assessment for Money Laundering

March 22, 2019 in AML | Permalink | Comments (0)

Thursday, March 21, 2019

Michel Temer: Brazil ex-president arrested in corruption probe

Former Brazilian President Michel Temer has been arrested in São Paulo as part of a massive corruption investigation. (BBC)

NY Times: former President Luiz Inácio Lula da Silva, who was sentenced to 12 years in prison for corruption and money laundering

Reuters states: Prosecutors alleged that Temer was the leader of a “criminal organization” that took in 1.8 billion reais ($472 million) in bribes or pending future kickbacks as part of numerous schemes, including one related to the Angra nuclear power plant complex on the Rio de Janeiro coast and other state firms. 

Former Minister Moreira Franco (Mines and Energy) was also arrested. (Estadão  - in Portuguese)


March 21, 2019 in AML | Permalink | Comments (0)

Cayman Islands Evaluation Report Finds Money Laundering

The Cayman Islands has a high level of commitment to ensuring their AML/CFT framework is robust and capable of safeguarding the integrity of the jurisdiction’s financial sector. The jurisdiction’s AML/CFT regime is complemented by a well-developed legal and institutional framework. As a major international financial centre, the Cayman Islands is confronted with inherent ML/TF risks, threats and associated vulnerabilities emanating from domestic and foreign criminal activities (e.g. tax evasion, fraud, drug trafficking).

  • The Cayman Islands has not provided the FRA with the tools to assist investigative authorities in the identification of cases. While the FRA is able to triage the SARs they receive, they have not been able to sufficiently analyse and disclose these reports in a timely manner. They also do not have access to the widest possible level of relevant information nor does the jurisdiction collect relevant information from its reporting entities (e.g. wire transfers) that would allow for the proactive identification of cases for investigation. The result is that there is a low level of usage of FRA’s disclosures to supplement investigations and they have been used to a negligible extent to initiate investigations.
  • While the Cayman Islands has trained and experienced investigators in the Financial Crimes Unit (FCU) to pursue TF, training to improve awareness and understanding of TF among the competent authorities and the judiciary is required. There has been to a limited extent, TF investigations and no TF prosecutions in the jurisdiction.
  • The jurisdiction may benefit from further training and outreach to relevant stakeholders in the areas of TF and PF so as to effectively implement the requirements of TFS measures.
  • The AML/CFT supervisory/regulatory regime for Financial Institutions (FIs) and Trust and Corporate Service Providers (TCSPs) is established and understood by relevant stakeholders. Customer due diligence (CDD) measures and controls are well entrenched in the financial sector. FIs particularly the larger and established banks as well as the TCSPs have an understanding of their ML threats, appear to be more vigorous in their mitigating efforts, but lack understanding of their TF threats. Nonetheless, a portion of the securities sector is subject to limited supervision and not subject to monitoring for AML/CFT compliance or risk assessment (e.g. 55% of excluded persons under SIBL). This is a potential source of ML/TF risks, particularly with respect to the excluded persons that perform the higher ML/TF risk activities of portfolio management and broker/dealing. Due to limited assessment and compliance information on the persons conducting these activities, the extent to which the AML/CFT regime is understood by these persons has not been determined.

Download Cayman Mutual Evaluation bv Carribean FATF

March 21, 2019 in AML | Permalink | Comments (0)

Sunday, March 17, 2019

Mizrahi-Tefahot Bank LTD. Admits Its Employees Helped U.S.Taxpayers Conceal Income and Assets

Bank Admits for Years It Opened and Maintained Customer Accounts in Violation of Agreement with the Internal Revenue Service; Agrees to Pay $195 Million as Part of a Deferred Prosecution Agreement with the Justice Department

Mizrahi-Tefahot Bank Ltd., (Mizrahi-Tefahot) and its subsidiaries, United Mizrahi Bank (Switzerland) Ltd. (UMBS) and Mizrahi Tefahot Trust Company Ltd.  (Mizrahi Trust Company), entered into a deferred prosecution agreement (DPA) with the Department of Justice filed today in the U.S. District Court for the Central District of California, announced Principal Deputy Assistant Attorney General Richard E. Zuckerman of the Department of Justice’s Tax Division, First Assistant United States Attorney Tracy L. Wilkison, and Chief Don Fort for Internal Revenue Service-Criminal Investigation.  As part of the agreement, Mizrahi-Tefahot will pay $195 million to the United States.

Mizrahi-Tefahot is one of Israel’s largest banks, with more than 4,000 employees, and is publicly traded on the Tel-Aviv Stock Exchange. During the relevant period of criminal activity, Mizrahi-Tefahot had branches in Los Angeles, California, the Cayman Islands, and London, England. In 2014, the Cayman Islands branch surrendered its license and was closed. UMBS, a subsidiary of Mizrahi-Tefahot, had one branch in Zurich, Switzerland. Mizrahi Trust Company, a fully owned subsidiary of Mizrahi-Tefahot, operated under the regulatory authority of the Bank of Israel. Collectively, Mizrahi-Tefahot, UMBS, and Mizrahi Trust Company provided private banking, wealth management, and financial services to high-net-worth individuals and entities around the world, including U.S. citizens, resident aliens and permanent residents.

“Mizrahi-Tefahot’s admission of guilt and agreement with the United States to pay significant penalties and pay over the fees earned from knowingly assisting tax evading Americans reflects the continuing efforts of the Tax Division to end the criminal role of international financial institutions in perpetuating offshore tax fraud,” said Principal Deputy Assistant Attorney General Zuckerman. “A financial institution is not a faceless entity, but is the embodiment of the acts of its bankers, relationship managers and all employees. When a bank’s employees, at any level, facilitate U.S. tax fraud, the bank facilitates tax fraud and will be held responsible.”

“For over a decade, this Israeli bank, through its employees, engaged in conduct designed to hide its clients’ funds so they could avoid paying U.S. income taxes,” said First Assistant United States Attorney Tracy L. Wilkison, “Mizrahi-Tefahot solicited customers in Los Angeles and other U.S. cities to open offshore accounts with the hope they would never be linked to the American clients. As a result of this criminal conduct, the bank will surrender fees it earned, repay the United States for lost tax revenue, and pay a substantial fine.”

“Today’s announcement sends a clear message that banks, who promote the use of offshore tax schemes against the United States, will be held accountable and face substantial fines and penalties,” said Don Fort, Chief, IRS-Criminal Investigation. “Any financial institution – no matter where it operates – will be held accountable if it helps U.S. residents dodge their tax responsibilities. This agreement with Mizrahi-Tefahot is the latest notice to American taxpayers, who might flout the law, that we can and will uncover your hidden assets.”

In the DPA and related court documents, Mizrahi-Tefahot admitted that from 2002 until 2012 the actions of its bankers, relationship managers, and other employees defrauded the United States and specifically the Internal Revenue Service (IRS) with respect to taxes by conspiring with U.S. taxpayer-customers and others. Mizrahi-Tefahot employees’ acts of opening and maintaining bank accounts in Israel and elsewhere around the world and violating Mizrahi-Tefahot’s Qualified Intermediary Agreement (QI Agreement) with the IRS enabled U.S. taxpayers to hide income and assets from the IRS.

According to the filed statement of facts and the DPA, these employees took steps to assist U.S. customers in concealing their ownership and control of assets and funds held at Mizrahi-Tefahot, Mizrahi Trust Company and UMBS, which enabled those U.S. customer-taxpayers to evade their U.S. tax obligations, including:

  • Assisting and referring U.S. customers to professionals to open and maintain accounts at Mizrahi-Tefahot and UMBS in the names of pseudonyms, code names, Mizrahi Trust, and foreign nominee entities in offshore locations, such as St. Kitts and Nevis (Nevis), Liberia, Turks & Caicos, and the British Virgin Islands (BVI), and thereby enabling those U.S. taxpayers to conceal their beneficial ownership in the accounts and maintain undeclared accounts;
  • Opening customer accounts at Mizrahi-Tefahot and UMBS for known U.S. customers using non-U.S. forms of identification, and failing to maintain copies of required identification and account opening documents;
  • Opening and maintaining foreign nominee bank accounts for certain U.S. clients holding U.S. securities, enabling those U.S. taxpayers to evade U.S reporting requirements on securities’ earnings in violation of Mizrahi-Tefahot’s QI Agreement with the IRS;
  • Entering into “hold mail” agreements with U.S. customers whereby Mizrahi-Tefahot and UMBS employees held bank statements and other account-related mail in their offices in Israel and Switzerland, and by doing so enabling documents reflecting the existence of the offshore accounts to remain outside the U.S.;
  • Until 2008, providing U.S. customers at Mizrahi-Tefahot’s Los Angeles branch use of their funds held in offshore Mizrahi-Tefahot and UMBS accounts (pledge accounts) through back-to-back loans, while excluding any record of the offshore pledge account at its Los Angeles branch to take advantage of Israeli and Swiss privacy laws and prevent disclosure of the funds to U.S tax authorities;
  • Failing to adhere to the requirements of Mizrahi-Tefahot’s QI Agreement by (i) permitting U.S. customers who refused to provide the bank with the proper IRS Forms W-8BEN and/or W-9 to continue trading in accounts holding U.S. securities, (ii) transferring assets to foreign entity accounts controlled by U.S. customers to avoid the proper QI reporting requirements, and (iii) failing to timely address compliance deficiencies in U.S. customer accounts holding U.S. securities; and
  • Until 2008, periodically sending “Roving Representatives,” to the United States to solicit new customers and to meet with existing U.S. customers in Los Angeles, California, New York, and other locations in the U.S. for the purposes of opening accounts and surreptitiously reviewing and managing existing customers’ offshore accounts.

According to the terms of the DPA, Mizrahi-Tefahot, UMBS, and Mizrahi Trust Company will cooperate fully, subject to applicable laws and regulations, with the United States, the IRS, and other U.S. authorities.  The DPA provides that Mizrahi-Tefahot will ensure that all of its overseas branches and other companies under its control that provide financial services to customers covered by the Foreign Account Tax Compliance Act, 26 U.S.C. §§ 1471-1474 (FATCA), will continue to implement and maintain an effective program of internal controls with respect to compliance with FATCA in their affiliates and subsidiaries.  The DPA also requires Mizrahi-Tefahot and its subsidiaries affirmatively to disclose certain material information it may later uncover regarding U.S.-related accounts, as well as to disclose certain information consistent with the Department’s Swiss Bank Program with respect to accounts closed between Jan. 1, 2009, and October 2017.  Under the DPA, prosecution against the bank for conspiracy will be deferred for an initial period of two years to allow Mizrahi-Tefahot, UMBS, and Mizrahi Trust Company to comply with the DPA’s terms. 

The $195 million payment consists of: 1) restitution in the amount of $53 million, representing the approximate unpaid pecuniary loss to the United States as a result of the criminal conduct; 2) disgorgement in the amount of $24 million, representing the approximate gross fees paid to the bank by U.S. taxpayers with undeclared accounts at the bank from 2002 through 2012; and 3) a fine of $118 million.

This agreement marks the second time an Israeli bank has admitted to similar criminal conduct.  In December 2014, the Bank Leumi Group entered into a DPA with the Department of Justice admitting that it conspired to aid and assist U.S. taxpayers to prepare and present false tax returns to the IRS by hiding income and assets in offshore bank accounts in Israel and elsewhere around the world. 

Principal Deputy Assistant Attorney General Zuckerman, First Assistant United States Attorney Wilkison and Chief Fort commended special agents of IRS-Criminal Investigation, who investigated this case, and Western Criminal Enforcement Section Chief Larry J. Wszalek and Trial Attorneys Melissa S. Grinberg and Lisa L. Bellamy of the Tax Division, who prosecuted this case.  Principal Deputy Assistant Attorney General Zuckerman also thanked the United States Attorney’s Office for the Central District of California for their substantial assistance.  

March 17, 2019 in AML, GATCA | Permalink | Comments (0)

Friday, March 15, 2019

in 2018, China convicted over 30,000 of taking bribes, 288,000 IP cases concluded, 28 million law suits filed

Among them were 18 officials at or above ministerial level, including Sun Zhengcai.

Another 2,466 people were convicted of offering bribes last year, according to the annual work report of the Supreme People's Court.

Local courts at all levels handled 28 million lawsuits and concluded 25 million, up 8.8 and 10.6 percent, respectively.

The number of concluded intellectual property cases reached 288,000, an increase of 42 percent year-on-year, according to the work report.

read the full story and follow the stats at ECNS here

March 15, 2019 in AML | Permalink | Comments (0)

Father and Son Convicted of Multimillion-Dollar Investment Fraud Scheme

A federal jury in Birmingham, Alabama found a father and son guilty of multiple charges for their roles in investment fraud and bank fraud schemes in which they stole over $10 million from individual investors—including multiple former professional athletes—and Alamerica Bank of Birmingham, Alabama.

Donald Watkins Sr., 70, of Atlanta, Georgia, was convicted on seven counts of wire fraud, two counts of bank fraud and one count of conspiracy.  Donald Watkins Jr., 46, of Birmingham was convicted on one count of wire fraud and one count of conspiracy.  Sentencing is set for July 16 before U.S. District Court Judge Karon O. Bowdre of the Northern District of Alabama, who presided over the trial.

“The jury’s verdict today sends a clear message: Donald Watkins Sr. and Donald Watkins Jr. are frauds, plain and simple,” said Assistant Attorney General Benczkowski.  “They induced their victims to part with more than $10 million of supposed ‘investment capital’ and used it to support their lavish lifestyle. I want to thank the prosecutors and law enforcement agents for their hard work investigating and prosecuting this case.” 

“This was a case about deception and greed at the expense of too many,” said U.S. Attorney Town.  “The findings of guilt for these two individuals should forewarn anyone who would seek to defraud investors so brazenly.  We appreciate the labor of the jurors whose role as citizens in this process is so critical to our system of justice.  We are also grateful to the Alabama Securities Commission and the Department of Justice’s Fraud Section for allowing their personnel to engage in this prosecution.”

“Both of the men found guilty today are financial predators who truly represent pure greed,” said FBI Special Agent in Charge Sharp.  “We are pleased that the defendants in this case are being held accountable for their crimes and we will continue to work with our law enforcement partners to investigate and prosecute those who commit these types of financial crimes.”

According to evidence presented at trial, between approximately 2007 and 2013, Donald Watkins Sr. sold “economic participations” and promissory notes connected with Masada Resource Group, a company that he ran as manager and CEO.  Investors paid millions of dollars after Donald Watkins Sr. and Donald Watkins Jr. falsely represented that the money would be used to grow Masada, which Donald Watkins Sr. described as a “pre-revenue” company that supposedly had technology that could convert garbage into ethanol.  Instead of investing the money into Masada, however, Donald Watkins Sr. and Donald Watkins Jr. diverted funds to pay personal bills and the debts of their other business ventures.  The evidence showed that victim money was used to pay for Donald Watkins Sr.’s alimony, hundreds of thousands of dollars in back taxes, personal loan payments, a private jet and clothing purchased by Donald Watkins Jr. and his wife.  Emails introduced at trial also showed that Donald Watkins Jr. and Donald Watkins Sr. planned to obtain millions of dollars for these purposes from one victim on multiple occasions, when they knew that their victims trusted them to put their money to use in growing Masada.  The defendants’ scheme eventually grew to include another business venture, Nabirm Global, a company that Donald Watkins Sr. claimed held mineral rights in Namibia.

Donald Watkins Sr. also defrauded Alamerica Bank, an entity in which Donald Watkins Sr. was the largest shareholder, the evidence showed.  In order to pay hundreds of thousands in litigation expenses associated with another one of Donald Watkins Sr.’s business ventures, the defendants, Donald Watkins Sr. executed a plan to use a straw borrower to take out money from Alamerica Bank and give it to them.  This straw borrower—Donald Watkins Sr.’s long-time mentor and a prominent figure in the Birmingham community—took over $900,000 in loans from Alamerica Bank and then immediately permitted Donald Watkins Sr. and Donald Watkins Jr. to use those funds for their personal benefit. 

March 15, 2019 in AML | Permalink | Comments (0)

Thursday, March 14, 2019

UK Economic Crime - Parliament's Conclusions and recommendations for anti-money laundering supervision and sanctions implementations


The threat of economic crime

1.The scale of economic crime in the UK is very uncertain. It seems that it can reasonably be said to run into the tens of billions of pounds, and probably the hundreds of billions. We note that those who gave evidence regarded it as being small in comparison to the total amount of financial activity in the UK, and especially the City of London—for example the daily value of foreign-exchange trading in the UK at around £1.8 trillion. Such a comparison provides no comfort to the Committee. Rather, it suggests that upper bound of the estimate is unknown, and almost unconstrained. (Paragraph 15)

2.It is exceptionally difficult to measure economic crime, given those undertaking it are actively trying to hide it. The Committee does not doubt the will of the authorities to combat economic crime. However, it considers there to be merit in attempting to measure its extent, since greater understanding of the scale of the problem will allow those responding to provide sufficient resources to tackle it, and potentially highlight where those resources should be targeted. The Committee therefore recommends that the Government undertakes more analysis to try and provide both more precision on the potential estimate of the size and scale of economic-related crime in the UK, as well as the exposure of different sectors to it. (Paragraph 16)

3.The UK holds a prime position in global financial services, with the City of London a dominant financial centre. Given Brexit challenges, the UK will work to keep it that way. A ‘clean’ City is important, so the Government must recognise the responsibility to combat economic crime that comes with that position. Recent moves by the Government in this area are welcome, but must be sustained, and match the UK’s ambitions to continue to be a global leader in financial services. (Paragraph 21)

4.The UK’s departure from the European Union will inevitably result in a change in international trading relationships. Such new trading relationships may also provide opportunities to those wishing to undertake economic crime in countries that are more vulnerable to corruption. The UK must remain alert to that risk, including when it conducts trade negotiations. The Government must be consistently clear about its intention to lead in the fight against economic crime, and not compromise that in an effort to swiftly secure new trading relationships. (Paragraph 26)

5.We recommend that the Government retains, or replicates, the arrangements with the EU to maintain the flow of information to UK law enforcement agencies on economic crime. We recommend that the Government work to develop strong relationships with other countries and strengthen mutual information sharing and law enforcement powers. (Paragraph 27)

6.The Committee may consider taking further evidence on the findings of the Financial Action Task Force (FATF) mutual evaluation in due course. The Committee does, however, note the zeal with which the Government has considered reform in this area as the FATF mutual evaluation has approached. With mutual evaluations occurring only on a 10-year cycle, the UK should not solely rely on prompting by FATF to ensure its economic crime prevention, detection and enforcement systems remain fit for purpose and it should not rely on FATF alone to identify areas where improvement is needed. The Committee therefore recommends the Government institutes a more frequent system of public review of the UK’s AML supervision, and law enforcement, that will ensure a constant stimulus to improvement and reform. This review should take a holistic view of the entire system, rather than be undertaken by each individual component supervisor or agency. There may be a role for the recently announced Economic Crime Strategic Board in this work. (Paragraph 33)

A fragmented approach to AML supervision

7.The property sector poses a risk from an anti-money laundering perspective. Yet the AML supervisory regime around property transactions is complicated. Banks are supervised by the Financial Conduct Authority, solicitors by their relevant professional body, and estate agents by HMRC. While there may be debate over which part of the transaction chain bears most responsibility from an AML perspective, each part has a role in reporting, or preventing, a transaction that may be used for money laundering. There is a risk that some estate agents may be unsupervised, having not registered with HMRC. We recommend that HMRC carries out further work to ensure estate agents are registered with them and following best anti-money laundering practice. (Paragraph 45)

8.There is a clearly identified risk that company formation may be used in money laundering. There are a number of entities that undertake company formation, and therefore a number of supervisors. More worryingly, there appears to be a number of unsupervised entities engaged in company formation. These should be identified by HMRC and dealt with as a matter of urgency. (Paragraph 51)

9.There must be no weak areas in the UK’s systems for preventing economic crime. At present, Companies House presents such a weakness. The UK cannot extol the virtue of a public register of beneficial ownership and yet not carry out the necessary rigorous checks of the information on that register. The Government must urgently consider reform of Companies House to ensure it has the statutory duties and powers to ensure it plays no role in helping those undertaking economic crime, whether here or abroad. It is welcome that the Economic Secretary has noted that BEIS is considering reform in this area, but the Government should move quickly and now publish detail of this reform by summer 2019. (Paragraph 63)

10.Though the emphasis has been on the risk presented by enablers, such as accountants or solicitors, there should also be a sharp focus on the supervision of the core financial services. To the extent that this risk is not ameliorated by supervision, the FCA needs to ensure that they keep up a constant pressure on the core financial services businesses and take appropriate enforcement action against them. (Paragraph 72)

11.The evidence we have received has directed our attention to those who act on the periphery of the financial system, rather than its core, the so-called enablers or facilitators. External witnesses suggested that there is a requirement for education as well as enforcement—the Security Minister pointed towards the responsibility of the enablers to play their part. It is welcome that in its Serious and Organised Crime Strategy, the Government has acknowledged a similar focus. The Committee recommends that the Government steps up education of facilitators, to ensure they have all information about their role, recouping any additional costs through fees. Once this has been completed, it should be followed with an enforcement campaign to ensure compliance. (Paragraph 78)

12.The Committee supports the role that The Office of Professional Body Anti-Money Laundering Supervision (OPBAS) has been given in relation to the Professional Body Anti-Money Laundering Supervisors. The inherent conflict in a membership organisation also monitoring its own members means that there is a need for external supervision. The number of such supervisors also shows there is a need for a single organisation to look at the system as a whole, and identify weaknesses across the piece. We consider the concerns around whether the statutory AML supervisors also need such a coordinating body later in this Report. (Paragraph 86)

13.At present, OPBAS also has the responsibility of recommending to the Treasury whether a professional body should remain an AML supervisor. It is not clear how the Treasury would consider such an OPBAS recommendation, and where it would envisage placing such AML supervisory responsibilities in such a case. Without adequate preparation in this area, AML supervisors may become too important to fail, and therefore risk undermining standards in this area. We recommend that the Treasury publishes—within six months—a detailed consideration of how it would respond to such a recommendation from OPBAS. (Paragraph 87)

14.In evidence to this Committee, the Chief Executive Officer of HMRC noted that he was considering, as part of the 2019 Spending Round, querying whether HMRC should retain its role in Anti-Money Laundering supervision. The Committee agrees that this should be given proper consideration, not only to support HMRC concentrating on its core tasks but also to address concerns expressed to the Committee about HMRC’s work as an AML supervisor, and whether its approach to its supervisory responsibilities may be unduly influenced by its role as a tax authority. The Treasury must send the Committee a report on this consideration well ahead of the Spending Review. (Paragraph 106)

15.Notwithstanding the above recommendation, the Committee has heard a number of concerns around the work of HMRC as an AML supervisor, including around its work on unregistered firms. If it is to retain its AML supervisory responsibilities, HMRC should: (Paragraph 107)

  • include within its departmental objectives a single stand-alone objective related to its anti-money laundering supervisory work; and
  • keep a clear reporting line between its AML supervisory work and its work investigating tax crime and associated money laundering offences. HMRC should have a separate strategy for its AML supervisory work which would include key performance indicators on which HMRC can report.

16.With the creation of OPBAS, the Government acknowledged that consistency across AML supervisors was important. The Committee recommends that it should go one stage further, by creating a supervisor of supervisors. The aim of this institution would be to ensure that there is consistency of supervision across all the AML supervisors, whether statutory or professional body. There is a strong case for this to be OPBAS, given it already has a role in the coordination of the professional body AML supervisors, and a role in information sharing. (Paragraph 111)

17.The Government should then also consider moving the supervisory responsibilities of HMRC to OPBAS. This would reduce fragmentation in the current supervisory landscape and allow HMRC to focus on its tax authority responsibilities. It would also mean that OPBAS could act as supervisor of last resort in the case of a failure of a professional body supervisor. The close relationship between OPBAS and the FCA, a fellow supervisor, would also be beneficial. (Paragraph 112)

18.OPBAS should be placed on a firmer statutory footing, more akin to the Financial Ombudsman Service, in having its own distinct identity protected under primary legislation. (Paragraph 113)

Other issues

19.The resources to combat economic crime available to the private sector dwarf those currently available to the public sector. The private sector support to the public sector, provided either through direct payments or through undertaking tasks one might expect Government to undertake on AML, is therefore welcome. (Paragraph 124)

20.One significant issue is the maintenance of expertise in the public sector to undertake this work, considering the salaries available in the private sector. The Government and public sector bodies should consider whether there is the pay flexibility available to ensure that the appropriate skills are maintained. (Paragraph 125)

21.The Committee is also concerned that the Government may have not allocated enough resource to effectively marshal the private sector resources to achieve a ‘hostile environment’. The Economic Secretary confirmed that there is no cross-government assessment of public resources being brought to bear in this area. The Committee recommends that such an assessment is made, and that any potential funding shortfalls are rectified. (Paragraph 126)

22.There has been great emphasis on the need for information sharing in combatting economic crime. Such information should be shared both within sectors, and between sectors. Banks have asked for additional powers to share information between each other. Such a move would require significant consideration of the privacy impact on consumers of financial services. At the very least, there should be a number of safeguards to protect both consumers’ information, and to ensure that as a consequence of such information sharing no consumers unfairly lose their access to financial services. We recommend that the Government reviews the scope to increase information flows at the bank level and report back to this Committee within six months. (Paragraph 135)

23.The Government has placed a lot of emphasis on the benefits the National Economic Crime Centre will bring. It is welcome that a single centre will provide an element of leadership to this complex web of interacting agencies and firms. The Committee will continue to monitor the impact of NECC, and recommend that annual updates of the measures of success of the NECC are published or provided to the Committee. (Paragraph 141)

24.Suspicious Activity Reports (SARs) are one way in which the authorities can receive intelligence from the private sector. The SARs reform programme is therefore an exceptionally important piece of work for the AML regime. The Committee’s evidence suggests that reform should focus on increasing the number of SARs reports by those outside the core of the financial system, the so-called enablers. We have heard a number of reasons why SARs may not be submitted by the enablers. It is a legal requirement for SARs to be submitted, so the system needs to be as robust and simple to use as possible. Thought should also be given, in a world of faster payments, to how NCA requested delays to payments can be better handled. Confidence in the SARs system, at present, appears to be weak outside the core financial service. In its response to this Report, the Government should set out how it will increase confidence in the SARs regime. (Paragraph 165)

25.We also heard evidence that quality, rather than the quantity of SARs, should be encouraged. While an increase in quality is always desirable, modern data analytics means that quantity may also be useful. The review will have to be careful not to stifle SARs that in and of themselves may seem of low quality, but when analysed in the round may provide far more useful information. (Paragraph 166)

26.The Politically Exposed Persons regime is an important part of the system for preventing money laundering. We have heard that defining PEPs remains difficult for institutions, both large and small. While commercial solutions are available, they may be beyond the resources of very small companies. We recommend that the Government creates a centralised database of PEPs for the use of those registered by AML supervisors. (Paragraph 171)

27.Derisking, where financial institutions cease customer relationships with certain ‘high risk’ customers, can have a significant impact on both individuals and businesses. As we have seen, it can also potentially move illicit flows underground. While there has seemingly been much effort, progress in tackling derisking has been achingly slow. We recommend that the Government publishes its strategy on how to address disproportionate derisking strategies within six months. That strategy must include how it will take the conclusions of the G20 taskforce forward. (Paragraph 183)

Legislative reform

28.The Government’s proposals on reforming the law on corporate liability around economic crime have stalled. Though the Solicitor General realises the importance of this issue, preparations for Brexit seem, in part, to have waylaid this important work. Despite Brexit, the Government must progress domestic priorities must not be forestalled any longer by Brexit. Without reform in this area, multi-national firms appear beyond the scope of legislation designed to counter economic crime. That is manifestly unfair, and weakens the deterrent effect a more stringent corporate liability regime may bring. (Paragraph 199)

29.There is clear evidence that legislative reform is required to strengthen the hand of law enforcement in the fight against economic crime. We recommend that the Government sets out a timetable for bringing forward legislation to improve the enforcement of corporate liability for economic crime. The Serious Fraud Office’s suggested reforms should be considered as part of those proposals. (Paragraph 200)

30.The Solicitor General emphasised the importance of getting the detail of new legislation right. The consultation process can help with that task and need not be delayed until proposed legislation is in near final form. (Paragraph 201)

31.We recommend that the Government responds to the evidence submitted in response to the 2017 Corporate liability for economic crime: call for evidence and undertake further consultation on proposals for legislation by the next Queen’s speech. (Paragraph 202)

Financial sanctions

32.The Office of Financial Sanctions Implementation (OFSI) has only been in existence for a year and a half. It has a number of potential sanctions breaches under investigation. While all breaches will have to be investigated thoroughly, and treated on their own merits, public examples of enforcement will be necessary if OFSI is to be recognised as an effective deterrent. It is necessary for the Government to review the effectiveness of OFSI. We recommend that two years after its formation marks the time for such a review to take place. (Paragraph 213)

33.The EN+ listing occurred due to a weakness in sanctions policy, not implementation. The evidence heard by the Committee suggests that while the proposed listing was carefully analysed given its sensitivities, the narrowness of the sanctions regime meant that the listing could not be blocked. (Paragraph 222)

34.In the face of this seeming failure of the sanctions regime, the Economic Secretary has suggested that there should be a power for the Government to block a listing on National Security grounds. On the face of it, this would create a new focussed power outside the sanctions regime. If the Committee is to be persuaded that such a power is necessary and appropriate, the Government needs to set out very clearly when such a power would be used, what effect it might have on UK listings and financial services, and most importantly, why it would be needed, especially when sanctions are in the full control of the UK post-Brexit. We would expect full, wide and timely consultation on such a power to inform its scope and design. (Paragraph 223)

35.There has been, without doubt, a malign influence on the UK financial system from certain elements of Russian money. This fact has been acknowledged by both financial services and law enforcement. However, as noted by the FCA, illicit Russian money does not need to use novel or unique ways to enter the UK. The UK must achieve a balance between focussing on financial flows from one country, while not distorting the AML system, and creating a risk that other criminals slip by while attention is focussed on individuals with a specific nationality. (Paragraph 230)

36.The United Kingdom’s departure from the European Union could allow additional flexibility in its use of sanctions. The Government must ensure it is ready to introduce any new powers it believes are necessary as soon as any further flexibility has become available, having consulted appropriately.(Paragraph 236)

March 14, 2019 in AML | Permalink | Comments (0)