International Financial Law Prof Blog

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

Monday, February 15, 2021

Man Purchased Lamborghini After Receiving $3.9 Million in PPP Loans

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

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

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

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

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

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

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

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

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

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

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

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

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

Sunday, February 14, 2021

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

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

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

Saturday, February 13, 2021

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

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

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

$66.6 Billion

-3.5%°

Exports:

$190.0 Billion

+3.4%°

Imports:

$256.6 Billion

+1.5%°

Next release: March 5, 2021

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

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

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

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

Exports, Imports, and Balance (exhibit 1)

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

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

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

Three-Month Moving Averages (exhibit 2)

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

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

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

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

Exports (exhibits 3, 6, and 7)

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

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

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

  Net balance of payments adjustments increased $0.1 billion.

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

  • Travel increased $0.2 billion.

Imports (exhibits 4, 6, and 8)

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

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

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

  Net balance of payments adjustments increased $0.2 billion.

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

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

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

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

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

Revisions

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

Revisions to November exports

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

Revisions to November imports

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

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

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

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

Annual Summary for 2020

Exports, Imports, and Balance (exhibit 1)

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

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

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

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

Exports (exhibits 3, 6, and 7)

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

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

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

  Net balance of payments adjustments decreased $6.1 billion.

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

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

Imports (exhibits 4, 6, and 8)

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

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

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

  Net balance of payments adjustments decreased $5.3 billion.

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

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

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

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

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

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

Friday, February 12, 2021

What drives people and businesses to pay taxes?

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

 

 

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

Thursday, February 11, 2021

Inclusive Framework on BEPS country membership increases to 139

Belarus and Samoa join international efforts against tax evasion and avoidance

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

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

Wednesday, February 10, 2021

Man Charged with $1.9 Million COVID-Relief Fraud

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

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

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

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

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

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

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

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

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

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

Tuesday, February 9, 2021

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

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

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

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

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

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

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

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

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

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

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

Monday, February 8, 2021

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

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

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

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

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

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

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

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

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

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

Sunday, February 7, 2021

FTC cases returned $483 million to people in 2020

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

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

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

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

Saturday, February 6, 2021

BEA News: Gross Domestic Product, 4th Quarter and Year 2020

Real gross domestic product (GDP) increased at an annual rate of 4.0 percent in the fourth quarter of 2020 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see "Source Data for the Advance Estimate" on page 4). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 25, 2021.

Real GDP: Percent change from preceding quarter, Q4 '20

Real GDP: Percent change from preceding quarter

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

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

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

Current‑dollar GDP increased 6.0 percent at an annual rate, or $309.2 billion, in the fourth quarter to a level of $21.48 trillion. In the third quarter, GDP increased 38.3 percent, or $1.65 trillion (tables 1 and 3). More information on the source data that underlie the estimates is available in the Key Source and Data Assumptions file on BEA's website.

The price index for gross domestic purchases increased 1.7 percent in the fourth quarter, compared with an increase of 3.3 percent in the third quarter (table 4). The PCE price index increased 1.5 percent, compared with an increase of 3.7 percent in the third quarter. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 3.4 percent.

Personal Income

Current-dollar personal income decreased $339.7 billion in the fourth quarter, compared with a decrease of $541.5 billion in the third quarter. The decrease in personal income was more than accounted for by decreases in personal current transfer receipts (notably, government social benefits related to the winding down of CARES Act pandemic relief programs) and proprietors' income that were partly offset by increases in compensation and personal income receipts on assets (table 8).

Disposable personal income decreased $372.5 billion, or 8.1 percent, in the fourth quarter, compared with a decrease of $638.9 billion, or 13.2 percent, in the third quarter. Real disposable personal income decreased 9.5 percent, compared with a decrease of 16.3 percent.

Personal saving was $2.33 trillion in the fourth quarter, compared with $2.83 trillion in the third quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 13.4 percent in the fourth quarter, compared with 16.0 percent in the third quarter. Additional information on factors impacting quarterly personal income and saving can be found in "Effects of Selected Federal Pandemic Response Programs on Personal Income."

GDP for 2020

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

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

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

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

Current-dollar GDP decreased 2.3 percent, or $500.6 billion, in 2020 to a level of $20.93 trillion, compared with an increase of 4.0 percent, or $821.3 billion, in 2019 (tables 1 and 3).

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

Measured from the fourth quarter of 2019 to the fourth quarter of 2020, real GDP decreased 2.5 percent during the period (table 6). That compared with an increase of 2.3 percent during 2019.

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

February 6, 2021 in Economics | Permalink | Comments (0)

Friday, February 5, 2021

Emotet Botnet Disrupted in International Cyber Operation

Emotet Malware Infected More than 1.6 Million Victim Computers and Caused Hundreds of Millions of Dollars in Damage Worldwide

The Justice Department today announced its participation in a multinational operation involving actions in the United States, Canada, France, Germany, the Netherlands, and the United Kingdom to disrupt and take down the infrastructure of the malware and botnet known as Emotet. Additionally, officials in Lithuania, Sweden, and Ukraine assisted in this major cyber investigative action.

“The Emotet malware and botnet infected hundreds of thousands of computers throughout the United States, including our critical infrastructure, and caused millions of dollars in damage to victims worldwide,” said Acting Deputy Attorney General John Carlin. “Cyber criminals will not escape justice regardless of where they operate. Working with public and private partners around the world we will relentlessly pursue them while using the full arsenal of tools at our disposal to disrupt their threats and prosecute those responsible.”

According to an unsealed search warrant affidavit, Emotet is a family of malware that targets critical industries worldwide, including banking, e‑commerce, healthcare, academia, government, and technology. Emotet malware primarily infects victim computers through spam email messages containing malicious attachments or hyperlinks. Emails were designed to appear to come from a legitimate source or someone in the recipient’s contact list. Once it has infected a victim computer, Emotet can deliver additional malware to the infected computer, such as ransomware or malware that steals financial credentials. Ransomware, in particular, has increased in scope and severity in the past year, harming businesses, healthcare providers, and government agencies even as the country has struggled to respond to the pandemic. 

“The coordinated disruption of Emotet was a great success for the FBI and our international partners,” said FBI Director Christopher Wray. “The FBI utilized sophisticated techniques, our unique legal authorities, and most importantly, our worldwide partnerships to significantly disrupt the malware. The operation is an example of how much we can achieve when we work with our international law enforcement partners to combat the cyber threat. The FBI remains committed, now more than ever, to imposing risk and consequences on cyber criminals to put an end to this type of criminal activity.”

The computers infected with Emotet malware are part of a botnet (i.e., a network of compromised computers), meaning the perpetrators can remotely control all the infected computers in a coordinated manner. The owners and operators of the victim computers are typically unaware of the infection.

“Cybercrime transcends physical and political boundaries and costs U.S. citizens and businesses billions each year,” said U.S. Attorney Matt Martin of the Middle District of North Carolina. “That was certainly true with Emotet. Now, more than ever, international collaboration is an imperative as we employ a technically and legally sophisticated approach to thwart cybercriminals in whatever corner of the globe they are found. This investigation will be a paradigm for effective international law enforcement cooperation directed at global cybercrime, and we applaud the FBI and the international law enforcement partners who contributed to the effort to take down this global threat.”

According to the affidavit, in 2017, for example, the computer network of a school district in the Middle District of North Carolina was infected with the Emotet malware. The Emotet infection caused damage to the school’s computers, including but not limited to the school’s network, which was disabled for approximately two weeks. In addition, the infection caused more than $1.4 million in losses, including but not limited to the cost of virus mitigation services and replacement computers. From 2017 to the present, there have been numerous other victims throughout North Carolina and the United States, to include computer networks of local, state, tribal, and federal governmental units, corporations, and networks related to critical infrastructure.

“The Emotet malware quickly elevated to one of the top cyber threats in the world,” said Special Agent in Charge Robert R. Wells of the FBI Charlotte Field Office. “The strong relationships with international law enforcement partners were critical to the success of this FBI investigation which began with a small North Carolina school system that did the right thing and quickly contacted their local FBI office for help.”

According to the U.S. Cybersecurity & Infrastructure Security Agency (CISA), Emotet infections have cost local, state, tribal, and territorial governments up to $1 million per incident to remediate. More information about the malware, including technical information for organizations about how to mitigate its effects, is available from CISA here: https://us-cert.cisa.gov/ncas/alerts/TA18-201A.

According to the affidavit, foreign law enforcement agents, working in coordination with the FBI, gained lawful access to Emotet servers located overseas and identified the Internet Protocol addresses of approximately 1.6 million computers worldwide that appear to have been infected with Emotet malware between April 1, 2020, and Jan. 17, 2021. Of those, over 45,000 infected computers appear to have been located in the United States.

Foreign law enforcement, working in collaboration with the FBI, replaced Emotet malware on servers located in their jurisdiction with a file created by law enforcement, according to the affidavit. This was done with the intent that computers in the United States and elsewhere that were infected by the Emotet malware would download the law enforcement file during an already-programmed Emotet update. The law enforcement file prevents the administrators of the Emotet botnet from further communicating with infected computers. The law enforcement file does not remediate other malware that was already installed on the infected computer through Emotet; instead, it is designed to prevent additional malware from being installed on the infected computer by untethering the victim computer from the botnet.

The scope of this law enforcement action was limited to the information installed on infected computers by the Emotet operators and did not extend to the information of the owners and users of the computers.

According to the affidavit, in coordination with foreign law enforcement officials, FBI personnel also gained lawful access to an Emotet distribution server located overseas and identified several servers worldwide that were used to distribute the Emotet malware. These servers were typically compromised web servers belonging to what appear to be unknowing third parties. The perpetrators uploaded the Emotet malware to the servers through unauthorized software applications. Victims who clicked on spam email messages containing malicious attachments or hyperlinks would then download the initial Emotet malware file from a distribution server.

In addition, according to the affidavit, FBI personnel notified more than 20 U.S.-based hosting providers that they hosted more than 45 IP addresses that had been compromised by the perpetrators associated with the Emotet malware and botnet. FBI Legal Attachés further notified authorities in more than 50 countries that hosting providers in their respective jurisdictions hosted hundreds of IP addresses that were compromised by Emotet.

The U.S. Attorney’s Office for the Middle District of North Carolina, the FBI Charlotte Division, and the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) conducted the operation in close cooperation with Europol and Eurojust who were an integral part of coordination and messaging, and investigators and prosecutors from several jurisdictions, including the Royal Canadian Mounted Police, France’s National Police and Judicial Court of Paris, Germany’s Federal Criminal Police and General Public Prosecutor’s Office Frankfurt/Main, Lithuanian Criminal Police Bureau, Netherlands National Police and National Public Prosecution Office, Swedish Police Authority, National Police of Ukraine and Office of the Prosecutor General of Ukraine, and the United Kingdom’s National Crime Agency and Crown Prosecution Service. The Justice Department’s Office of International Affairs and the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) also provided significant assistance. CCIPS Senior Counsel Ryan K.J. Dickey and Assistant U.S. Attorneys Eric Iverson and Anand Ramaswamy of the Middle District of North Carolina led the U.S. efforts.

More information about the operation is available by clicking: Eurojust/Europol. In addition, the Dutch National Police have created the following website to check whether your email address has been compromised by the administrators of Emotet: https://www.politie.nl/emocheck.

February 5, 2021 in AML | Permalink | Comments (0)

Thursday, February 4, 2021

2.2 Million Fraud Reports from Consumers in 2020 to FTC

The Federal Trade Commission received more than 2.1 million fraud reports from consumers in 2020, according to newly released data, with imposter scams remaining the most common type of fraud reported to the agency.

Online shopping was the second-most common fraud category reported by consumers, elevated by a surge of reports in the early days of the COVID-19 pandemic. Internet services; prizes, sweepstakes, and lotteries; and telephone and mobile services rounded out the top five fraud categories.

Consumers reported losing more than $3.3 billion to fraud in 2020, up from $1.8 billion in 2019. Nearly $1.2 billion of losses reported last year were due to imposter scams, while online shopping accounted for about $246 million in reported losses from consumers.

Just over a third of all consumers who filed a fraud report with the FTC—34 percent—reported losing money, up from just 23 percent in 2019.

The FTC’s Consumer Sentinel Network is a database that receives reports directly from consumers, as well as from federal, state, and local law enforcement agencies, the Better Business Bureau, industry members, and non-profit organizations. This year, the FTC welcomed the data contributions of the FBI’s Internet Crime Complaint Center, the Florida Department of Agriculture and Consumer Services, and the Connecticut Department of Consumer Protection. Twenty-five states now contribute to Sentinel. Reports from around the country about consumer protection issues are a key resource for FTC investigations that stop illegal activities and, when possible, provide refunds to consumers.

Consumer Sentinel Network Data Book 2020 - 4.7 million reports. Top Three Reports (1. Identity Theft 2. Imposter Scams 3. Online Shopping and Negative Reviews.  2.2 million fraud reports.  34% reported a loss.  $3.3 billion total fraud losses.  $311 median loss.  Source: Federal Trade Commission.  FTC.gov/exploredata.Sentinel received more than 4.7 million reports in 2020; these include the fraud reports detailed above, as well as identity theft reports and complaints related to other consumer issues, such as problems with credit bureaus and banks and lenders. In 2020, there were nearly 1.4 million reports of identity theft, received through the FTC’s IdentityTheft.gov website, about twice as many as in 2019.

Of the identity theft reports received in 2020, 406,375 came from people who said their information was misused to apply for a government document or benefit, such as unemployment insurance. That represents a tremendous increase from 2019, when the number was 23,213.

In 2020, the FTC introduced ReportFraud.ftc.gov, an updated platform for filing reports with the agency. The FTC uses the reports it receives through the Sentinel network as the starting point for many of its law enforcement investigations, and the agency also shares these reports with about 2,800 law enforcement users around the country. While the FTC does not intervene in individual complaints, Sentinel reports are a vital part of the agency’s law enforcement mission.

A full breakdown of reports received in 2020 is now available on the FTC’s data analysis site at ftc.gov/exploredata. The data dashboards there breakdown the reports across a numbers of categories, including by state and metropolitan area, as well as exploring a number of subcategories of fraud reports.

February 4, 2021 in AML | Permalink | Comments (0)

Thursday, January 28, 2021

Gross Domestic Product, 4th Quarter and Year 2020

Real gross domestic product (GDP) increased at an annual rate of 4.0 percent in the fourth quarter of 2020 (table 1), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 33.4 percent.

The GDP estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see "Source Data for the Advance Estimate" on page 4). The "second" estimate for the fourth quarter, based on more complete data, will be released on February 25, 2021.

Real GDP: Percent change from preceding quarter, Q4 '20

Real GDP: Percent change from preceding quarter

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

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

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

Current‑dollar GDP increased 6.0 percent at an annual rate, or $309.2 billion, in the fourth quarter to a level of $21.48 trillion. In the third quarter, GDP increased 38.3 percent, or $1.65 trillion (tables 1 and 3). More information on the source data that underlie the estimates is available in the Key Source and Data Assumptions file on BEA's website.

The price index for gross domestic purchases increased 1.7 percent in the fourth quarter, compared with an increase of 3.3 percent in the third quarter (table 4). The PCE price index increased 1.5 percent, compared with an increase of 3.7 percent in the third quarter. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 3.4 percent.

Personal Income

Current-dollar personal income decreased $339.7 billion in the fourth quarter, compared with a decrease of $541.5 billion in the third quarter. The decrease in personal income was more than accounted for by decreases in personal current transfer receipts (notably, government social benefits related to the winding down of CARES Act pandemic relief programs) and proprietors' income that were partly offset by increases in compensation and personal income receipts on assets (table 8).

Disposable personal income decreased $372.5 billion, or 8.1 percent, in the fourth quarter, compared with a decrease of $638.9 billion, or 13.2 percent, in the third quarter. Real disposable personal income decreased 9.5 percent, compared with a decrease of 16.3 percent.

Personal saving was $2.33 trillion in the fourth quarter, compared with $2.83 trillion in the third quarter. The personal saving rate—personal saving as a percentage of disposable personal income—was 13.4 percent in the fourth quarter, compared with 16.0 percent in the third quarter. Additional information on factors impacting quarterly personal income and saving can be found in "Effects of Selected Federal Pandemic Response Programs on Personal Income."

GDP for 2020

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

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

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

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

Current-dollar GDP decreased 2.3 percent, or $500.6 billion, in 2020 to a level of $20.93 trillion, compared with an increase of 4.0 percent, or $821.3 billion, in 2019 (tables 1 and 3).

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

Measured from the fourth quarter of 2019 to the fourth quarter of 2020, real GDP decreased 2.5 percent during the period (table 6). That compared with an increase of 2.3 percent during 2019.

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

*          *          *

Next release, February 25, 2021 at 8:30 A.M. EST

January 28, 2021 in Economics | Permalink | Comments (0)

Friday, January 8, 2021

Boeing Charged with 737 Max Fraud Conspiracy and Agrees to Pay over $2.5 Billion

The Boeing Company (Boeing) has entered into an agreement with the Department of Justice to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with the FAA AEG’s evaluation of Boeing’s 737 MAX airplane.

Boeing, a U.S.-based multinational corporation that designs, manufactures, and sells commercial airplanes to airlines worldwide, entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed today in the Northern District of Texas. The criminal information charges the company with one count of conspiracy to defraud the United States. Under the terms of the DPA, Boeing will pay a total criminal monetary amount of over $2.5 billion, composed of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the Boeing 737 MAX crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

As Boeing admitted in court documents, Boeing—through two of its 737 MAX Flight Technical Pilots—deceived the FAA AEG about an important aircraft part called the Maneuvering Characteristics Augmentation System (MCAS) that impacted the flight control system of the Boeing 737 MAX. Because of their deception, a key document published by the FAA AEG lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for U.S.-based airlines lacked information about MCAS.

Boeing began developing and marketing the 737 MAX in or around June 2011. Before any U.S.-based airline could operate the new 737 MAX, U.S. regulations required the FAA to evaluate and approve the airplane for commercial use.

In connection with this process, the FAA AEG was principally responsible for determining the minimum level of pilot training required for a pilot to fly the 737 MAX for a U.S.-based airline, based on the nature and extent of the differences between the 737 MAX and the prior version of Boeing’s 737 airplane, the 737 Next Generation (NG). At the conclusion of this evaluation, the FAA AEG published the 737 MAX Flight Standardization Board Report (FSB Report), which contained relevant information about certain aircraft parts and systems that Boeing was required to incorporate into airplane manuals and pilot-training materials for all U.S.-based airlines. The 737 MAX FSB Report also contained the FAA AEG’s differences-training determination. After the 737 MAX FSB Report was published, Boeing’s airline customers were permitted to fly the 737 MAX.

Within Boeing, the 737 MAX Flight Technical Team (composed of 737 MAX Flight Technical Pilots) was principally responsible for identifying and providing to the FAA AEG all information that was relevant to the FAA AEG in connection with the FAA AEG’s publication of the 737 MAX FSB Report. Because flight controls were vital to flying modern commercial airplanes, differences between the flight controls of the 737 NG and the 737 MAX were especially important to the FAA AEG for purposes of its publication of the 737 MAX FSB Report and the FAA AEG’s differences-training determination.

In and around November 2016, two of Boeing’s 737 MAX Flight Technical Pilots, one who was then the 737 MAX Chief Technical Pilot and another who would later become the 737 MAX Chief Technical Pilot, discovered information about an important change to MCAS. Rather than sharing information about this change with the FAA AEG, Boeing, through these two 737 MAX Flight Technical Pilots, concealed this information and deceived the FAA AEG about MCAS. Because of this deceit, the FAA AEG deleted all information about MCAS from the final version of the 737 MAX FSB Report published in July 2017. In turn, airplane manuals and pilot training materials for U.S.-based airlines lacked information about MCAS, and pilots flying the 737 MAX for Boeing’s airline customers were not provided any information about MCAS in their manuals and training materials. 

On Oct. 29, 2018, Lion Air Flight 610, a Boeing 737 MAX, crashed shortly after takeoff into the Java Sea near Indonesia. All 189 passengers and crew on board died. Following the Lion Air crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash. The FAA AEG also learned for the first time about the change to MCAS, including the information about MCAS that Boeing concealed from the FAA AEG. Meanwhile, while investigations into the Lion Air crash continued, the two 737 MAX Flight Technical Pilots continued misleading others—including at Boeing and the FAA—about their prior knowledge of the change to MCAS.

On March 10, 2019, Ethiopian Airlines Flight 302, a Boeing 737 MAX, crashed shortly after takeoff near Ejere, Ethiopia. All 157 passengers and crew on board died. Following the Ethiopian Airlines crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash. On March 13, 2019, the 737 MAX was officially grounded in the U.S., indefinitely halting further flights of this airplane by any U.S.-based airline.

As part of the DPA, Boeing has agreed, among other things, to continue to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions. As part of its cooperation, Boeing is required to report any evidence or allegation of a violation of U.S. fraud laws committed by Boeing’s employees or agents upon any domestic or foreign government agency (including the FAA), regulator, or any of Boeing’s airline customers. In addition, Boeing has agreed to strengthen its compliance program and to enhanced compliance program reporting requirements, which require Boeing to meet with the Fraud Section at least quarterly and to submit yearly reports to the Fraud Section regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced so that it is effective at deterring and detecting violations of U.S. fraud laws in connection with interactions with any domestic or foreign government agency (including the FAA), regulator, or any of its airline customers.

The department reached this resolution with Boeing based on a number of factors, including the nature and seriousness of the offense conduct; Boeing’s failure to timely and voluntarily self‑disclose the offense conduct to the department; and Boeing’s prior history, including a civil FAA settlement agreement from 2015 related to safety and quality issues concerning the Boeing’s Commercial Airplanes (BCA) business unit. In addition, while Boeing’s cooperation ultimately included voluntarily and proactively identifying to the Fraud Section potentially significant documents and Boeing witnesses, and voluntarily organizing voluminous evidence that Boeing was obligated to produce, such cooperation, however, was delayed and only began after the first six months of the Fraud Section’s investigation, during which time Boeing’s response frustrated the Fraud Section’s investigation.

The department also considered that Boeing engaged in remedial measures after the offense conduct, including:  (i) creating a permanent aerospace safety committee of the Board of Directors to oversee Boeing’s policies and procedures governing safety and its interactions with the FAA and other government agencies and regulators; (ii) creating a Product and Services Safety organization to strengthen and centralize the safety-related functions that were previously located across Boeing; (iii) reorganizing Boeing’s engineering function to have all Boeing engineers, as well as Boeing’s Flight Technical Team, report through Boeing’s chief engineer rather than to the business units; and (iv) making structural changes to Boeing’s Flight Technical Team to increase the supervision, effectiveness, and professionalism of Boeing’s Flight Technical Pilots, including moving Boeing’s Flight Technical Team under the same organizational umbrella as Boeing’s Flight Test Team, and adopting new policies and procedures and conducting training to clarify expectations and requirements governing communications between Boeing’s Flight Technical Pilots and regulatory authorities, including specifically the FAA AEG. Boeing also made significant changes to its top leadership since the offense occurred.

The department ultimately determined that an independent compliance monitor was unnecessary based on the following factors, among others: (i) the misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management; (ii) although two of Boeing’s 737 MAX Flight Technical Pilots deceived the FAA AEG about MCAS by way of misleading statements, half-truths, and omissions, others in Boeing disclosed MCAS’s expanded operational scope to different FAA personnel who were responsible for determining whether the 737 MAX met U.S. federal airworthiness standards; (iii) the state of Boeing’s remedial improvements to its compliance program and internal controls; and (iv) Boeing’s agreement to enhanced compliance program reporting requirements, as described above.

January 8, 2021 | Permalink | Comments (0)

Thursday, January 7, 2021

Barbados deposits its instrument of ratification for the Multilateral BEPS Convention

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

With 95 jurisdictions currently covered by the MLI, the ratification by Barbados now brings to 60 the number of jurisdictions which have ratified, accepted or approved it. The Multilateral Convention became effective on 1 January 2021 for over 600 treaties concluded among the 60 jurisdictions, with an additional 1200 treaties to become effectively modified once the MLI will have been ratified by all Signatories.

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

January 7, 2021 in BEPS | Permalink | Comments (0)

Tuesday, December 22, 2020

U.S. International Transactions, 3rd Quarter 2020

Current Account Deficit Widens by 10.6 Percent in Third Quarter

Current Account Balance, Third Quarter

The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, widened by $17.2 billion, or 10.6 percent, to $178.5 billion in the third quarter of 2020, according to statistics released by the U.S. Bureau of Economic Analysis. The revised second quarter deficit was $161.4 billion.

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

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

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

Current Account Transactions (tables 1-5)

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

Quarterly U.S. Current Account Transactions

Trade in Goods (table 2)

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

Trade in Services (table 3)

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

Primary Income (table 4)

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

Secondary Income (table 5)

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

Capital Account Transactions (table 1)

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

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

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

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

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

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

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

Financial Derivatives (table 1)

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

Updates to Second Quarter 2020 International Transactions Accounts Balances

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

*  *  *

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

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

Monday, December 21, 2020

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

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

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

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

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

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

Saturday, December 19, 2020

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

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

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

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

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

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

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

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

Friday, December 18, 2020

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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