FinCrimes Update: December 2015 Summary, Volume 2, Issue 10

anti-laundering
anti-laundering

OFAC PUBLISHES CYBER-RELATED SANCTIONS REGULATIONS

On December 31, OFAC issued regulations to implement Executive Order 13694 of April 1, 2015, “Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities.” Effective immediately, the regulations prohibit all transactions prohibited by Executive Order 13694, including dealing in the property or interests in property, that come within the United States, of blocked persons. Among other things, under Executive Order 13694, a party may be blocked if the U.S. government finds the party  “to be responsible for or complicit in, or to have engaged in, directly or indirectly, cyber-enabled activities originating from, or directed by persons located, in whole or in substantial part, outside the United States that are reasonably likely to result in, or have materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States” and that have one of the purposes or effects enumerated in the Order. More information on the Executive Order is available here. OFAC’s Specially Designated Nationals (SDN) List will include persons blocked pursuant to the Executive Order and regulation. OFAC intends to supplement the new regulations with a more comprehensive set of regulations, “which may include additional interpretive and definitional guidance, regarding ‘cyber-enabled’ activities, and additional general licenses and statements of licensing policy.”

FINCEN ASSESSES CIVIL MONEY PENALTY AGAINST LA-BASED PRECIOUS METALS BUSINESS FOR AML VIOLATIONS

On December 30, FinCEN announced a civil money penalty of $200,000 against a Los Angeles-based precious metals business – a financial institution as defined by the BSA – and its owner and compliance officer. The company and the two individuals admitted to willfully violating federal AML laws by (i) failing to adequately asses its own risk; and (ii) failing to conduct due diligence on its highest-risk customers. Specifically, the business did not have an AML program in place until 2011, five years after the IRS instructed it to establish one. In 2013,

IRS examiners found that the company’s recently-established AML program did not ensure compliance with the BSA and, as a result, the company “failed to appropriately assess its money laundering to terrorist financing risks, conducted almost no due diligence on money laundering and terrorist financing, conducted almost no due diligence on many of its highest risk customers, and failed to implement effective procedures to identify red flags or to conduct inquiries when such red flags were present, among other things.” In addition to the civil money penalty, the company and the two individuals agreed that, until 2020, they would: (i) retain an auditor; (ii) provide a comprehensive annual report to FinCEN detailing the implementation of the company’s improved AML program; and (iii) annually provide FinCEN with a copy of the company’s AML training program, certifying attendance and testing results of the program.

OFAC UPDATES SDN AND BLOCKED PERSONS LIST

On December 22, OFAC updated its Specially Designated Nationals (SDNs) list to identify additional persons and entities with which U.S. citizens and permanent residents are prohibited from doing business and whose assets or interests in assets must be frozen if they come within the jurisdiction of the U.S. OFAC’s update to the SDN list names 34 individuals and entities under Ukraine-related sanctions and authorities. In addition, OFAC identified – under the Sectoral Sanctions Identifications List – a number of subsidiary companies that are at least 50% owned by two previously-sanctioned banks and/or one previously-sanctioned defense company.

FINCEN SETTLES WITH CARD CLUB GAMING ESTABLISHMENT FOR BSA VIOLATIONS

On December 17, FinCEN announced a $650,000 settlement with a “card club” gaming establishment in California for willfully violating the program and reporting requirements of the Bank Secrecy Act (BSA). The gaming establishment allegedly trained its staff using misleading and inaccurate AML policy, which either failed to provide instructions at all, or provided incorrect instructions regarding the establishment’s obligations and reporting requirements under the BSA. As an example, the establishment “encouraged employees to provide notice to patrons if they were about to conduct a cash transaction that would put them over the $10,000 threshold for the filing of a Currency Transaction Report, thereby possibly encouraging structured transactions.” In addition, since the establishment’s policy did not contain instructions regarding when an employee should file a Suspicious Activity Report (“SAR”), it failed to file SARs in 2009 and 2010. Card clubs are gaming facilities that generally host only games involving cards; like casinos, card clubs are defined as financial institutions under the BSA, rendering them subject to FinCEN’s rules and regulatory authority.

NEW YORK DFS ANNOUNCES ENFORCEMENT ACTION AGAINST PAKISTAN-BASED BANK’S NEW YORK BRANCH

On December 17, the New York DFS announced an enforcement action against a New York branch of a Pakistan-based bank. The Federal Reserve Bank of New York (FRBNY) and the DFS recently conducted an examination of the branch and found significant risk management and compliance failures with regard to state and federal laws, rules, and regulations relating to anti-money laundering (AML) compliance. Under the terms of the DFS’s order, the branch agreed to reform its policies and procedures to ensure compliance with AML laws. Per the order, the bank must submit to the DFS, within 60 days of the order, a number of written programs regarding its (i) corporate governance and management oversight; (ii) BSA/AML compliance review; (iii) customer due diligence; and (iv) suspicious activity monitoring and reporting. The branch must also hire an independent third-party approved by the DFS and the FRBNY to review the effectiveness of the bank’s compliance program, and to prepare a written report of its findings, conclusions, and recommendations for the program. Because the branch’s compliance with OFAC regulations was insufficient, the order also mandates that the bank retain an independent third-party to examine its U.S. dollar-clearing transactions between October 2014 and March 2015. Significantly, the order does not require the branch to pay a civil money penalty.

FINCEN ANNOUNCES MOU WITH CHINA ANTI-MONEY LAUNDERING MONITORING AND ANALYSIS CENTER

On December 11, FinCEN announced that Director Jennifer Shasky Calvery and the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) Director-General Luo Yang of the People’s Republic of China signed an MOU “to create a framework to facilitate expanded U.S.-China collaboration, communication, and cooperation between both nations’ financial intelligence units.” As the financial intelligence unit (FIU) for the United States, FinCEN is responsible for combating money laundering and the financing of terrorism by collecting, analyzing, and disseminating financial intelligence to law enforcement and other relevant authorities; as the Chinese counterpart to FinCEN, the CAMLMAC has comparable responsibilities to the Chinese government. The recently announced MOU is intended to provide a “mechanism for sharing information on money laundering and the financing of terrorism in order to prevent illicit actors from abusing either country’s financial systems.”

FCPA & ANTI-CORRUPTION:

TWO CONTRACTORS ARRESTED IN VENEZUELA OIL PROBE

According to news reports, a DOJ spokesman has confirmed the December 20 arrest of two contractors in connection with an ongoing probe of Venezuela’s state-owned oil company, Petroleos de Venezuela.  One of the contractors, Roberto Rincon, is the owner of a Houston-based oil-field supply company.  The other, Abraham Jose Shiera-Bastidas, is a Venezuelan national living in Florida.

The indictment, filed in a Texas federal court, alleges violations of the FCPA’s anti-bribery provisions as well as money laundering offenses, and seeks forfeiture of several Swiss bank accounts.  The indictment alleges that between 2009 and 2014, Rincon and Shiera-Bastidas conspired to bribe Venezuelan officials in exchange for rigging the bidding panels that award contracts from Petroleos de Venezuela.  The indictment identifies nine alleged bribes paid by Rincon and Shiera-Bastidas totaling $790,000.

BRAZIL CHARGES 12 INDIVIDUALS IN CONNECTION WITH PETROBRAS INVESTIGATION

On December 21, Brazilian officials charged twelve individuals with corruption-related offenses in connection with a probe into the relationship between Petrobras and Dutch oilfield company SBM Offshore N.V.  Those charged include several former SBM Offshore executives, former SBM Offshore sales agents, and several former Petrobras executives. News reports state that the charges center on $46 million in allegedly corrupt payments made between 1998 and 2012.

On December 17, SBM Offshore issued a statement that referred to ongoing discussions with Brazil’s Comptroller General’s Office and Attorney General’s Office to reach a settlement agreement and to secure disclosure of information relevant to the ongoing investigation into Petrobras.  Brazil’s actions follow SBM Offshore’s prior settlement with Dutch authorities over allegations that it bribed officials in Brazil, Angola, and Equitorial Guinea; SBM Offshore agreed to pay the Dutch Public Prosecutor’s Office $240 million as part of the settlement.  The company also had announced the conclusion of the DOJ’s investigation into the matters resolved with the Dutch.  Previous FCPA Scorecard coverage of SBM Offshore settlement and the Petrobas investigation can be found here and here.

FIFA ETHICS COMMITTEE ISSUES EIGHT-YEAR BANS TO PRESIDENT AND VICE PRESIDENT

On December 21, the FIFA Ethics Committee announced that it would ban its embattled President, Sepp Blatter, and Vice President, Michel Platini, from all football-related activities for eight years. The ban was imposed as a result of an investigation into a payment of $2 million from FIFA to Platini in 2011 that was authorized by Blatter.  The Ethics Committee’s statement on their decision stated that the payment was made without a legal basis. Platini is currently the head of UEFA, the governing body of European football. News reports state that it was widely anticipated that Platini would be elected President of FIFA in the upcoming 2016 election, but he has now withdrawn his candidacy following the Ethics Committee’s decision.

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