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FINANCIALCRIME |
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Welcome to your weekly edition of RANE's Financial Crime Digest. RANE has carefully curated a selection of recent articles related to Anti-Corruption, AML, Sanctions, and Regulatory and Enforcement Actions designed to keep compliance and risk professionals up to date with news relevant to your program. We also feature critical insights drawn from the collective wisdom of our network of risk experts.
Of Note This Week:
- The Department of Justice (DOJ) released guidance to False Claims Act (FCA) litigators. The formal policy explains the manner in which the DOJ awards credit to defendants who cooperate during a False Claims Act investigation and identifies the type of cooperation eligible for credit.
- The Financial Industry Regulatory Authority (FINRA) released guidance to firms regarding suspicious activity monitoring and reporting obligations. The notice provides additional and new money laundering red flags of which firms should be aware, highlighting in particular emerging areas of risk like virtual currency.
- The Financial Crimes Enforcement Network (FinCEN) provided guidance on regulations relating to money services businesses and how they apply to business models involving virtual currencies (CVCs). FinCEN also issued an Advisory to help financial institutions to identify and report suspicious activity related to criminal exploitation of CVCs for money laundering, sanctions evasion, and other illicit financing purposes.
- The Commodity Futures Trading Commission (CFTC) Division of Enforcement (DOE) also issued its first public enforcement manual. The manual, which ostensibly serves as a general reference for DOE staff in the investigation and prosecution of potential violations of CFTC regulations, provides businesses and compliance professionals with a more transparent and detailed map into what guides the thinking behind DOE and CFTC enforcement actions.
For insight into the separate pieces of guidance released last week by the DOJ and OFAC, please see our interview with RANE expert A.J. Bosco below.
Our team is available to answer any questions related to the topics in this edition or to connect you with credentialed experts and service providers that can help address or mitigate risk issues. Please email your inquiry to advisory@ranenetwork.com. In the meantime, you’ll continue to receive this digest every Tuesday. |
| Insights From RANE Network Experts |
RANE Expert A.J. Bosco on Recent Compliance Guidelines From the DOJ and OFAC
Recently, the Department of Justice and the Office of the Treasury both released guidance on compliance (The Evaluation of Corporate Compliance Programs and A Framework for OFAC Compliance Commitments, respectively). We spoke with experienced attorney and RANE compliance expert A.J. Bosco to hear his thoughts on the recent publications.
RANE Corp |
| Anti-Bribery/Anti-Corruption/Fraud |
Department of Justice Issues Guidance on False Claims Act Matters and Identifies Cooperation Eligible for Credit.
The Civil Division has released formal guidance to the Department of Justice’s False Claims Act (FCA) litigators explaining the manner in which the DOJ awards credit to defendants who cooperate during an FCA investigation, as well as the type of cooperation eligible for credit. Under the policy, cooperation credit in FCA cases may be earned by voluntarily disclosing misconduct unknown to the government, cooperating in an ongoing investigation, or undertaking remedial measures in response to a violation. Most often, cooperation credit will take the form of a reduction in the damages multiplier and civil penalties. The DOJ may also notify a relevant agency about the company’s voluntary disclosure, cooperation, or remediation so that the agency can take those actions into account in deciding how to apply administrative remedies.
US Department of Justice |
CFTC Whistleblower Office Issues Alert Incentivizing Public to Identify and Report Virtual Currency Fraud
The Whistleblower Office of the Commodity Futures Trading Commission (CFTC) has issued an alert informing the public about how they may be eligible for financial awards if they report observed misconduct associated with fraud and manipulation relating to virtual currencies. Virtual currencies are commodities under the Commodity Exchange Act. Conduct that potential whistleblowers should be on the lookout for with regard to virtual currency includes: price manipulation (like pump-and-dump schemes); pre-arranged or wash trading; trades on an unregistered domestic platform or facility; schemes marketed to retail customers by unregistered persons, even without direct evidence of fraud or manipulation; or supervision failures or fraudulent conduct by exchanges.
US Commodity Futures Trading Commission (CFTC) |
Shell, Eni Executives Named in $1 Billion Nigeria Bribery Suit; New Individuals Ensnared in Old Scandal
In a new lawsuit, the Nigerian government alleges that a handful of executives at Royal Dutch Shell Plc and Eni SpA were tied to $1.1 billion in bribery payments. The corruption allegations are just the latest in a years-long dispute over exploration rights to a tract in the Gulf of Guinea called Oil Prospecting License 245 (OPL 245). This London lawsuit mentions individuals who hadn’t previously been caught up in the scandal, including former Shell Chief Executive Officer Peter Voser and Maarten Wetselaar, the current head of its large natural gas business. The Nigerian government is seeking more than $1 billion in damages as well as the right to revoke Shell and Eni’s license to OPL 245, which may have billions of barrels of oil.
Bloomberg |
Risks Associated with Whistleblower Claims Brought by Compliance Personnel
A recent case decision highlights risks associated with claims brought by compliance personnel, as plaintiffs are increasingly claiming to be victims of retaliation for raising red flags. In Wadler v. Bio-Rad Laboratories, Bio-Rad’s former general counsel Wadler claimed he was fired for internally reporting alleged FCPA violations. Bio-Rad argued he was fired for poor performance and a dysfunctional relationship with management; Bio-Rad asserted he made the report out of worry for his job security and was seeking protection. The jury awarded Wadler $11 million and decided Bio-Rad’s conduct violated the Sarbanes-Oxley Act, the Dodd-Frank Act, and California public policy. This is a reminder that performance problems of people in key compliance positions must be properly documented. Companies should not discipline these individuals without being certain they are free of even the appearance of bias.
New York Law Journal |
| Anti-Money Laundering/Counter-Terrorist Financing |
FINRA Issues Guidance Regarding Suspicious Activity Monitoring and Reporting Obligations; Notes Emerging Areas of Risk
FINRA has issued a Notice to provide guidance to firms with regard to suspicious activity monitoring and reporting obligations under its Anti-Money Laundering Compliance Program. Although it has previously published a list of money laundering red flags, this Notice gives examples of additional and new red flags for firms to consider incorporating into their AML programs. The Notice is intended to assist broker-dealers in complying with their existing obligations under the Bank Secrecy Act/Anti-money laundering requirements; it does not create any new requirements or expectations, but it does caution firms to be aware of emerging areas of risk, such as risks associated with cryptocurrencies.
Financial Industry Regulatory Authority (FINRA) |
UK Review Reveals Law Firms Falling Short on Anti-Money Laundering
A new review by the UK’s Solicitors Regulation Authority (SRA) has revealed that a number of law firms providing trust and company services are falling short of their obligations to prevent money laundering. The review found many breaches of the 2017 Money Laundering Regulations, with the biggest area of concern being firms’ risk assessments. More than a third of the firms reviewed fell short, with a handful that had no risk assessment at all. There were also customer due diligence issues, with a quarter being found to have inadequate processes. As a result of the review, the SRA has put 26 firms into its disciplinary processes, and it has begun a further review of 400 other law firms to check compliance. This review will be led by a new dedicated anti-money laundering unit.
UK Solicitors Regulation Authority (SRA) |
US Says EU-Iran Trade Vehicle Instex is Unlikely to Meet Anti-Money-Laundering Standard
France, Germany, and Britain have created a special purpose vehicle called Instex, which opens a channel for barter-based trade and aims to shield Iran from US sanctions, while encouraging Iran to adhere to the 2015 deal on its nuclear program. In a blow to those ambitions, the US officials announced on May 7 that Instex is unlikely to meet the standard required to ensure that the trade vehicle is not used to finance terrorism or launder money, as stipulated by the Paris-based Financial Action Task Force (FATF). According to US Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker, it will likely be impossible for Iran to meet these requirements because much of its economy is “opaque” and closely linked with organizations sanctioned by the US, particularly the Islamic Revolutionary Guard Corps (IRGC).
Reuters (US) |
Canadian Authorities Fail to Catch 99.9 Percent of Money Laundering: Report
According to a recent policy brief, Canadian authorities are failing to catch 99.9 percent of money laundering in the country, resulting in US$75 billion to $100 billion of dirty money flowing through Canada each year, due mainly to the country’s lack of transparency surrounding beneficial owners of companies and lack of penalties for those who break the law. The country has lax requirements when it comes to collecting information on who really owns companies and real estate. A separate report released days later detailed a vast trade-based money-laundering scheme in which Canadian criminals buy luxury cars and sell them to China, allowing the criminals not only to launder money, but also receive millions of dollars in tax rebates by selling used cars.
European Parliament |
| Sanctions Watch |
Trump Imposes Fresh Sanctions on Iran Amid New Standoff
On May 8, the White House announced new sanctions on Iran’s steel, iron, aluminum, and copper sectors following Iran’s announcement that it will partially withdraw from the 2015 Joint Comprehensive Plan of Action (JCPOA), a multilateral agreement to limit Iran’s nuclear program. In a televised statement announcing Iran’s intention to withdraw from the agreement and resume stockpiling low-enriched uranium, President Rouhani stated that he intends to wait 60 days before taking additional action, allowing additional time for countries that are still part of the nuclear agreement to decide whether to continue engaging with Iran despite US sanctions. The US withdrew from the JCPOA in 2018, and has since imposed increasingly strict sanctions on Iran’s energy and financial industries.
The Hill |
OFAC Removes Sanctions on Former Venezuelan Intelligence Official After Public Break With Maduro and Dismissal
The Treasury Department’s Office of Foreign Assets Control (OFAC) lifted sanctions on General Manuel Ricardo Christopher Figuero (Christopher), the former Director General of Venezuela’s National Intelligence Service, after he broke ranks with President Maduro and publicly declared his support for US-backed opposition leader Juan Guaido. As a result of OFAC’s action, Christopher’s property interests have been unblocked, and otherwise lawful interactions with US citizens are no longer prohibited. The Treasury statement noted that similar sanctions relief may be available to other sanctioned Venezuelan individuals who publicly voice their support for Guaido or take concrete steps to oppose Maduro.
US Department of the Treasury |
Treasury Identifies the Venezuelan Defense and Security Sector as Subject to Sanctions, Further Targets Venezuelan Oil Moving to Cuba
The Treasury has stated that persons operating in the defense and security sector of the Venezuelan economy may be subject to sanctions; in addition, OFAC designated two companies that operate in the oil sector of the Venezuelan economy. OFAC also identified two vessels, which transported oil from Venezuela to Cuba, as blocked property owned by the companies. The designations — a response to SEBIN’s arrest of National Assembly members — are intended to target actors who participate in the repressive Maduro defense and intelligence sector. SEBIN is an internal security force subordinate to the Vice President of Venezuela. The designated companies are Monsoon Navigation Corporation, which is the registered owner of the vessel Ocean Elegance, and Serenity Maritime Limited, which is the registered owner of the vessel Leon Dias.
US Department of the Treasury |
US Seizes North Korean Cargo Vessel Connected to Sanctions Violations; First Seizure of its Kind
The Justice Department announced the US, for the first time, seized a North Korean ship for violating sanctions. The Wise Honest carrier ship was being used to export coal to foreign countries and import heavy machinery as part of a North Korean scheme. The US and UN have aggressively sanctioned the coal industry in an effort to compel North Korea to dismantle its nuclear program. Coming on the heels of a recent North Korea weapons test, the timing of this seizure and the message it sends will likely result in an escalation of tensions. The release also mentioned that American banks were unwittingly caught up in the scheme, transmitting payments around the world for maintenance, equipment and improvement of the ship, providing a salient reminder for companies to diligently stay on top of transaction monitoring.
US Department of Justice |
| Regulatory And Enforcement Actions |
CFTC’s Division of Enforcement Issues First Public Enforcement Manual
The Commodity Futures Trading Commission’s (CFTC) Division of Enforcement (DOE) published its Enforcement Manual, which works to establish general policies and procedures that guide the staff in detecting, investigating, and prosecuting violations of the Commodity Exchange Act (CEA) and the CFTC Regulations. This is the first issuance of a public Manual by DOE, and its publication is part of a broader agency effort to provide the public with information about DOE’s operations with the intent to increase certainty and consistency, and promote fairness, increase predictability, and enhance respect for the rule of law.
US Commodity Futures Trading Commission (CFTC) |
Telefônica Brasil Resolves ‘World Cup Hospitality’ FCPA Offenses
The SEC fined São Paulo-based telecom company Telefônica Brasil S.A. — a unit of Spain's Telefónica, S.A. — $4.125 million for providing soccer tickets and hospitality to government officials who could help the company's business, in violation of the FCPA's internal accounting controls and recordkeeping provisions. The company marked the costs for 2014 World Cup tickets and 2013 Confederations Cup tickets as “Publicity Institutional Events” and “Advertising & Publicity,” and the tickets went to 127 government officials. The SEC said the payments weren't accurately reflected in Telefônica Brasil’s books and records and the company failed to devise and maintain a sufficient system of internal accounting controls. The SEC said the settlement took into account Telefônica Brasil's remedial action and cooperation.
The FCPA Blog |
FinCEN Issues Guidance on Its Regulatory Framework for Virtual Currencies and an Advisory Warning of Virtual Currency Misuse
The Financial Crimes Enforcement Network (FinCEN) issued the guidance “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies (CVC)” in response to uncertainty concerning the regulatory treatment of businesses dealing in CVCs. FinCEN also issued an “Advisory on Illicit Activity Involving Convertible Virtual Currency” in order to help financial institutions identify and report suspicious activity related to criminal exploitation of CVCs. The advisory highlights frequently used methods and associated red flags; it also identifies information law enforcement would find most valuable if contained in suspicious activity reports. The guidance consolidates current FinCEN standards that relate to money transmission involving virtual currency. FinCEN’s rules define certain businesses or individuals involved with CVCs as money transmitters subject to the same requirements and responsibilities as other money services businesses.
US Financial Crimes Enforcement Network (FinCEN) |
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