On May 20, the SEC announced that it had instituted and settled administrative proceedings against a global resources company to resolve alleged FCPA violations during the 2008 Summer Olympics. According to the SEC’s administrative order, the company invited over 175 government officials and employees of state-owned enterprises, many from countries in Africa and Asia with a “well-known history of corruption,” to attend the Games at its expense. Those who accepted were provided with “hospitality packages” that included event tickets, luxury hotel accommodations, meals and, in many cases, business class airfare. Even though the company was aware that providing high-end hospitality packages to government officials created a heightened risk of violating anti-corruption laws, its internal controls were “insufficient” because there was no independent legal or compliance review of the invited guests or enhanced training of employees regarding the corruption risks. Read more…
According to its May 19 securities filing, a Brazilian manufacturer of commercial jets has entered into discussions with the DOJ to resolve an FCPA probe launched by the Department in 2010. The government’s investigation stems from allegations that the manufacturer’s sales executives bribed various Dominican individuals who, in exchange, influenced legislators in the Dominican Republic to approve a $92 million contract and financing agreement for aircraft. In its filing, the company stated that a resolution of the investigation would result in fines and other sanctions by the DOJ. The Brazilian government’s criminal case against the manufacturer’s eight sales executives is ongoing.
OFAC Publishes Guidance Regarding Travel Between U.S. and Cuba, Releases Updated FAQs Regarding Cuba-Related Sanctions
On May 5, OFAC issued new Guidance Regarding Travel Between the U.S. and Cuba, which provides information on the types of individuals and cargo that can be transported between the U.S. and Cuba by a licensed air carrier or commercial passenger vessel. With respect to individuals, the guidance addressed persons subject to U.S. jurisdiction, Cuban nationals, and other individuals, including foreign nationals, travelling on official government business. The guidance regarding cargo addressed, among other things, alcohol and tobacco products. In a separate announcement released on April 16 (and later updated on May 5), OFAC issued new and updated Frequently Asked Questions (FAQs) related to the Cuban Assets Control Regulations (CACR). The updated FAQs follow a January 15 announcement in which OFAC issued a final rule amending the CACR to reflect policy changes previously announced by President Obama in 2014.
DOJ and International Investment Bank Enter Into Plea Agreement to Resolve LIBOR Manipulation Claims, Bank Agrees to Pay $2.5 Billion Penalty
On April 23, the DOJ announced that an international investment bank and its subsidiary agreed to plead guilty to wire fraud for its alleged conduct, spanning from 2003 through 2011, in manipulating the London Interbank Offered Rate (LIBOR), which is used to set interest rates on various financial products. In addition, the DOJ announced that the bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust claims for manipulating both the U.S. Dollar LIBOR and Yen LIBOR. Under terms of the agreement, the $2.5 billion in penalties will be divided among U.S. and U.K. authorities – $800 million to the Commodity Futures Trading Commission, $775 million to the DOJ, $600 million to the New York Department Financial Services, and roughly $340 million to the U.K.’s Financial Conduct Authority. The authorities also ordered the bank to install an independent compliance monitor.
On April 22, the Financial Conduct Authority (FCA) fined a subsidiary of U.S.-based bank approximately £13 million ($19.8 million) for (i) improperly reporting more than 35 million various client transactions, ranging from the identity of counterparties to the trading times of such transactions; and (ii) failing to report an additional 121,000 transactions over a seven-year period. According to the final notice issued by the FCA, many of the reporting issues were self-reported to the British regulator.
On April 14, President Obama submitted to Congress a report and certifications signaling the Administration’s intent to rescind Cuba’s designation as a State Sponsor of Terrorism, according to a statement by the White House Press Secretary. The decision to rescind Cuba’s designation, which has been in effect since 1982, was based on a recommendation from the Secretary of State, resulting from the Department of State undertaking a comprehensive review of Cuba’s record. As statutorily required for a country’s designation to be rescinded, the President must submit a report to Congress at least 45 days before the proposed rescission would be effective and certifying that (i) Cuba has not provided any support for international terrorism during the preceding 6-month period; and (ii) the Cuban government has provided assurances that it will not support acts of international terrorism in the future. The White House’s announcement follows recent policy changes by the Administration aimed at normalizing U.S.-Cuba relations.
On April 8, the Federal Communications Commission (FCC) announced a $25 million settlement with an international telecommunications carrier concerning the unauthorized release of the personal information of nearly 280,000 customers by certain employees. The alleged data breach took place over a 168-day period at carrier call centers in Mexico, Columbia, and the Philippines where employees of the carrier allegedly were paid by unauthorized third parties to disclose confidential customer information. The third parties appear to have sought the information to unlock and traffic stolen cell phones. The FCC Enforcement Bureau found that the data breach violated a carrier’s duty under Section 222 of the Communications Act and also constituted “an unjust and unreasonable practice” under Section 201. In addition to paying the $25 million civil money penalty, terms of the settlement require the carrier to (i) notify all affected customers and reimburse them for any subsequent credit monitoring services; and (ii) implement new internal policies to improve the carrier’s privacy and data security practices. For more information on the latest regulatory guidance on data security and evolving best practices, please visit the Privacy, Cyber Risk, and Data Security Resource Center.
On April 2, the United States, along with the U.K., France, Germany, Russia, China, and the EU (the “P5+1”), agreed with Iran on a Joint Comprehensive Plan of Action (“JCPOA”). The JCPOA is a preliminary framework to reduce Iran’s nuclear program, and details key parameters to provide the foundation upon which a final JCPOA is intended to be agreed by June 30, 2015. The framework includes five key components: (i) Enrichment, (ii) Inspections and Transparency, (iii) Reactors and Reprocessing, (iv) Sanctions Relief, and (v) Phasing. In particular, the sanctions relief will not be immediate and, instead, linked to verifiable measures Iran takes with respect to its commitments under the JCPOA. In addition, sanctions relief is specific to a suspension of nuclear-related sanctions. Importantly, the structure of such sanctions will remain in place, allowing for a “snap-back” of sanctions in the event of significant non-performance. U.S. sanctions with respect to terrorism, human rights abuses and ballistic missiles will remain in place against Iran.
On March 11, OFAC updated its Specially Designated Nationals (SDNs) list comprising of individuals and entities including a Russian national bank, Russian National Commercial Bank. The SDN list identifies persons and entities with which U.S. citizens and permanent residents are prohibited from doing business and whose assets or interests in assets that come within U.S. jurisdiction must be frozen.
On March 8, President Obama signed an executive order imposing sanctions on Venezuela in response to the country’s ongoing human rights violations and abuses in anti-governmental protests. Specifically, the Order (i) designates seven Venezuelan government officials as Specially Designated Nationals (SDNs), (ii) provides authorization for the designation of additional parties as SDNs who are determined to be engaged in specified activities, and (iii) suspends entry into the United States of persons designated under the Order. While the Order stems from defending human rights and democratic governance, according to Treasury Secretary Jack Lew, the Order “will be used to protect the U.S. financial system from the illicit financial flows from public corruption in Venezuela.”
On March 2, an international bank agreed to pay $30 million to settle allegations that it changed the order in which customers’ debit transactions cleared in order to generate additional overdraft fees. According to the plaintiffs, the bank engaged in a practice known as “high-to-low” posting, whereby a bank orders transactions from the largest to the smallest dollar amount before posting them to the customer’s account. The bank also charged a $35 fee for each overdraft, regardless of the amount of the transaction. The plaintiffs allege that, when combined, these practices increased the number of overdraft fees paid by some customers because processing the largest charges first depleted their funds more quickly and increased the total number of transactions that failed to clear. The bank appropriately defended its practices, contending, among other things, that the claims were preempted by the National Bank Act and barred by the Uniform Commercial Code, and that the deposit agreement provided for discretion to order transactions. The settlement is scheduled to face a fairness hearing and final approval by the court.
On February 24, the SEC announced charges against a global manufacturer for alleged violations of the FCPA involving bribes paid by its African subsidiaries in order to make sales in Kenya and Angola. Over the course of a four-year period, the manufacturer allegedly failed to detect more than $3.2 million in bribes paid in cash to employees of private companies, government-owned entities, and other local authorities, including police or city council officials. According to the SEC Order, the manufacturer maintained “inadequate FCPA compliance controls,” allowing improper payments to be recorded as legitimate business expenses, which violated the books, records, and internal control provisions of the Securities Exchange Act of 1934. Under the terms of the settlement, the manufacturer will pay over $16 million to settle the SEC’s allegations and report its FCPA remediation efforts to the SEC for three years.
On January 21, the Australian Transaction Reports and Analysis Centre (AUSTRAC) announced a $122,400 penalty (Australian dollars) against a large financial services company for failing to register six affiliate businesses as remittance services providers. AUSTRAC serves as Australia’s regulator of anti-money laundering and counter-terrorism financing activities. AUSTRAC noted the company’s voluntary disclosure was taken into consideration when determining its enforcement approach.
On January 15, the Department of Treasury’s Office of Foreign Assets Control (OFAC) announced a final rule amending its Cuban Assets Control Regulations (CACR) to reflect policy changes previously announced by President Obama on December 17. The amendments (i) allow U.S. financial institutions to maintain correspondent accounts at Cuban financial institutions; (ii) allow U.S. financial institutions to enroll merchants and process credit and debit card transactions for travel-related and other transactions consistent with the CACR; (iii) increase the limit of remittances to $2,000 from $500 per quarter; and (iv) under an expanded license, allow U.S. registered brokers or dealers in securities and registered money transmitters to process authorized remittances without having to apply for a specific license. In addition, OFAC released a FAQ sheet to help explain the new amendments, which are effective January 16.
On December 18, President Obama signed into law H.R. 5859, the “Ukraine Freedom Support Act of 2014.” First introduced in the House on December 11, the bill gives the President the authority to impose sanctions against countries, entities, and individual persons that pose potential threats to financial stability through excessive risk-taking with the Russian market. The bill provides authority for sanctions against foreign persons, including executive officers of an entity, relating to (i) banking transactions; (ii) investing in or purchasing equity or debt instruments; (iii) U.S. property transactions; and (iv) Export-Import Bank of the United States assistance. Finally, the bill directs the President to “use U.S. influence to encourage the World Bank Group, the European Bank for Reconstruction and Development, and other international financial institutions to invest in and stimulate private investment in such projects.”