FRA Associate Director Mihnea Rotariu recently attended the DC Bar White Collar Crime Series: Financial Crime Enforcement and Compliance Conference in Washington, DC. The event covered discussions around compliance best practices and recent enforcement trends in the world of financial crime, specifically with a focus on the Foreign Corrupt Practices Act (FCPA), Anti-Money Laundering (AML) and U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) sanctions. Below are some of his key insights from the event.
- Woo Lee, Deputy Chief International Unit, Money Laundering & Asset Recovery Section – U.S. Department of Justice
- Stephen Gibbons, Acting Director Senior Counsel, Anti-Corruption & International Agreements – Raytheon
- Joseph Moreno – Partner, White Collar Defense and Investigations Group, specializing in FCPA/UKBA, AML/CFT, and DOJ/SEC enforcement – Cadwalader, Wickersham & Taft LLP
- Fabio Leonardi – Counsel – Pillsbury Winthrop Shaw Pittman LLP
Recent Developments – FCPA
Higher than all of 2018, $1.5 billion has been collected by the DOJ/SEC in fines, penalties, disgorgements and interest as of September 2019. As of March 2019, the DOJ revised their Corporate Enforcement Policy, including:
- Voluntary self-disclosure in FCPA Matters
- Full cooperation in FCPA Matters (Instant Messaging and Communications)
- Timely and Appropriate remediation in FCPA Matters
In April 2019, there has been updated guidance on evaluating the effectiveness of corporate compliance programs, raising questions including:
- Is the corporation’s compliance program well designed?
- Is the corporation’s compliance program being implemented effectively?
- Does the corporation’s compliance program work in practice?
- Furthermore, it was noted that there is a link between foreign bribe payments and other financial crimes.
Recent Developments – AML
- There are growing synergies between AML and sanctions enforcement and compliance programs
- AML regulators’ are encouraging “innovative approaches” including artificial intelligence
- There has been an expansion of FinCEN’s real estate geographic targeting orders (GTOs)
- There are plans for draft legislation to amend key aspects of the Bank Secrecy Act
- There is a growing attention paid to AML in the cryptocurrency space
Recent Developments – AML/ Crypto-currency
Cryptocurrencies & Digital Assets
- There are no single set of definitions used by regulators, market participants or others persons to describe assets represented on blockchain
- There are three categories to consider: Cryptocurrency / Virtual Currency; Initial Coin Offerings (“ICOs”) and Utility Tokens
- Most U.S. regulators (CFTC, FinCEN, IRS, SEC, NY DFS) take the view that crypto assets are a security or a virtual currency
- CDD on customers is controversial
- U.S. regulations do not prevent “users” from transacting directly and anonymously with one another, but when a person is “in the business” of providing payments, custody, and exchange services, the BSA treats it as a financial institution
- Under the BSA, a financial institution should not permit anonymity
AML for MSBs (Money Service Businesses)
- Back in 2013, FinCEN clarified that certain actors undertaking specific virtual currency transactions are subject to the MSB regulations governing money transmission
- “Users” obtain virtual currency to purchase goods or services
- “Exchangers” are persons engaged as a business in the exchange of virtual currency, funds or other virtual currency
- “Administrators” are persons engaged as a business is issuing (putting into circulation) a virtual currency and who have the authority to redeem (to withdraw from circulation) such virtual currency.
2013 FinCEN Virtual Currency Guidance
- A person has AML obligations under the Bank Secrecy Act if it is a “money services business” (“MSB”)
- “Users” are generally not MSBs and thus not subject to the BSA
- “Money transmitters” are MSBs and thus subject to the BSA’s AML requirements
Both “exchangers” and “administrators” of virtual currency are “money transmitters” if they:
- Accept/transmit a convertible virtual currency; or
- Buy/sell convertible virtual currency for any reason.
Last month, FinCEN launched the “Global Investigations Division” led by a former criminal prosecutor.
- FATF is currently conducting its Fourth Round of Mutual Evaluations
- In June 2019, FATF (under a US Presidency) issued an interpretive note to recommendation 15 on new technologies
- In 2011, the Kleptocracy Initiative was formed and cased within the Money Laundering and Asset Recovery Section (MLARS)
- DOJ Kleptocracy prosecutors have targeted over $3.1 billion in corruption proceeds since the team’s formation in 2011
- Kleptocracy cases involved individuals from Malaysia, Nigeria, Korea, Taiwan, Ukraine, Equatorial Guinea, Uzbekistan, Honduras, and Philippines.