Insights from the DC BAR White Collar Crime Series: Financial Crime Enforcement and Compliance Conference

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.

Panel

• 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

Anonymity

• 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.