OFAC Cites the Use of U.S.-Origin Software and U.S. Network Infrastructure in Reaching a Nearly $8 Million Settlement with a Swiss Commercial Aviation Services Company

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Rachel M. Fiorill, Karen R. King and Jacob A. Braly

On February 26, 2020, the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”) announced a $7,829,640 settlement agreement with Geneva-based Société Internationale de Télécommunications Aéronautiques SCRL (“SITA”), to settle its potential civil liability for 9,256 apparent violations of the Global Terrorism Sanctions Regulations (“GTSR”).[1] The case involved the alleged provision of commercial services and software subject to U.S. jurisdiction for the benefit of certain airline customers designated by OFAC as specially designated global terrorists (“SDGTs”) between April 2013 and February 2018.[2] Continue reading →

FINMA Imposes Measures and Sanctions on Julius Baer for Serious Anti-Money Laundering Failings

by Jonathan J. Rusch

Since December 2018, the Swiss Financial Market Supervisory Authority (FINMA) has taken a series of significant actions that stress its concern about compliance by Swiss financial institutions with anti-money laundering (AML) rules: issuing the revised FINMA Anti-Money Laundering Ordinance, which sets out due diligence requirements for fintech licensee institutions;[1] providing guidance on the application of Swiss AML rules to financial services providers with regard to blockchain technology;[2] and issuing a Risk Monitor that designated money laundering as one of the six principal risks identified for FINMA-supervised institutions.[3]  Most recently, FINMA has imposed a number of measures and sanctions on a leading Swiss bank for serious failings in the bank’s AML program, including prohibiting the bank from conducting major acquisitions until it achieves full legal compliance with AML requirements.

On February 20, FINMA announced that it had concluded an investigation of Swiss bank Julius Baer. That investigation — which FINMA had begun in connection with alleged cases of corruption linked to Petróleos de Venezuela S.A. (PDVSA), a Venezuelan state-owned oil company, and FIFA, the world soccer federation — resulted in a finding that Julius Baer had “systematic failings to comply with due diligence under the Anti-Money Laundering Act as well as violations of AML reporting requirements.”[4]  In particular, the investigation found that the bank “was in breach of obligations to combat money laundering and its duty to put in place an appropriate risk management policy, representing a serious infringement of financial market law.”[5] Continue reading →

Debevoise Coronavirus Checklists—Cybersecurity

by Luke Dembosky, Jeremy Feigelson, Avi Gesser, Jim Pastore, Lisa Zornberg, Tricia Bozyk Sherno, Hilary Davidson, and Christopher S. Ford

As companies dust off their Business Continuity Plans to prepare for possible disruptions and remote working due to COVID-19, here are 10 cybersecurity considerations to add to the list of preparations: Continue reading →

FinCEN Imposes Its First Penalty on a Bank Compliance Officer for $450,000 for Failing to Prevent AML Violations

by H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel Fiorill, Karen R. King, Justin D. Lerer, Anand Sithian, and Avery Medjuck

On March 4, 2020, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) issued a consent order assessing a $450,000 civil money penalty against Michael LaFontaine, a former Chief Operational Risk Officer at U.S. Bank NA (“U.S. Bank”), for his alleged failure to prevent Bank Secrecy Act/anti-money laundering (“BSA/AML”) violations that took place during his tenure.[1] This action—which follows U.S. Bank’s 2018 BSA/AML-related resolution with FinCEN, the U.S. Department of Justice (“DOJ”), the Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve for a combined $613 million in financial penalties—marks the first time FinCEN has imposed a penalty on a bank compliance officer for his role in failing to prevent BSA/AML compliance program failures.[2] Continue reading →

FCPA Litigation Update: DOJ Theories on Unit of Prosecution and Agency Tested, to Mixed Results

by Ronald Machen, Kimberly Parker, Jay Holtmeier, Erin Sloane, Chavi Keeney Nana, Cadene Brooks, and Kelsey Quigley

Two recent rulings in separate foreign bribery cases highlight the continued impact of individual prosecutions on the interpretation of various provisions of the Foreign Corrupt Practices Act (FCPA). In United States v. Coburn, the government prevailed in its interpretation of the proper “unit of prosecution,” while a recent district court ruling in United States v. Hoskins further constrained the Department of Justice’s (DOJ) ability to prosecute foreign nationals acting outside of the United States. Where higher courts land on the outcome of both of these questions could impact the DOJ’s FCPA charging strategies going forward. Continue reading →

Unstable Coins: Cryptoassets, Financial Regulation and Preventing Financial Crime in the Emerging Market for Digital Assets

by Therese Chambers

Keynote address delivered at the March 4, 2020 conference of New York University School of Law’s Program on Corporate Compliance and Enforcement, titled, The Advancement of Digital Assets and Addressing Financial Crime Risk

Many thanks for inviting me to speak to you about “digital assets” and preventing financial crime risks in this emergent market. In the UK, we have made the decision to refer to these as “cryptoassets”, which includes “cryptocurrencies” such as Bitcoin, Litecoin or Ethereum and I will refer to them as such for the rest of this speech which focusses on cryptoassets only in the context of the UK’s Money Laundering Regulations (MLRs).

I will cover:

  • the origins of cryptoassets, how this influences the unique financial crime risks arising from this technology in the market today.
  • moving from the technology itself to the regulation in the UK, and how we look to maximise the benefits of innovation while tackling these financial crime risks.
  • how our approach differs from the regulatory landscape in the United States; I will touch on similarities and areas where there is scope for us to work together.

Continue reading →

General Counsel Publicly Reprimanded: PA Supreme Court Ruling Serves as Stark Reminder of Potential Ethical Issues in Government Investigations

By Brendan F. Quigley and Heather Souder Choi

On February 19, 2020, the Pennsylvania Supreme Court ordered that the former general counsel of Penn State University (“the GC”) be publicly reprimanded, finding that the GC had violated multiple ethical rules, in connection with the Pennsylvania Attorney General’s investigation of sex abuse by former Penn State assistant football coach Jerry Sandusky.[1] Reviewing a prior decision from the Disciplinary Board of the Supreme Court of Pennsylvania, the February 19 opinion noted not only the GC’s violations of multiple rules, but also the “significant personal and public effect” these lapses had in the context of a high-profile criminal investigation and the GC’s “lack of remorse.” Continue reading →

How Final CFIUS Regulations Will Impact Technology Companies and Investors

by Les P. Carnegie, John H. Chory, Benjamin A. Potter, Rachel K. Alpert, and Erica S. Koenig

On February 13, 2020, two Final Rules published by the US Treasury Department implementing changes to the foreign investment review process administered by the Committee on Foreign Investment in the United States (CFIUS) became effective. The Final Rules include provisions pertaining to certain investments in the United States by foreign persons (PDF: 479 KB), as well as provisions pertaining to certain transactions by foreign persons involving real estate in the United States (PDF: 406 KB). This post provides an overview of the areas of the Final Rules that may affect technology companies and their investors.[1]

Continue reading →

Edgewell/Harry’s Merger – A Cautionary Tale

by Frank Aquila, Renata Hesse, Steven Holley, Matthew Hurd, Eric Krautheimer, Scott Miller, Melissa Sawyer, and Krishna Veeraraghavan 

On February 10, 2020, Edgewell Personal Care Co. (“Edgewell”) announced that it would abandon its $1.37 billion acquisition of Harry’s Inc. (“Harry’s”), after the Federal Trade Commission (“FTC”) sued to block the deal. Both Edgewell and Harry’s sell razors. While Edgewell is a longstanding incumbent in the industry through its Schick and Wilkinson Sword brands, Harry’s began in 2013 as a direct-to-consumer (“DTC”) retailer and expanded into retail outlets in 2016. Edgewell also announced that it anticipates litigation with Harry’s following Edgewell’s decision to terminate the merger agreement.

The FTC challenge demonstrates that it is closely scrutinizing acquisitions that may eliminate successful market disruptors, particularly in concentrated industries. The challenge also illustrates that statements executives make to investors while a deal is pending can significantly influence the merger clearance process. For private equity and venture investors, the case highlights that antitrust risks may limit available exit strategies for those pursuing investments in disruptive start-ups.

Finally, the threat of Harry’s filing a lawsuit against Edgewell provides a reminder that litigation between former merger partners does occur. Prospective acquirers should keep the possibility of litigation in mind when negotiating merger agreement provisions, and exhibit particular care towards provisions that govern the parties’ obligations in the event of an extended regulatory review or challenge. Continue reading →

Wells Fargo Reaches Resolutions with DOJ and SEC for $3 Billion, Agrees to a Deferred Prosecution Agreement

by Jessica S. Carey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, and Sofia D. Martos 

On February 21, 2020, Wells Fargo & Company and its subsidiary, Wells Fargo Bank, N.A. (collectively, “Wells Fargo”), entered into resolutions with the Department of Justice (“DOJ”) and the Securities and Exchange Commission (the “SEC”) requiring Wells Fargo to pay a combined $3 billion in penalties in connection with its improper sales practices. Of this amount, $500 million would be received by the SEC for distribution to harmed investors. Specifically, Wells Fargo entered into:

  • a three-year Deferred Prosecution Agreement (the “DPA”) with DOJ, in which it admitted to two criminal violations—creating false bank records and identify theft;[1]    
  • a settlement agreement with DOJ that resolves civil claims under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) based on the false bank records conduct;[2] and
  • a cease-and-desist order with the SEC[3] to settle allegations that it misled investors about the “success of its core business strategy at a time when it was opening fake accounts for unknowing customers and selling unnecessary products that went unused.”[4]

Continue reading →