Tag Archives: Jonathan J. Rusch

TD Bank Pleads Guilty to Bank Secrecy Act and Money Laundering Conspiracy Violations and Agrees to Pay More Than $3.09 Billion in Criminal and Civil Penalties for “Systemic Breakdown” in Compliance Policies, Procedures, and Processes

by Jonathan J. Rusch

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In any corporate compliance program, chief compliance officers must be mindful that their programs are not guaranteed to maintain consistent levels of funding from year to year.  Factors such as expanding or contracting business operations, declining business conditions, or external events such as recessions or COVID may require various year-to-year adjustments in a compliance program’s staffing levels and internal controls operations.[1]

Even so, it is essential that senior management in any company or financial institution recognize and accept the fact that at all times, the compliance programs in their enterprise must be adequately resourced and empowered to function effectively.[2] What a company’s senior leadership may not do, under any circumstances, is to make decisions that, over time, systematically starve critical compliance programs of resources essential to the effectiveness of those programs.

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FINMA Sanctions Swiss Private Bank Mirabaud & Cie for Serious Violations of Swiss Financial Market Law

by Jonathan J. Rusch

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For generations, the Swiss financial sector has carefully burnished its reputation as the “perfect home for wealth” and a “financial safe haven.”[1]  That reputation, not surprisingly, has led for some time not only to attraction of persons seeking legitimate investment and wealth management opportunities, but to a high degree of money laundering risk.[2]

In recent years, Swiss government authorities have responded to these money laundering risks with necessary changes in its anti-money laundering (AML) laws and general improvements in its legal and regulatory enforcement of those laws.  The Swiss Attorney General’s Office, for example, has demonstrated an increasing commitment to holding the Swiss banking community accountable for criminal violations of Swiss anti-money laundering (AML) laws.[3]  The Swiss Financial Market Supervisory Authority (FINMA), as the supervisor of the Swiss financial sector, has lately shown increased resolve in imposing significant sanctions on banks that fail to comply with AML laws.[4]

The most recent example of FINMA’s resolve took place on September 17, when FINMA disclosed that it had taken strong AML-related measures against a prominent Swiss private bank, Mirabaud & Cie SA.[5]  It stated that in June 2023, it had concluded enforcement proceeding against Mirabaud, finding that Mirabaud breached its AML obligations under Swiss law and “seriously violated provisions of financial market law concerning adequate organisation (governance), risk management and money laundering prevention over a prolonged period.”  It also took the highly unusual steps of confiscating CHF 12.7 million of unlawfully generated profits, opening three proceedings against individuals, and prohibiting Mirabaud from accepting any new clients with increased money-laundering risks until compliance with Swiss financial market law has been restored.

This post will explain the background and basis of FINMA’s actions and provide several observations on its significance.

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The New Threat in Business Email Compromise Schemes: Video “Deepfakes” of Corporate Executives

by Jonathon J. Rusch

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Cybercriminals around the world use a variety of exploits to conduct fraud schemes directed against individuals, companies, and government agencies. One of these schemes that has proved highly lucrative for cybercriminals over the past decade is the so-called “business email compromise” (BEC) scheme.[1]

BEC schemes typically involve cybercriminals’ infection of the email account of a corporate executive, then impersonating that company executive via email to direct a subordinate employee to wire-transfer a substantial amount of funds to one or more accounts that the cybercriminals control. The United States Secret Service has estimated current global daily losses to BEC schemes at approximately $8 million (an annualized $2.9 billion).[2]

Another online fraud technique that has been emerging more recently is the use of so-called “deepfakes.”  Deepfakes — a form of synthetic media that uses “deep learning” (artificial intelligence) technology to synthetically create or manipulate various media, including video, audio, and images[3] — are well-recognized in the U.S. and United Kingdom banking sectors as a significant threat to bank customers.[4] Voice deepfakes, for example, can be used to deceive customers as well as bankers into transferring funds out of customer accounts.[5]

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Creating A European Union-Wide Anti-Money Laundering/Counter Financing of Terrorism Regime (Part II): Changes in Anti-Money Laundering Rules

by Jonathan J. Rusch

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As part of its continuing efforts to strengthen the capacity and capability of the European Union (EU) to combat money laundering and terrorism financing[1], on January 18, 2024 the Council of the European Union announced that it and the European Parliament had found a provisional agreement on parts of the anti-money laundering and countering the financing of terrorism (AML/CFT) package to protect EU citizens and the EU’s financial system.

This provisional agreement is intended to accomplish two fundamental objectives: (1) to transfer all AML/CFT rules applying to the private sector to a new regulation; and (2) in doing so, for the first time to make those rules more stringent and harmonize them “exhaustively”, in order to close possible loopholes that criminals use to launder illicit proceeds or finance terrorist activities through the financial system.[2]

The first post in this series covered the provisional agreement relating to the creation and operation of a new EU-wide anti-money laundering authority (AMLA).[3]  This post will summarize and comment on the extensive and detailed provisions of this provisional agreement with regard to two elements: (1) the new AML regulation[4]; and (2) a new AML/CFT directive (to be designated by the EU as the “Sixth Anti-Money Laundering Directive”) that would establish the mechanisms that EU Member States should put in place for AML/CFT purposes and repeal the EU’s 2015 Fourth AML Directive.[5]

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Creating A European Union-Wide Anti-Money Laundering/Counter Financing of Terrorism Regime (Part I): The Anti-Money Laundering Authority

by Jonathan J. Rusch

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Introduction

Since 2018, when the then-European Commissioner for Justice Věra Jourová described the Danske Bank money-laundering catastrophe[1] as “the biggest scandal in Europe”[2], the European Commission (EC), as the politically independent executive arm of the European Union (EU)[3], has worked assiduously to repair the substantial defects in Europe’s anti-money laundering and counter-financing of terrorism (AML/CFT) mechanisms.

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French Competition Regulator Fines Six Companies €31.2 Million for Bid-Rigging

by Jonathan J. Rusch 

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Despite its clearcut illegality in numerous countries around the world[1], and its inherently corrupt nature[2], bid rigging remains a perennial temptation for some companies that prefer predictability to the rigors of competition.  A recent decision by the French Autorité de la concurrence (French Competition Authority/FCA) shows the extent to which some companies will go in establishing and maintaining bid-rigging schemes.

On September 7, the FCA issued a decision that fined six companies in the engineering, maintenance, decommissioning, and nuclear waste treatment services sector – OTND, Nuvia Process (a subsidiary of the Vinci Group), Endel, Bouygues Construction Expertises Nucléaires (BCEN), SNEF, and SPIE — a total of €31.2 million for engaging in anticompetitive agreements during calls for tender for decommissioning of a nuclear power plant.[3]  This post will address the actions of the fined companies, summarize the FCA’s decision, and offer some observations about its significance.

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Federal Reserve Imposes $186 Million in Civil Money Penalties Against Deutsche Bank for Violations of OFAC and AML Orders and Danske Bank-Related Failures

by Jonathan J. Rusch 

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Within the past year, federal law enforcement and regulatory agencies have repeatedly signaled that recidivist violations of law by corporate entities are likely to result in substantial penalties.  Those signals include recidivism-specific policy statements, such as the Justice Department’s revision of its Corporate Enforcement Policy[1] to reflect its “more holistic approach to corporate recidivism”[2] and the Office of the Comptroller of the Currency’s (OCC’s) recent revisions of its Policies and Procedures Manual to address banks’ failure to correct persistent weaknesses.[3]

But those signals also include specific enforcement actions that carried substantial financial penalties, such as the Justice Department’s $315 million criminal penalty against ABB[4] and $206.7 million criminal penalty against Ericsson[5], and the Consumer Financial Protection Bureau/OCC $250 million enforcement actions against Bank of America for illegal activity in its consumer business.[6]

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FinCEN and OCC Assess $140 Million in Civil Penalties Against USAA Federal Savings Bank for Failure to Implement and Maintain Anti-Money Laundering Program

by Jonathan J. Rusch

Delay, Thomas Jefferson once wrote, “is preferable to error.”[1] When it comes to corporate compliance, however, significant and unjustified delay in implementing compliance programs can lead not merely to error, but to substantial business costs that can include business disruption, revenue losses, fines, penalties, and settlement costs.[2]

On March 17, the Financial Crimes Enforcement Network (FinCEN) announced that it had imposed a $140 million civil penalty against USAA Federal Savings Bank (USAA FSB) for willful violations of the Bank Secrecy Act (BSA) and its implementing regulations. In particular, USAA FSB admitted “that it willfully failed to implement and maintain an anti‑money laundering (AML) program that met the minimum requirements of the BSA from at least January 2016 through April 2021”, and “that it willfully failed to accurately and timely report thousands of suspicious transactions to FinCEN involving suspicious financial activity by its customers, including customers using personal accounts for apparent criminal activity.”[3]

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Hong Kong Securities and Futures Commission Imposes $45 Million Fine on Citigroup Global Markets Asia for “Pervasive Dishonest Behaviour” on Trading Desks

by Jonathan J. Rusch

In the Hong Kong securities sector, it is a fundamental tenet that “in conducting its business activities, a licensed or registered person should act honestly, fairly, and in the best interests of its clients and the integrity of the market.”[1]  A recent enforcement action by the Hong Kong Securities and Futures Commission (SFC) indicates the potentially severe consequences when a firm systematically disregards that tenet.

On January 28, the SFC announced that it had reprimanded and fined Citigroup Global Markets Asia Limited (CGMAL) US$45 million (HK$348.25 million) “for allowing various trading desks under its Cash Equities business to disseminate mislabelled Indications of Interest (IOIs).”[2]  As part of that decision, the SFC found that “such pervasive dishonest behaviour would not have continued but for serious lapses and deficiencies in its internal controls, compliance function and management oversight.”  This post will summarize the SFC’s key findings, conclusions, and sanctions, and offer some observations on the significance of the SFC’s action.

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United Kingdom Solicitors Regulation Authority Imposes £232,500 Financial Penalty on Law Firm for Money Laundering Regulations Violations

by Jonathan J. Rusch

Under the United Kingdom’s anti-money laundering (AML) legal regime, it has been clear for some time that the United Kingdom Money Laundering Regulations 2007 and 2017 (MLR) apply to multiple business sectors, including accountants, financial service businesses, estate agents, and solicitors.[1]  Although some lawyers might still chafe at the notion that they are subject to such regulations, there is no doubt that United Kingdom solicitors, as legal professionals, are obliged to comply with AML legislation.[2]

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