Tag Archives: Jonathan J. Rusch

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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Photo courtesy of the author

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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Photo courtesy of the author

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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UK Financial Conduct Authority Imposes £264.8 Million Criminal Penalty on National Westminster Bank for Serious Anti-Money Laundering Violations

by Jonathan J. Rusch

For the better part of a decade, the Financial Conduct Authority (FCA) has operated as the United Kingdom’s leading regulator of the financial services industry.[1] Like financial regulators in various other countries, it wields considerable civil and administrative authority in carrying out its missions to protect consumers, maintain stability in the financial sector, and oversee competition in that sector.

Unlike many financial regulators, however, the FCA also has the power to initiate criminal proceedings against individuals and corporate entities for a wide range of criminal offences in England, Wales, and Northern Ireland.[2] Since its creation in 2013, the FCA has brought criminal prosecutions against a number of individuals.[3] Until 2021, however, it had never done so against any firm.

On December 13, 2021, the FCA announced that a major United Kingdom bank, National Westminster Bank Plc (NatWest), had been sentenced to a fine of £264,772,619.95, based on NatWest’s prior guilty plea to three violations of the United Kingdom Money Laundering Regulations.[4] Because this case is the first of its kind for FCA criminal enforcement in general, and for FCA anti-money laundering (AML) enforcement in particular, this post will discuss key elements of the NatWest resolution.

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United States v. Bescond: The Second Circuit Construes the Fugitive Disentitlement Doctrine in a Corporate Criminal Investigation

by Jonathan J. Rusch

For more than a century, U.S. federal courts have been articulating and refining a doctrine known as the fugitive disentitlement doctrine.[1]  In the context of criminal law, the doctrine generally allows a court to deny a party’s request to make use of the U.S. judicial system when he or she is seen to be “purposely evad[ing] the jurisdiction to avoid criminal prosecution.”[2]  In principle, the doctrine extends to all areas of federal crime, including white-collar crime.[3]

The U.S. Supreme Court has advanced three reasons for application of the doctrine.  First, “so long as the party cannot be found, the judgment on review may be impossible to enforce.”[4]  Second, an appellant’s escape “disentitles” the appellant to call upon a court’s resources “for determination of his claims.”[5]  Third, disentitlement “discourages the felony of escape and encourages voluntary surrenders,” and “promotes the efficient, dignified operation” of the courts.[6]

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