Tag Archives: Jonathan J. Rusch

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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FinCEN Issues First AML/CFT Policy Priorities

by Jonathan J. Rusch

The Anti-Money Laundering Act of 2020 (AML Act) (enacted as Division F of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021), specifically stated Congress’s intention “to reinforce that the anti-money laundering and countering the financing of terrorism [(AML/CFT)] policies, procedures, and controls of financial institutions shall be risk-based.”[1] Among other significant changes in AML/CFT law, it revised the Bank Secrecy Act (BSA) to provide that one of the purposes of the BSA’s reporting requirements was to “prevent the laundering of money and the financing of terrorism through the establishment by financial institutions of reasonably designed risk-based programs to combat money laundering and the financing of terrorism.”[2]

The AML Act further stated that AML/CFT programs should be “(II) risk-based, including ensuring that more attention and resources of financial institutions should be directed toward higher-risk customers and activities, consistent with the risk profile of a financial institution, rather than toward lower-risk customers and activities.”[3]  To those ends, the AML Act directed the Secretary of the Treasury, in consultation with other agencies, to “establish and make public priorities for [AML/CTF] policy” within 180 days of the AML Act’s enactment, and to update those priorities at least once every four years.[4]

On June 30, the Financial Crimes Enforcement Network (FinCEN), an agency of the Treasury Department, announced that it had issued the first national AML/CFT Priorities pursuant to the AML Act, along with two Priorities Statements to provide guidance to covered institutions on how to approach the Priorities.[5]  This post will discuss the Priorities document and the two additional statements, and recommend immediate steps for covered institutions in response to these documents.

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Bank Julius Baer Agrees to Pay More Than $79 Million for Role in FIFA Money Laundering

by Jonathan J. Rusch 

Over the past decade, the Fédération Internationale de Football Association (FIFA) has been embroiled in several overlapping scandals associated with a reported $150 million in bribery related to FIFA and regional soccer-federation officials.[1]  Investigations by U.S. and Swiss authorities to date have led to criminal charges against numerous individuals (including former FIFA and other soccer-federation, sports-marketing, and media executives) and companies,[2] as well as a deferred prosecution agreement (DPA) with an Israeli bank that required the bank to pay more than $340 million for its role in laundering tens of millions of dollars in bribe payments to corrupt soccer officials in multiple countries.[3]

The latest development in the long-running scandal occurred on May 27, when the U.S. Department of Justice announced that a leading Swiss bank, Bank Julius Baer, had agreed to enter into a deferred prosecution agreement (DPA) requiring it to pay more than $79 million in penalties and to admit that it conspired to launder more than $36 million in bribes through the United States to soccer officials with FIFA and other soccer federations.[4] Continue reading →

Central Bank of Ireland Fines Ulster Bank Ireland €37.7 Million for Serious Customer Mistreatment

by Jonathan J. Rusch

As a rule, financial institutions recognize the need to maintain effective compliance with laws that carry criminal sanctions, such as bribery and corruption, fraud, and money laundering.  Yet even a well-managed financial institution, otherwise committed to compliance, can expose itself to significant liability if it engages in sales practices that systematically mistreat its customers.

Although the Wells Fargo cross-selling scandal[1] has been the most prominent example of such misconduct, a recent enforcement action by the Central Bank of Ireland indicates that other financial institutions can be similarly capable of systematic customer mistreatment.  On March 23, the Central Bank of Ireland reprimanded Ulster Bank Ireland DAC (UBID) and fined it €37,774,520 for “serious failings in the treatment of its tracker customers holding 5,940 mortgage accounts between August 2004 and April 2020.”[2]  This post will review the background of the Central Bank’s investigation of UBID and the elements of the fine and reprimand that it imposed, and identify lessons to be learned from the UBID action.

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Should Companies Use Machine Learning for Their Anti-Corruption Programs?: The New Coalition for Integrity Guidance

by Shruti Shah and Jonathan J. Rusch

As they work to maintain the effectiveness of their anti-corruption risk and compliance programs, companies must be increasingly attentive to how well they make use of the data they acquire that are relevant to those programs.  The most recent edition of the U.S. Department of Justice’s “Evaluation of Corporate Compliance Programs” document states that prosecutors should inquire into whether compliance and control personnel “have sufficient direct or indirect access to relevant sources of data to allow for timely and effective monitoring and/or testing of policies, controls, and transactions,” and whether “any impediments exist that limit access to relevant sources of data.”[1]

Companies, however, are increasingly awash in such data from a multiplicity of sources: accounts payable, spend data, third-party supplier data, to name just a few.  Many companies make use of rule-based programming, in which human programmers write rules that enable the company to search for and find data indicative of corruption risk.  But some companies are increasingly curious about whether they should use a particular field of artificial intelligence: machine learning, in which computer systems “learn” on their own from data and do not depend on human-written rules.

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Ivory-Tower Money Laundering: Risks for Colleges and Universities

by Jonathan J. Rusch

Until recently, most universities might have thought that the topic of money laundering was solely of academic interest for courses in law, criminal justice, or accounting.  It is becoming increasingly clear, however, that colleges and universities may be facing increasing risk of exposure to handling criminal proceeds when they accept large cash payments for student tuitions. Two recent sets of developments in Canada and Great Britain show that that risk is more than speculative, and that universities need to revise their policies for accepting currency to minimize that risk. Continue reading →

FATF Issues Guidance on Cryptocurrency-Related Red Flags Indicative of Money Laundering and Terrorist Financing

by Jonathan J. Rusch

Over the last several years, one of the persistent concerns of law enforcement and regulatory agencies has been the growing use of cryptocurrencies as a vector for money laundering and terrorist financing (ML/TF). For example, a 2020 report by a blockchain analysis company traced $2.8 billion in Bitcoin that moved from criminal entities to exchanges in 2019[1] – a substantial increase from about $1 billion in 2018.[2]

As one indication of the depth of those concerns, in 2019, the leaders of the Commodity Futures Trading Commission, the Financial Crimes Enforcement Network, and the Securities and Exchange Commission issued a joint statement “to remind persons engaged in activities involving digital assets of their anti-money laundering and countering the financing of terrorism (AML/CFT) obligations under the Bank Secrecy Act (BSA).”[3] To underscore the importance of compliance with those obligations, the U.S. Department of Justice has been prosecuting a stream of criminal cases against various individuals for using cryptocurrencies to launder illegal proceeds.[4]

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European Commission Announces Six-Point Action Plan on Money Laundering and Terrorist Financing

by Jonathan J. Rusch

Over the past two decades, the European Union (EU) has sought to establish a coherent and effective approach to prevent the misuse of the financial system for money laundering and terrorist financing (ML/TF).[1] That approach, which began with the EU’s First Anti-Money Laundering (AML) Directive,[2] gradually expanded into an extensive regulatory framework.

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Swedish and Estonian Regulatory Actions Against Swedbank for Anti-Money Laundering Compliance Failures

by Jonathan J. Rusch

Since 2018, the Danske Bank money laundering scandal has triggered substantial repercussions across the European banking system. One of the Scandinavian banks that strongly felt those repercussions is leading Swedish bank Swedbank. In 2019, initial reports of suspected money-laundering transactions occurring between Danske Bank and Swedbank [1] led to:

    • The firing of multiple Swedbank senior executives;[2]
    • An internal report that disclosed Swedbank’s Estonian operations had handled €135 billion in “high-risk, non-resident” money flows; and
    • Parallel investigations of Swedbank and its Estonian subsidiary Swedbank AS by the Swedish and Estonian financial supervisory authorities (Finansinspektionen (FI) and Finantsinspektsioon, respectively), as well as separate inquiries by U.S., Swedish, and Estonian authorities.[3]

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