Tag Archives: Jonathan J. Rusch

FINMA Annual Report Indicates Decline in Enforcement, Highlights Money Laundering Risk Factors

by Jonathan J. Rusch

In the world of global financial crimes compliance, one national regulator that has become increasingly visible and assertive is the Swiss Financial Market Supervisory Authority (FINMA).  FINMA’s supervisory and regulatory mandate extends across the Swiss financial sector to banks, insurance companies, financial institutions, collective investment schemes, and their asset managers and fund management companies.[1]

In carrying out that mandate, FINMA has been active on a variety of fronts relating to financial crimes.  These include issuance of a revised Anti-Money Laundering (AML) Ordinance, sanctioning of leading Swiss bank Julius Baer for serious AML failings, and continuing cooperation with U.S. and other financial regulators and enforcement authorities.[2]

On April 2, FINMA published its 2019 Annual Report, which for the first time integrates FINMA’s Enforcement Report.[3]  While the Report covered all aspects of FINMA’s supervisory and regulatory activity, it included three topics that are of particular interest from a risk and compliance perspective. 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 →

Dutch Cabinet Ministers Present Action Plan on Money Laundering to Dutch Legislators

by Jonathan J. Rusch

On June 30, two Ministers in the Dutch Cabinet — Minister of Finance Wopke Hoekstra and Minister of Justice and Security Ferdinand Grapperhaus – sent a joint letter to the President of the House of Representatives in the Dutch States-General (Parliament), outlining a series of new measures as an action plan to combat money laundering.[1]   The letter characterized money laundering as “an immense and complex problem” that made it very important that money laundering be combated “in a joint and effective manner.” [Note: All translations herein are unofficial.] Continue reading →

In Precedent-Setting Case, Two Senior Corporate Executives Indicted for Failure to Report Under the Consumer Product Safety Act

by Jonathan J. Rusch

On March 29, the U.S. Department of Justice announced that on March 28, a federal grand jury in the Central District of California indicted two senior corporate executives with two corporations on multiple counts for their roles in a scheme involving defective and dangerous dehumidifiers made in China.  Simon Chu and Charley Loh, who served respectively as part owners, chief administrative officer, and chief executive officer of the same two corporations in California, were charged with (1) conspiracy (a) to commit wire fraud, (b) to fail to furnish information under the Consumer Product Safety Act (CPSA), and (c) to defraud the U.S. Consumer Product Safety Commission (CPSC); (2) wire fraud; and (3) failure to furnish information under the CPSA.  The Department indicated this was the first time that any individual had been criminally charged for failure to report under the CPSA. Continue reading →

“They Wanted the Barrels”: A Case Study in Behavioral Influences on Corporate-Compliance Decisionmaking

by Jonathan J. Rusch

In 2011, during NATO’s bombing campaign against Libyan ruler Muammar Qaddafi’s forces, NATO bombs hit a particular oil company’s storage facility containing thousands of barrels of chemicals used in oil drilling.  While most barrels were destroyed, a substantial number were intact but their contents were permanently altered, due to extreme heat from bomb explosions and fires.  The chemical changes made the barrels’ contents useless for their intended purpose.[1]

Some days later, the oil company’s compliance lawyer with responsibility for the region was contacted by an oilfield operations manager for the company.  The manager said that they had been approached by unnamed “authorities” in eastern Libya, who were offering millions of dollars to buy the chemicals to use for drilling for water. He explained that the company would not permit use of the altered chemicals to drill for oil because they no longer met company quality standards.

The oilfield manager also told the lawyer, “We need this deal” and “We haven’t had any significant revenue for years.”  He showed the lawyer “photos of the damaged chemicals and the letters requesting the deal from the authorities,” as well as “the approvals from the commercial lawyers and a chain of emails from our leaders showing their desperation to screw some profit out of this situation.”  The manager also asserted that “the authorities were running out of patience. They had a window in which they had to get drilling and if we couldn’t help them they would need to find someone who could. So time was of the essence and all that was lacking was the compliance seal of approval.” Continue reading →

Is a European Anti-Corruption Prosecutor Needed?

by Jonathan J. Rusch

In a January 17 interview with the French news-magazine L’Obs, former French Prime Minister Bernard Cazeneuve argued that a European anti-corruption prosecutor is needed “to restore a balance, to correct the asymmetry of the Euro-Atlantic relationship in the fight against corruption from which European companies are currently suffering.”

In the interview, Cazeneuve — now a partner with the August Debouzy law firm specializing in compliance issues – stated that “it cannot be ruled out that in a context of rising protectionism under the Trump Administration, ‘compliance’ rules are also used to protect the economic and industrial interests of certain powers.  Faced with such a reality, it would be very naive not to seek to protect our own interests!”  At the same time, Cazeneuve said that “in a global economy, corruption is a long-term factor that impoverishes companies and distorts competition. Only the law can regulate what needs to be and create the conditions for a global level playing field. Preventing corruption in French companies is still the best way to protect them from the often intrusive procedures of U.S. prosecuting authorities.” Continue reading →

Professor John Darley: An Appreciation

by Jonathan J. Rusch

One of the well-established concepts in social psychology and behavioral economics is loss aversion: i.e., “the idea that losses generally have a much larger psychological impact than gains of the same size.”[1]  Though usually discussed in the context of tangible gains and losses, loss aversion has some bearing on our response when a person who has made significant contributions in life passes away.  Our immediate sadness at the loss of the person can distract us from thinking about and appreciating the gains that he or she provided to society or to specific people.  For that reason, this post is devoted to a brief appreciation of Professor John Darley, focusing on aspects of his work that have applications to corporate compliance.

Professor Darley, who died several months ago at age 80, was not merely a distinguished Professor of Psychology and Public Affairs at Princeton University for many years, but “one of the foremost figures of social psychology.”[2]  He strongly influenced the growth and development of that field, in areas such as “morality and the law, the function of punishment, and the way organizations inadvertently promote evil.”[3] Continue reading →

FinCEN and Federal Financial Institution Supervisory Agencies Issue Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing

by Jonathan J. Rusch

FinCEN and Federal Financial Institution Supervisory Agencies Issue Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing

On December 3, 2018, the Financial Crimes Enforcement Network (“FinCEN”) and the four federal financial institution supervisory agencies[1] (“the agencies”) issued a joint statement (“Joint Statement”) encouraging banks (i.e., banks, savings associations, credit unions, and foreign banks) “to consider, evaluate, and, where appropriate, responsibly implement innovative approaches to meet their Bank Secrecy Act/anti-money laundering (BSA/AML) compliance obligations, in order to further strengthen the financial system against illicit financial activity.”[2] Continue reading →

Section 7 of the United Kingdom Bribery Act 2010 and the “Fair Warning Principle”

by Jonathan J. Rusch

As governments around the world watch the rising tide of public sentiment and law enforcement actions against corruption,[1] some are looking to the United Kingdom Bribery Act 2010 (the “Act”) as a model for crafting their own criminal sanctions, including with regard to corporate criminal liability.[2]  Section 7 of the Act, which is captioned, “Failure of commercial organization to prevent bribery,” defines the offense in just 45 words:

A relevant commercial organisation (“C”) is guilty of an offence under this section if a person (“A”) associated with C bribes another person intending—

(a) to obtain or retain business for C, or

(b) to obtain or retain an advantage in the conduct of business for C.[3]

Unless the company, as an affirmative defense, can “prove that [it] had in place adequate procedures designed to prevent persons associated with [it] from undertaking such conduct,”[4] it faces a criminal fine without statutory limit.[5] Continue reading →