Tag Archives: Roberto J. Gonzalez

Congress to Include Significant Expansion of Beneficial Ownership Disclosure Requirements for U.S. Companies and Non-U.S. Companies Registered to Do Business in the United States as a Part of the 2021 NDAA

by H. Christopher Boehning, Jessica S. Carey, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Mark F. Mendelsohn, Richard S. Elliott, Rachel M. Fiorill, Karen R. King,  Anand Sithian, and Joshua R. Thompson

As has been widely reported[1] and announced in statements by members of both the House and Senate,[2] Congress has included a significant expansion of beneficial ownership disclosure requirements for companies in the United States as a part of the fiscal year 2021 National Defense Authorization Act (the “2021 NDAA”), a spending bill that is expected to pass by the end of the year. The most recent version of the 2021 NDAA reported out of conference to the House last week includes new beneficial ownership (defined for purposes of the 2021 NDAA as those individuals who own 25 percent or more of the ownership interests of a company and/or who exercise “substantial control” over a company) reporting requirements for companies that closely track the Corporate Transparency Act of 2019,[3] which passed the House in October 2019, although certain changes were made to make the disclosure provisions somewhat more business-friendly. Nonetheless, if the 2021 NDAA is passed and signed into law in its current form,[4] the law would impose new beneficial ownership disclosure requirements on many U.S. companies—and non-U.S. companies that are registered to do business in the United States (collectively, “reporting companies”)—that previously had not been required to disclose their beneficial owners. Continue reading →

NY DFS Files Enforcement Action Against Opioid Manufacturer for Insurance Fraud

by H. Christopher Boehnig, Roberto Finzi, Michael E. Gertzman, Roberto J. Gonzalez, Brad S. Karp, Elizabeth M. Sacksteder, and Patrick Cordova

On April 16, 2020, the New York Department of Financial Services (“DFS”) issued a Statement of Charges and Notice of Hearing against Irish pharmaceutical company Mallinckrodt plc and several of its U.S. subsidiaries (collectively, “Mallinckrodt”). [1] The administrative hearing will take place on August 24, 2020, before a hearing officer appointed by the DFS Superintendent. According to DFS, Mallinckrodt committed insurance fraud in violation of New York law by allegedly misrepresenting the efficacy and safety of opioids to patients and healthcare professionals, causing an over-prescription of its drugs, the cost of which was ultimately passed on to New York insurance companies and their policyholders. Continue reading →

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 →

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 →

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 →

DOJ Announces Revised Export Control and Sanctions Enforcement Policy for Companies, Including Financial Institutions

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, Karen R. King, and Anand Sithian

On December 13, the U.S. Department of Justice’s (“DOJ”) National Security Division (“NSD”) announced a new policy designed to encourage business organizations to make voluntary self-disclosures (“VSDs”) to the DOJ in connection with potentially willful export control and economic sanctions violations (the “Revised VSD Policy”).[1] The policy, which only applies to voluntary self-disclosures to NSD’s Counterintelligence and Export Control Section (“CES”), revises a 2016 DOJ policy on the same topic. As the policy notes, in the export control and sanctions context, criminal violations require proof of willfulness, defined as knowledge that the conduct violated the law.[2] Continue reading →

Social Media Bot Company Devumi LLC Reaches $2.5 Million Settlement with FTC for Sale of Misleading Social Media “Influence Indicators”

by Christopher D. Frey, Roberto J. Gonzalez, Jeh Charles Johnson, Jonathan S. Kanter, Claudine Meredith-Goujon, Lorin L. Reisner, Jeannie S. Rhee, Richard C. Tarlowe, Alessandra Baniel-Stark, Daniel J. Klein, and Taylor C. Williams.

Background

On October 21, 2019, the Federal Trade Commission (“FTC”) settled its first-ever complaint against a company for selling fake indicators of social media influence such as phony likes, follows, views, and subscribers to users on Twitter, LinkedIn, YouTube, Pinterest, Vine, and SoundCloud.[1] The company, Devumi LLC (“Devumi”), and its CEO, German Calas, Jr., settled the enforcement action with a $2.5 million fine.[2] The company was dissolved in 2018.[3]  Reporting suggested that Devumi maintained an estimated stock of at least 3.5 million automated accounts, thousands of which used personal details of real social media users (who had not engaged Devumi’s clients with follows, likes, etc.), and that these accounts were used to generate the false indicators of social media influence.[4] 

The FTC found, for example, that Devumi filled more than 58,000 orders for fake Twitter followers from a diverse set of buyers, including actors, athletes, musicians, investment professionals, lawyers, and experts who wanted to increase their appeal as influencers or otherwise boost their credibility.[5] Devumi filled over 800 orders for fake LinkedIn followers to marketing and public relations firms, consulting firms, and financial services companies, among others.[6] Continue reading →

OFAC Takes Enforcement Action Against U.S. Parent Company for its Recently Acquired Chinese Subsidiary’s Iran Sanctions Violations

by Brad S. Karp, H. Christopher Boehning, Jessica S. Carey, Christopher D. Frey, Michael E. Gertzman, Roberto J. Gonzalez, Richard S. Elliott, Rachel M. Fiorill, Karen R. King, Joshua R. Thompson

Enforcement Action Shows the Importance of Pre-Acquisition Sanctions Due Diligence and Post-Acquisition Sanctions Compliance Enhancements

On March 27, 2019, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) announced a $1,869,144 settlement agreement with Connecticut-based Stanley Black & Decker, Inc. (“Stanley Black & Decker”), a manufacturer of industrial tools and household hardware, regarding 23 apparent violations of OFAC’s Iran sanctions regulations.[1] OFAC determined that Stanley Black & Decker’s Chinese subsidiary, Jiangsu Guoqiang Tools Co. Ltd. (“GQ”), knowingly provided power tools and spare parts to Iranian end-users.[2] According to OFAC, GQ’s shipments were made via third-party intermediaries, located in the United Arab Emirates and China, with the knowledge that the products were ultimately destined for Iran.[3]  Under U.S. law, non-U.S. companies owned or controlled by U.S. companies are required to adhere to Iran sanctions as if they were U.S. persons.  The settlement,  along with the Kollmorgen Corporation (“Kollmorgen”) settlement in February 2019, signals the Trump Administration’s willingness to hold U.S. parent companies liable for their subsidiaries’ Iran sanctions violations, which is an area that, prior to this year, had seen little enforcement activity to date. Continue reading →

Economic Sanctions and Anti-Money Laundering Developments: 2018 Year in Review

by Brad S. Karp, Christopher Boehning, Jessica S. Carey, Michael E. Gertzman , Roberto J. Gonzalez, Richard S. Elliott, Rachel M. Fiorill, and Karen R. King.

Executive Summary

This memorandum surveys economic sanctions and anti-money laundering (“AML”) developments and trends in 2018 and provides an outlook for the year ahead. These areas remained a high priority last year, with the Trump administration making major changes in U.S. sanctions policy and federal and state agencies imposing over $2.7 billion in penalties for sanctions/AML violations. We also provide some thoughts concerning compliance and risk mitigation in this challenging environment.

After a period of relative quiet on the sanctions enforcement front, the last months of 2018 saw a $1.3 billion multi-agency resolution with Société Générale S.A., a burst of enforcement actions by Treasury’s Office of Foreign Assets Controls (“OFAC”), and Treasury Under Secretary Sigal Mandelker’s announcement that OFAC will soon publish guidance on the “hallmarks of an effective sanctions compliance program” and incorporate these principles in future settlements. Last year also witnessed significant and constant changes to the sanctions policy landscape. In a dramatic break from the Obama administration’s policy towards Iran, President Trump withdrew the United States from the Joint Comprehensive Plan of Action (“JCPOA”) in May 2018, and fully revoked JCPOA-era sanctions relief by November 2018, creating new sanctions risks for U.S. and non-U.S. companies across industries, generating conflict-of-law issues, and straining relations with U.S. allies.  The administration also took a number of significant actions with respect to Russia/Ukraine sanctions, including designating a number of Russian “oligarchs” and their global companies and taking further steps to implement the Russian secondary sanctions regime enacted by Congress in the 2017 Countering America’s Adversaries through Sanctions Act (“CAATSA”).  The administration also imposed several new sanctions against the Maduro regime in Venezuela (and recently sanctioned Venezuela’s national oil company), continued its campaign of “maximum pressure” on North Korea, implemented Global Magnitsky Act sanctions targeting human rights abuses and corruption worldwide, and established new sanctions programs targeting the Nicaraguan regime and non-U.S. interference in U.S. elections. Continue reading →

Court Upholds SEC Authority and Finds Broker-Dealer Liable for Thousands of Suspicious Activity Reporting Violations

by H. Christopher Boehning, Jessica S. Carey, Michael E. Gertzman, Roberto J. Gonzalez, David S. Huntington, Brad S. Karp, Raphael M. Russo, Richard S. Elliott, Rachel M. Fiorill, Karen R. King, Anand Sithian, and Katherine S. Stewart

Decision Provides Rare Judicial Guidance on SAR Filing Requirements

On December 11, 2018, the Securities and Exchange Commission (SEC) obtained a victory in its enforcement action against Alpine Securities Corporation, a broker that cleared transactions for microcap securities that were allegedly used in manipulative schemes to harm investors.[1] Judge Cote of the U.S. District Court for the Southern District of New York issued a 100-page opinion partially granting the SEC’s motion for summary judgment and finding Alpine liable for thousands of violations of its obligation to file Suspicious Activity Reports (SARs).[2]

Because most SAR-related enforcement actions are resolved without litigation, this decision is a rare instance of a court’s detailed examination of SAR filing requirements.  The decision began by rejecting—for a second time[3]—Alpine’s argument that the SEC lacks authority to pursue SAR violations.  The court then engaged in a number of line-drawing exercises, finding that various pieces of information, as a matter of law, triggered Alpine’s SAR filing obligations and should have been included in the SAR narratives.  This mode of analysis, which applies the SAR rules under the traditional summary judgment standard, may appear to contrast with regulatory guidance recognizing that SARs involve subjective, discretionary judgments.[4]

Although the decision has particular relevance in the microcap context, all broker-dealers—and potentially other entities subject to SAR filing requirements—may wish to review the court’s reasoning for insight on a number of SAR issues, including the adequacy of SAR narratives and the inclusion of “red flag” information. Among other cautions, the decision illustrates the dangers of relying on SAR “template narratives”[5] that lack adequate detail.

More broadly, the SEC’s action against Alpine is another indicator of heightened federal interest in ensuring broker-dealer compliance with Bank Secrecy Act (BSA) requirements. For example, last month the U.S. Attorney for the Southern District of New York brought the first-ever criminal BSA charge against a broker-dealer, noting that this charge “makes clear that all actors governed by the Bank Secrecy Act—not only banks—must uphold their obligations.”[6] Continue reading →