This Week in Compliance

This Week in Compliance: Commonwealth Bank embroiled in money laundering allegations

Here’s what’s been going on in the compliance world this week:

Business

  • Commonwealth Bank embroiled in money laundering allegations: The Australian financial intelligence agency Austrac insists that the Commonwealth Bank repeatedly breached anti-money-laundering laws by failing to properly monitor and report suspicious cash transactions through its ATM network. Austrac also claims that CBA failed to provide the agency with all the relevant information in its ‘suspicious matter reports’ and to properly conduct due diligence on its customers. Austrac initially launched investigations into the operations of the bank in August 2017. The bank denies the allegations, yet has set aside USD 375 million for potential fines it may incur from the case. Analysts argue, however, that the fine will be much higher.
  • Three prison sentences handed down in the Latvenergo bribery case: Three individuals have been sentenced to prison for bribery in a corruption case involving public utility Latvenergo. The defendants include Latvenergo’s former vice-president Aigars Melko, who received four and a half years, while Latvenergo technical director Gunars Cvetkovs and the head of the company ‘Energy Consulting’ Andrejs Livanovics were both sentenced to three and a half years. Reportedly, Latvenergo officials and employees received bribes amounting to EUR 627,100 to ensure that the company would pick Alstom Power Sweden AB’s bid for reconstruction of hydraulic units at the Plavinas power plant. Livanovics was charged with distributing the bribes, while Melko and Cvetkovs with taking them.
  • SEC awards USD 2.2 million to whistleblower: The Securities and Exchange Commission (SEC) awarded more than USD 2.2 million to a former company whistleblower who had initially gone to another federal agency with the report before taking it to the SEC, thus bringing the total SEC monetary awards to USD 264 million to 54 whistleblowers since 2012. The award was handed out under the ‘safe harbor’ rule, which stipulates that if a whistleblower submits information to another federal agency, but also submits the same information to the SEC within 120 days, the SEC will treat the submission as though it was filed on the same date the first agency received it. The timing is crucial, as whistleblower awards can depend on who first tipped the SEC to the illegal behavior.

Government

  • Former South Korean President Park sentenced to 24 years: Park Geun-hye, South Korea’s former president, who was impeached subsequently to her alleged involvement in a sweeping corruption case, was handed down a 24 years’ prison sentence after the court found her guilty of corruption and influence peddling among other offenses. Prosecutors on the case argued that Park pressured top business executives to donate USD tens of millions to foundations run by the ex-president’s confident Choi in return for political favors. The sentencing, in turn, exposes the deep-seated links between politics and the country’s chaebols.
  • Eleven members of the Kosovo ruling party indicted on corruption charges: Kosovo’s special prosecutor’s office revealed that 11 members of President Hashim Thaci’s ruling Democratic Party of Kosovo (PDK) have been indicted for allegedly hiring people to state jobs in government agencies and public firms based on cronyism and patronage networks. The members include a former government minister, a former member of parliament, a current lawmaker, and Kosovo’s minister for innovation and entrepreneurship. The case is based on wiretaps made in 2011 which led to a public scandal in 2016, dubbed the ‘Pronto Affair’, involving high-ranking PDK officials.
  • Another ex-South Korean president indicted on corruption: Three days following the sentencing of former President Park to 24 years in prison, Lee Myung-bak, also a former president of South Korea, was indicted on bribery, embezzlement, and other charges. According to the Prosecutor’s Office, Lee took a total of USD 10 million in bribes from South Korea’s spy agency and Samsung, among others, embezzled USD 33 million of official funds from a private company he owned and evaded USD 281,270 in corporate taxes. Lee has, since his arrest in March, refused to be questioned.

Noteworthy

  • Additional corruption charges in the college basketball case: New York federal prosecutors accused Adidas AG executive James Gatto of bribing high school players to attend the University of Kansas and North Carolina State University – all of which sponsored by the brand – thus, expanding corruption investigations into college basketball. Gatto was charged in an earlier indictment with a scheme to bribe students to attend other Adidas-sponsored universities. The charges related to the two additional universities came in a superseding indictment. An Adidas consultant and another defendant who worked at a sports management company are also accused in the case. All three men are charged with bribery and wire fraud, yet deny the allegations.
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