This Week in Compliance

Professor Who is an Expert on Corruption Charged with Laundering Money

Welcome to This Week In Compliance: GAN’s weekly news roundup, where we curate the latest stories on compliance and anti-corruption to keep you informed. This week we cover the FCPA charges of a Miami University professor charged for laundering Venezuelan bribery proceeds. Keep reading for this breaking story and find more news below:

Top Story

Professor who is an expert on corruption charged with laundering money:

Bruce Bagley, a professor in international studies at the University of Miami who co-authored a book on organized crime in South America was arrested for laundering USD 2.5 million in corrupt proceeds from Venezuela. While Bagley was released on bail for USD 300,000, if convicted, the professor could face up to 20 years in prison. It is alleged that the proceeds Bagley attained came from graft and corruption related to public work projects in Venezuela. According to the indictment, Bagley transferred most of the money into a co-conspirator’s bank account to conceal the illegal transactions and kept a 10% commission on the funds. The University of Miami has placed the professor on administrative leave and has declined to comment by saying that the issue is a personal matter.

Policy Updates

DOJ makes clarifications to FCPA corporate leniency program:

DOJ makes clarifications to FCPA corporate leniency program: The U.S. Department of Justice made several clarifications to the language in its foreign bribery leniency program this week. Under the DOJ’s FCPA Corporate Enforcement Policy, companies can presume that the DOJ will decline to prosecute potential violations if the company self-discloses the conducts, cooperates with prosecutors, and takes steps to prevent future infractions. When a company doesn’t meet the full standards of the program, they may still be eligible for a discount of up to 50% off any penalties issued. The first change pertains to language making it clear that if a company discloses a possible violation soon after learning about it, they would not be expected to have a full picture of the situation yet. Previous language dictated that companies should disclose “all relevant facts known to it”, including about individuals who may have been involved in the breach. A second change pertains to the information sharing expected; the new policy specifies that “where the company is aware of relevant evidence not in the company’s possession, it must identify that evidence to the Department”.

Business

Westpac accused of more than 23m breaches of anti-money laundering laws:

Westpac, one of Australia’s biggest banks, is being subjected to an investigation by the Australian financial intelligence agency on money laundering accusations. The bank is being accused of more than 23 million breaches of AML and counter-terrorism finance laws involving USD 11 billion in transactions. The bank failed to carry out appropriate due diligence on its clients and failed to implement appropriate controls in their low-value payment system known as LitePay. As a result, Westpac failed to detect activity that was allegedly related to individuals involved in child exploitation. In addition, the bank failed to provide timely reports for more than 12,000 transactions. Westpac is facing a theoretical maximum fine worth USD 300 trillion dollars based on a maximum fine of AUD 21 million per breach.

Former Braskem CEO charged with FCPA and money laundering conspiracies:

Jose Carlos Grubisich, former CEO of Braksem, the Brazilian petrochemical giant, was charged for helping his company and Odebrecht bribe politicians in Brazil through a black fund. Odebrecht owns 40% of Braksem’s shares. Grubisich, who served as the CEO of Braksem from 2002 to 2008, and as a consultant at Odebrecht from 2012-2015, is being charged with violating the FCPA’s books and records provisions by falsifying financial information and money laundering conspiracy. The DOJ alleged that both companies diverted around USD 250 million from 2002-2014 in bribes to politicians through a secret slush fund. The fund was financed by fraudulent contracts with shell companies and Braskem bank accounts shored in Brazil, New York, and Florida. The bribes were reportedly given to obtain favorable pricing in negotiations with Petrobras.

GM sues Fiat Chrysler, alleging union bribes cost it billions:

General Motors Co filed a lawsuit against Fiat Chrysler Automobiles NV (FCA) alleging that in engaged in a long lasting bribery scheme with United Auto Workers (UAW) union officials in order to gain advantages in their collective bargaining process. GM is alleging that Chrysler left GM paying higher wages from 2009 to 2015 as a result of the “pattern of racketeering” which secured preferential concessions in the union’s commitment to Chrysler. FCA, which is currently in the middle of an M&A deal with French automaker PSA and is under negotiations for a four-year labor contract with the UAW, has dismissed the allegations as an intention to disrupt both negotiation processes. 

Government

Israeli Prime Minister Netanyahu charged with bribery, fraud:

Israeli PM Benjamin Netanyahu, was charged for fraud, breach of trust and bribery after long-standing allegations raised by the police. Netanyahu has denied all allegations, and Israeli law does not require him to resign from the post even if indicted. Among other charges, the PM received gifts worth thousands of dollars in exchange for changing regulations in favor of a media group. It is also alleged that him and his wife both received gifts from Hollywood producer Arnon Milchan and an Australian billionaire in exchange for political favors. Netanyahu is also being accused of negotiating with two different Israeli media magnates to receive favorable news coverage for political favors. While the opposition has said it will not sit in a government whose leader is facing corruption charges, the attorney general’s decision could have a wide-reaching effect not just on the embattled leader but on Israeli politics in general.

UK’s new ‘freeze and seize’ powers upheld in Moldovan money laundering case:

Last week the UK National Crime Agency’s Financial Intelligence Unit reported that the new reforms on the Criminal Finances Act had contributed to a 153.6% increase in potential criminal assets retained by UK enforcement in 2018-2019 in comparison to previous years. The Act included the introduction of Unexplained Wealth Orders (UWOs) and Account Freezing and Forfeiture Orders (AFOs) which allow law enforcement to freeze cash if on the balance of probabilities, the cash came from an unlawful source. At the beginning of November, the AFO rejected its first appeal. The appeal came after the son of Moldovan prime minister tried to dismiss his own involvement in his father’s USD 1 billion graft scheme. So far the UK has issued 15 Unexplained Wealth Orders (UWO) for assets worth USD 148 million in four cases, and has also announced using Account Freezing Orders (AFO) in suspected corruption cases in 106 bank accounts. 

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