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, Switzerland arrests a key conspirator behind the Cum-Ex tax fraud case. Read the full story and more news below:
Switzerland Arrests Conspirator Behind Cum-Ex Tax Case:
Swiss authorities arrested German tax attorney Hanno Berger, accused of being the mastermind behind Europe’s Cum-Ex tax fraud scandal, considered the biggest tax scandal of the century. Berger, who was arrested on an extradition warrant, allegedly exploited loopholes in German tax law to help 900 financial institutions and individuals evade taxes across Europe. German authorities estimate the tax scheme to have led to USD 65B in losses in the public sector revenues across Europe. While the case does arguably not constitute a breach of the laws, a landmark German court deemed the scheme was a severe tax fraud in 2020. It is still unclear how Berger, who has been avoiding German authorities for nine years, will face his extradition.
Former Bank Exec Found Guilty of Bribery:
Stephen M. Calk, former chairman of the Federal Savings Bank in Chicago, was proven guilty of conspiracy to defraud a financial institution and bribery. According to the federal court in Manhattan, Calk arranged USD 16M in loans to Paul Manafort, Trump’s campaign chairman, in exchange for a job in the Trump cabinet. Prosecutors stated that Calk pressured the Federal Savings Bank to approve the loans despite many red flags. Manafort, who is listed as a co-conspirator in the case, was not charged.
Malaysia Seeks USD 5.6B Over Damages from KPMG:
Malaysian authorities are seeking USD 5.6B in damages claims from KPMG for its negligence in the 1MDB case. KPMG, which was hired to do audits on financial statements from 2010 to 2012, denied all allegations and stated the firm would contest the claims. The plaintiffs of the case allege that USD 3.2B was stolen from Malaysia’s development fund when KPMG was conducting the audits. Authorities allege that proper auditing would have raised red flags and avoided the fraud. Deloitte audited the fund after KPMG and settled claims for USD 80M in June. In 2020, Malaysia’s former PM was found guilty of corruption in the same case.
U.K. Authorities Seize USD 250M in Crypto in AML Case:
The U.K.’s Metropolitan Police announced it seized USD 250M worth of cryptocurrencies as part of an investigation into what is suspected to be a multi-country money laundering case. The confiscation, which was the most prominent crypto seizure in the country’s history, is part of the same investigation that led to USD 157M worth of cryptocurrency being seized in June. The investigation began after the police received a tip on the scheme.
Michael Avenatti Sentenced to 2.5 Years in Nike Extortion Case:
Californian lawyer Michael Avenatti was sentenced to 2.5 years in prison for attempting to extort Nike. According to the New York court’s sentence, Avenatti threatened Nike by saying he would surface false accusations if they did not pay him USD 25M. The attorney is facing three more trials on fraud this year in court in California.
Biden Administration Targets Foreign Corruption Through AML Laws:
According to legal analysts from JDSupra, after Biden issued the “Memorandum on Establishing the Fight Against Corruption as a core United States National Security Interest” earlier this June, U.S. prosecutors have expanded the prosecution of overseas corruption using statutes other than the FCPA. In recent cases, AML laws have been used to expand the jurisdictional reach of U.S. prosecutors enabling them to impose charges on foreign individuals, something that is more complex to do within the framework of the FCPA. Therefore, legal experts suggest that familiarity with the FCPA is no longer ‘enough’ to ensure compliance with the U.S. anti-corruption framework.
Former Congo PM Faces Arrest Warrant:
Matata Ponyo Mapon, former Prime Minister of the Democratic Republic of Congo, is facing an arrest warrant after being accused of stealing USD 140M from government funds. According to the allegations, Mapon, who served as PM from 2012-2016 under Joseph Kabila’s Presidency, misappropriated funds from an agriculture project. Moreover, Mapon was accused by the DRC’s prosecutor of ordering reimbursement payments to foreign businesspeople who had their properties expropriated in the 70s, of which he got a substantial amount.