This Week in Compliance

This Week in Compliance: Romanian parliament passes laws that may hamper anti-corruption efforts

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

Business

  • Nicaraguan construction company and consultant debarred by World Bank: Constructora Quintero S.A. – CONSTRUQUINSA was debarred by the bank for 15 months, meaning that it will not be eligible to bid on any World Bank-funded projects for that period of time. The World Bank said the company “misrepresented its credentials and submitted a forged document to win contracts for the construction and improvement of two schools, which is a fraudulent practice under the World Bank procurement guidelines.” A consultant named Jelua del Carmen Abdalah Ramirez was also debarred for 18 months for falsifying documents for two companies bidding for a separate project known as the Hurricane Felix Emergency Recovery Project in Nicaragua. Both debarments qualify for cross-debarment by a number of other developments banks, including the Asian Development Bank and the European Bank for Reconstruction and Development.
  • JPMorgan Chase fined for attempting to rig benchmark rate: JPMorgan Chase, the American banking giant, was hit with a USD 65 million fine by the Commodity Futures Trading Commission (CFTC) over charges that its traders had attempted to manipulate a benchmark rate for interest-derivatives. The rate, known as ISDAfix, determines the value of trillions of dollars of derivatives. As part of the agreement, the firm neither admitted nor denied the allegations which spanned a timeframe from 2007 through 2012. Goldman Sachs Group Inc., Citigroup Inc., and Barclays Plc among others have all previously been fined over similar allegations.
  • Former Anglo Irish Bank CEO to be jailed for six years: David Drumm, former CEO of the now defunct Anglo Irish Bank was sentenced to six years of imprisonment on Wednesday in Dublin. Drumm had been found guilty of authorizing a multi-billion euro conspiracy to defraud and of false accounting earlier in June. The former CEO had pleaded not guilty to charges of dishonestly making it appear that the bank had reserves EUR 7.2 billion larger than they actually had. While the scheme was in place, another financial institution called Irish Life made deposits of EUR 7.2 billion with Anglo shortly before the end of the financial year. Irish Life made the deposits appear as if they came from consumers, rather than the institution. Three former Irish Life executives were sentenced over the scheme in 2016. The sentencing of David Drumm draws a line under prosecutions following the banking meltdown in Ireland of 2008-2009, which ended up costing taxpayers in excess of EUR 64 billion.

Government

  • Romanian parliament passes laws that may hamper anti-corruption efforts: A new penal handbook was adopted by Romania’s parliament in a 175 to 78 vote. The penal handbook will limit criminal investigations to one year, which will force prosecutors to press charges within a year or close the investigation if they have not been able to gather enough evidence to press charges yet. Corruption investigations typically last several years before prosecutors have gathered enough evidence to press charges. Courts will also have to dismiss wiretap evidence that is not directly related to the suspected crime being investigated and higher courts will not be able to convict defendants found innocent by lower courts unless new evidence emerges. Opposition parties have indicated that they intend to challenge the new laws in front of the Supreme Court. However, since most of the justices on the Supreme Court are considered pro-government, the challenge has little chance of succeeding.
  • Head of Chinese shipbuilding company detained in corruption crackdown: Sun Bo, head of China Shipbuilding Industry Corporation (CSIC), has been detained by Chinese authorities as part of President Xi Jinping’s corruption crackdown. The authorities did not give any reason for the arrest except for that Sun is “suspected of serious violation of laws and regulations and is currently undergoing disciplinary review and monitoring investigation by the Central Commission for Discipline Inspection.” CSIC is one of the most important companies for China’s maritime modernization program. The company is in charge of building a new aircraft carrier for the Chinese Navy. Sun Bo’s arrest is only the latest in a widespread corruption crackdown; President Xi Jinping has gone after more than 1.5 million allegedly corrupt Communist Party officials.

Noteworthy

  • Panama Papers firm Mossack Fonseca unable to identify beneficial owners: A new leak from Mossack Fonseca, the firm from which the Panama Papers leaked in 2016, has shown that the company was unable to identify up to three-quarters of the beneficial owners behind the companies it administered. Out of 28,500 companies it administered in the British Virgin Islands (BVI), it was unable to identify 70 percent of owners two months after the documents leaked to the international press. In Panama, the firm was unable to identify 75 percent of beneficial owners. The firm was fined GBP 333,000 by the BVI Financial Services Commission in November 2016 for infringements of anti-money laundering laws, among other violations. In March 2018, the firm announced it was closing down due to the reputational damage it had suffered in the wake of the Panama Papers.
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