This Week in Compliance

This Week in Compliance: UBS Fined EUR 4.5 Billion For Tax Fraud

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  • UBS Fined EUR 4.5 Billion For Tax Fraud: A Paris court ordered Swiss banking group UBS to pay more than EUR 4.5 billion after finding the bank guilty of aiding wealthy French clients to stash undeclared funds in Swiss accounts. Presiding judge Christine Mee openly clashed with bank officials during the trial, saying: “the criminal wrongdoings were of an exceptionally serious nature”. The court found that UBS illegally laundered funds of French customers with the help of Swiss bankers who were not licensed to offer their services in France. The size of the fine is the biggest ever in France, and likely a surprise to UBS which had set aside only USD 640 million in anticipation of a fine. The total fine consists of a EUR 3.7 billion fine requested by prosecutors and EUR 1.6 billion in damages requested by the government. The case first came to light in 2014 following a whistleblower report. Settlement negotiations to avoid a trial broke down twice; the first time because UBS balked at entering a guilty plea, and the second because talks collapsed over the size of the settlement.

Business

  • Two former Cognizant execs charged in bribery case – prosecution against the company declined: It was announced late last week that technology company Cognizant settled FCPA charges with the SEC in exchange for a USD 25 million payment. The payment consists of disgorgement of USD 19 million in addition to a penalty of USD 6 million. The company avoided criminal charges pursuant to the FCPA Corporate Enforcement Policy, because it voluntarily disclosed the matter within two weeks of learning about it. The DOJ further charged two of the company’s former executives, an ex-president and a former chief legal officer overseeing the company’s compliance efforts, for their role in paying bribes to an Indian government official. The charges lodged against C-level officials are unusual because bribery schemes typically do not rise to their level or because there is little evidence directly implicating them in the wrongdoing.
  • Estonia orders Danske Bank branch to close: Estonian authorities have told Danske Bank to close its branch office in the capital city of Tallinn before the end of 2019. The move follows an investigation last year that revealed the branch had processed questionable payments of EUR 200 billion. Danske Bank’s interim Chief Executive Jesper Nielsen said the bank would comply with the request and will shut most of its activities in Latvia, Lithuania, and Russia. The European Banking Authority opened an investigation into possible breaches of EU law by financial authorities in Estonia and Denmark.
  • Dutch prosecutors investigate alleged corruption in Saudi metro project: The offices of construction company Strukton in the Netherlands were raided last Friday as part of an investigation into alleged bribery relating to a metro construction project in Saudi Arabia. Dutch financial crime prosecutors stated that the focus of the investigation is possible corruption and forgery in obtaining a contract to build a metro in Riyadh. Strukton is part of a consortium building the metro line; it was not immediately clear if other participants in the consortium are also implicated in the investigation. Strukton’s share of the contract is worth approximately USD 1 billion.
  • Former Goldman Sachs banker to be extradited to U.S. for 1MDB charges: Roger Ng, a former Goldman Sachs banker, will be extradited by Malaysia to the U.S. to face charges related to the 1MDB scandal. Ng earlier fought his extradition, but a Kuala Lumpur court ruled last Friday that he may be extradited to the U.S. to face charges there. The banker was the deputy to Tim Leissner, former chairman of the bank’s Southeast Asian unit, who pleaded guilty to DOJ charges late last year. Ng has indicated he will defend himself against the charges upon reaching the U.S.

Government

  • Canadian Prime Minister Trudeau’s top adviser resigns while denying wrongdoing: Principal Secretary Gerald Butts, Trudeau’s closest adviser and close personal friend, resigned this week while denying allegations that he pressured Canada’s former attorney general to avoid prosecuting SNC-Lavalin, a major Canadian engineering and construction company. The resignation is a blow to Trudeau, who is seeking re-election this year. The accusation was made public earlier this month after newspaper The Globe and Mail reported that Trudeau or his staff have pressured the former attorney general to avoid prosecuting the company. A conviction could lead to debarment of the company, further exacerbating its woes. It was announced last week that Trudeau is being investigated by Canada’s Ethics Commissioner over the allegations.
  • New bill in Brazil seeks to add Non-Prosecution Agreements and whistleblower rewards: Brazilian Minister of Justice Sergio Moro presented a bill for an “anti-crime package” earlier this month. As part of the measures proposed, new articles regulating conditions and rules for non-prosecution agreements between the Brazilian Public Prosecution Service and offenders and another article in the Administrative Improbity Act allowing settlements, agreements, and conciliations for offenses provided in that act. Moreover, the bill proposes to oblige all public entities to establish a whistleblowing channel. The bill also introduces rules for protecting whistleblowers against retaliation and an award of 5 percent of the recovered amount is proposed.
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