This Week in Compliance

This Week in Compliance: US Bank settles money laundering violations with DOJ

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

Business

  • US Bank settles money laundering violations with DOJ: US Bancorp, the parent company of U.S. Bank, entered into a two-year deferred prosecution agreement with the DOJ and agreed to pay USD 613 million in criminal and civil penalties to resolve charges that it knowingly ran a defective anti-money laundering program and hid the defects from federal regulators. US Bancorp also reached settlements with other regulatory authorities including FinCEN, the Office of the Comptroller of the Currency (OCC), and the Federal Reserve. According to the DOJ, the Bank had failed to report suspicious banking activities of Scott Tucker, a longtime customer, who had defrauded 4.5 million borrowers through deceptive loan terms and illegal interest rates. The DOJ added that the Bank was warned that Tucker was laundering proceeds from illegal and fraudulent schemes. Trucker was sentenced to more than 16 years’ imprisonment.
  • Company sues Venezuela’s former oil czar for pressuring it into bribery: Harvest Natural Resources filed a suit against Venezuela’s former oil czar Rafael Ramirez – also former minister of foreign affairs, energy minister and president of PDVSA – for allegedly pressuring Harvest into paying about USD 10 million in bribes to sign off deals to sell its stake in a joint venture with PDVSA to Indonesia’s state-owned Pertamina. Harvest claims to have found another buyer, Argentina’s Pluspetrol, yet the sale was blocked again by bribery demands. The company alleges that since 2012, it refused to pay bribes to an intermediary, who said he was acting in the name of Ramirez, then PDVSA’s president and oil minister, who subsequently rejected the sale and the deal subsequently fell through. Prosecutors already suspect Ramirez of taking bribes in connection with a corrupt scheme at PDVSA. Ramirez denies the bribery charges in connection with the sale.
  • Shikun & Binui subsidiary investigated for corruption: Shikun & Binui, Israel’s largest construction group, reported that four current and former employees of a foreign subsidiary have been detained for questioning by Israeli police on suspicion of bribery in Africa. Reportedly, the investigated subsidiary was also recently notified by the World that it intended to conduct an audit related to several of its projects in Kenya financed by the bank. The Israeli national fraud investigation unit has been cooperating on a corruption investigation with international law enforcement agencies for months into a construction company operating in Israel and overseas suspected of giving bribes. The unit did not name the company nor the four people detained in the investigation. According to the police, the payments were allegedly made to secure construction projects worth USD million in Africa.

Government

  • Latvian bank and governor of central bank investigated for corruption: Latvian ABLV bank sought emergency support from the central bank after depositors withdrew about 22 percent of the bank’s total deposits, following a warning by the US that it was seeking to impose sanctions on ABLV for violating the EU and UN imposed sanctions on North Korea. According to FinCen – the U.S. Treasury’s Financial Crimes Enforcement Network – ABLV had ‘institutionalized money laundering’ and linked the bank’s alleged activities to North Korea’s ballistic missiles program accusing its executives and management of covering these up by bribing Latvian officials. In the meanwhile, the Latvian Corruption Prevention and Combating Bureau released Ilmars Rimšēvičs, the governor of the central bank and ECB policymaker, after being arrested for several days on suspicion of having solicited EUR 100,000 in bribes. The anti-corruption agency said, however, that its investigation was not connected to the probe into ABLV.
  • Netanyahu aids emroiled in new corruption cases: According to Israeli police, Nir Hefetz, a former spokesman of Benjamin Netanyahu tried to bribe a judge in return for dropping a fraud case against the prime minister’s wife, Sara Netanyahu. Last September, the attorney-general was considering indicting Sara Netanyahu for fraud over the suspected diversion of public funds for personal benefit. A final decision on the charges is still pending. The former spokesman and close confident of Netanyahu is involved in two bribery cases entangling the prime minister, the police had also recently arrested him in a separate case involving allegations of corruption at Israel’s biggest telecoms company. A week ago, police recommended Prime Minister Netanyahu be indicted for bribery and fraud. Netanyahu has dismissed all allegations against him as being politically motivated.

Noteworthy

  • Supreme court rules in favor of Digital Realty: A Supreme Court ruling came out in favor of Digital Realty Trust Inc, thereby throwing out a lawsuit brought by Paul Somers, a former employee who had been fired for blowing the whistle on misconduct internally in the company under the Dodd-Frank Act. Somers, who had worked as a Digital Realty portfolio-management vice president, claimed that Digital Realty retaliated against him after he internally reported his supervisor for hiding major cost overruns, eliminating internal controls and granting unsubstantiated payments to friends. The Supreme Court ruled that claimants filing suits under the Dodd-Frank Act must take reports of wrongdoing to the Securities and Exchange Commission (SEC) in order to be shielded against retaliation. Whistleblowers who file suits under the Sarbanes-Oxley Act of 2002 may enjoy broader protections, yet within a shorter timeframe for filing a whistleblower lawsuit.
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