The FCPA Report

The definitive source of actionable intelligence covering the Foreign Corrupt Practices Act

Articles By Topic

By Topic: Financial Institutions

  • From Vol. 5 No.15 (Jul. 27, 2016)

    Credit Suisse, Goldman Sachs and Defense Counsel Discuss Corruption Issues Troubling Financial Institutions

    Over the past several years, anti-corruption regulators have consistently focused on financial institutions. From the Morgan Stanley declination in 2012, to the 2015 U.K. prosecution of Standard Bank, to the recent SEC sweep of sovereign wealth funds, financial institutions are facing enforcement risks in multiple jurisdictions. During a recent PLI seminar, Credit Suisse’s global head of anti-corruption and economic sanctions, a VP in Goldman Sachs’ Financial Crime Compliance group and top FCPA defense counsel from Gibson Dunn, Wilmer Hale and Sullivan and Cromwell discussed the FCPA issues faced by financial institutions, including a regulatory focus on hiring and internships, due diligence, the impact of the so-called “Panama Papers” and third-party risks. For more on this subject, see “Mayer Brown Attorneys Discuss Global Corruption Risk in the Financial Services Industry” (Aug. 19, 2015); and “Compliance Leaders from Citigroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions” (May 14, 2014). 

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  • From Vol. 4 No.17 (Aug. 19, 2015)

    BNY Mellon Settles Nepotism-Related Charges for $14.8 Million

    Three participants in a highly competitive BNY Mellon internship program received their jobs differently from the rest, according to the SEC.  In the first FCPA settlement related to the hiring practices of financial institutions, the bank has agreed to pay $14.8 million dollars to resolve the SEC’s allegations that it hired relatives of foreign government officials affiliated with a Middle East sovereign wealth fund in exchange for contracts to manage and service the assets of the fund.  The case represents a collision of two separate investigations targeting financial institutions and their relationships with foreign government officials.  See also “Mayer Brown Attorneys Discuss Global Corruption Risk in the Financial Services Industry,” in this issue.

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  • From Vol. 4 No.12 (Jun. 10, 2015)

    WilmerHale Partners Discuss How Private Fund Managers Can Address Growing Corruption Risks

    The financial services industry is under increased scrutiny from anti-corruption enforcement authorities both in the U.S. and abroad.  Fund managers face two primary types of corruption risks.  First, employees or third parties engaged by a manager may make improper payments to secure business.  Second, a fund may acquire a stake in a company that is engaging in corrupt practices.  During a recent program hosted by Lawline, Kimberly A. Parker and Erin G.H. Sloane, both partners at WilmerHale, discussed these and other corruption risks faced by fund managers and provided actionable advice on how to address them.  See “Private Equity FCPA Enforcement: High Risk or Hype?,” Vol. 4, No. 4 (Feb. 18, 2015).

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  • From Vol. 4 No.7 (Apr. 1, 2015)

    From Princelings to SWFs: All-Star Panel Dissects Corruption Issues Affecting Wall Street

    For financial institutions and the private funds industry, corruption risks lurking in common activities are coming to the forefront.  At the New York City Bar, a distinguished panel of former prosecutors and industry experts offered insights into those evolving risks (including hiring practices and sovereign wealth funds), the enforcement landscape and how companies can strengthen their compliance programs in response.  The panel was moderated by John D. Buretta, a partner at Cravath, Swaine & Moore and former Assistant U.S. Attorney and Principal Deputy Assistant Attorney General at the DOJ.  The other speakers were Sarah Coyne, counsel at Debevoise & Plimpton and a former Assistant U.S. Attorney in the Eastern District of New York and Chief of the Business and Securities Fraud Section; Kelly B. Kramer, a partner at Mayer Brown; Claudius O. Sokenu, a partner at Shearman & Sterling and former SEC Senior Counsel; and Linda Chatman Thomsen, a partner at Davis Polk & Wardwell and former SEC Director of Enforcement.  See also “Friendly Relations? When Nepotism May Violate the FCPA,” The FCPA Report, Vol. 1, No. 10 (Oct. 17, 2012).

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  • From Vol. 4 No.4 (Feb. 18, 2015)

    Identifying and Addressing FCPA Exposure for Lenders

    FCPA risk for lenders may not be as intuitive as it is in other industries, but lenders are subject to FCPA scrutiny, Bridget Marsh, Deputy General Counsel of the Loan Syndications and Trading Association (LSTA) and Jeanine P. McGuinness, counsel at Davis Polk & Wardwell, said at a recent presentation sponsored by the LSTA.  Marsh and McGuinness considered the specific corruption risks lenders face and offered tips on how lenders may mitigate that risk through borrower due diligence and contractual provisions.  See also “International Corruption Risks Facing Financial Institutions,” The FCPA Report, Vol. 1, No. 4 (Jul. 25, 2012).

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Anti-Corruption and Trade Regulations: Identifying Common Elements and Streamlining Compliance Programs (Part Two of Two)

    The $9 billion dollar fine of French bank BNP Paribas, which pled guilty in late June 2014 to transferring billions of dollars on behalf of Iran, Sudan and Cuba, is a sharp reminder of the government’s continued focus on trade sanctions.  Understanding how and when the FCPA and trade regulations intersect can help companies affected by both laws structure their compliance programs effectively and efficiently.  In a recent webinar hosted by Securities Docket, FCPA and trade regulations experts from KPMG and McGuire Woods came together to explain the details of the Office of Foreign Assets Control (OFAC) regulations and how they compare and contrast to the FCPA.  In part two of our article series, the panelists discuss six common elements of FCPA and trade sanctions enforcement, detail potential anti-corruption and trade regulation synergies and provide four steps for developing a synergistic compliance program.  In part one of this article series, the panelists detailed various OFAC penalties, discussed how OFAC calculates penalties and outlined three issues for companies to consider when negotiating with OFAC.  See also “How Can Anti-Money Laundering Laws Affect an FCPA Compliance Program? An Interview with Former FinCEN Director James H. Freis, Jr. (Part Two of Two),” The FCPA Report, Vol. 2, No. 4 (Feb. 20, 2013).

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  • From Vol. 3 No.14 (Jul. 9, 2014)

    Anti-Corruption and Trade Regulations: Identifying Common Elements and Streamlining Compliance Programs (Part One of Two)

    The repercussions of violating trade sanctions, and the government’s focus on the issue, were recently highlighted with the $9 billion dollar fine of French bank BNP Paribas, which pled guilty in late June 2014 to transferring billions of dollars on behalf of Iran, Sudan and Cuba.  That case may be followed by others as the government investigates similar behavior by other companies.  Understanding how and when the FCPA and trade regulations intersect can help companies affected by both laws structure their compliance programs effectively and efficiently.  In a recent webinar hosted by Securities Docket, FCPA and trade regulations experts from KPMG and McGuire Woods came together to explain the details of the Office of Foreign Assets Control (OFAC) regulations and how they compare and contrast to the FCPA. In part one of this article series, KPMG Managing Director Charlie Steele details various OFAC penalties, discusses how OFAC calculates penalties and outlines three issues for companies to consider when negotiating with OFAC.  In part two, the panelists discuss the commonalities of FCPA and trade sanctions enforcement, detail potential anti-corruption and trade regulation synergies and provide four steps for developing a synergistic compliance program.

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  • From Vol. 3 No.13 (Jun. 25, 2014)

    British Bankers’ Association Provides Guidance to Help Financial Institutions Avoid Liability Under the U.K. Bribery Act

    The British Bankers’ Association (BBA), the trade association for the U.K.’s banking and financial services sector, has recently refreshed its guidance on the steps that banks should take to comply with the U.K. Bribery Act 2010.  Despite its industry focus, the BBA Guidance contains a number of recommendations that will be valuable to any large company when implementing an anti-bribery compliance program.  In a guest article, Jeremy Cole and Alex Hohl, consultant and senior associate, respectively, in Hogan Lovells’ London office, provide a recap of some of the key features of the Bribery Act and consider the role of the U.K.’s financial regulator in pushing companies to take the implementation of anti-bribery measures seriously.  They also examine the BBA Guidance, which not only builds on the official guidance on anti-bribery compliance published by the U.K.’s Ministry of Justice in March 2011, but also looks beyond the Bribery Act to take into account the requirements that the U.K.’s regulatory regime places on financial institutions in this area. See “Corruption Risks and Anti-Corruption Strategies in the E.U.,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 3 No.10 (May 14, 2014)

    Compliance Leaders from Citigroup and Morgan Stanley Examine FCPA Risks and Solutions for Financial Institutions

    Banks and other financial institutions are subject to constant regulatory scrutiny.  Given their global reach and government touchpoints, they face constant challenges in assuring compliance with the FCPA.  At a recent program sponsored by the New York City Bar Association, Chinwe Esimai, Senior Vice President of Global Anti-Bribery & Corruption at Citigroup Inc. and Morgan Heyer, Executive Director and Global Head of Anti-Corruption Group Compliance at Morgan Stanley, considered the most pressing FCPA risks in their industries (including the recent government inquiries into banks’ hiring practices) and how their companies are handling those risks.  The panel was moderated by Kimberly A. Parker, a partner at Wilmer Hale and Claudius O. Sokenu, a partner at Shearman & Sterling.  See “How Can Financial Services Firms and Employees Avoid FCPA Liability?,” The FCPA Report, Vol. 2, No. 16 (Aug. 7, 2013).

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  • From Vol. 2 No.21 (Oct. 23, 2013)

    Why the Direct Access Partners Case Matters for Financial Sector Anti-Corruption Compliance

    With the filing of criminal and civil charges against employees of New York-based broker dealer Direct Access Partners, the government has opened a new chapter of FCPA enforcement in the finance sector.  The labyrinthine scheme alleged by the government and the financial company’s rapid disintegration following the revelation of the charges serve as a stark reminder to the financial services industry of the importance of periodically assessing the effectiveness and appropriateness of anti-bribery compliance programs.  In a guest post, Sean Hecker, Andrew M. Levine and Steven S. Michaels of Debevoise & Plimpton LLP discuss the most recent developments in the case, summarize the government’s charges against the lower level defendants Clarke and Hurtado and identify some of the unique risks faced by financial services firms stemming from the complex transactions in which they deal and the multiplicity of government entities with mandates that can encompass anti-bribery compliance.  See also “FCPA Charges against Broker-Dealer Stemming From Routine SEC Examination Is ‘Wake-Up Call’ to the Financial Services Industry,” The FCPA Report, Vol. 2, No. 10 (May 15, 2013). 

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  • From Vol. 2 No.17 (Aug. 21, 2013)

    SEC Investigation of JPMorgan Hiring Practices Demonstrates FCPA Nepotism Risks

    Should banks with global presences be concerned that their hiring practices may cause FCPA headaches?  The recent revelation that JPMorgan Chase & Co., the nation’s largest bank, is being investigated by the SEC for possible FCPA violations stemming from its hiring of the children of two high-placed Chinese officials, may cause other banks to scrutinize who they are hiring and how they are documenting their hiring decisions, especially if the new hires are related to foreign officials.  This article discusses the JPMorgan investigation and how companies can mitigate FCPA risks in their hiring practices.  See also “Friendly Relations? When Nepotism May Violate the FCPA,” The FCPA Report, Vol. 1, No. 10 (Oct. 17, 2012).

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  • From Vol. 2 No.16 (Aug. 7, 2013)

    How Can Financial Services Firms and Employees Avoid FCPA Liability?

    The financial services industry has come under increasing scrutiny by the government in various areas, including anti-corruption.  See “Buyer Beware: Understanding and Mitigating Parent Company FCPA Liability in the Context of Private Equity Acquisitions,” The FCPA Report, Vol. 2, No. 15 (Jul. 24, 2013).  In May, for example, the DOJ and SEC brought charges against individuals at a broker-dealer alleging that the individuals paid bribes in connection with sales of financial services.  See “FCPA Charges against Broker-Dealer Stemming From Routine SEC Examination Is ‘Wake-Up Call’ to the Financial Services Industry,” The FCPA Report, Vol. 2, No. 10 (May 15, 2013).  Given this increased attention from the government, how can principals and employees of private equity firms, hedge fund managers, broker-dealers and other financial services firms – as well as their principals and employees – protect themselves?  What are the chief risk factors and the most effective precautions?  During a recent program hosted by Strafford Publications, Inc., Lara Covington, special counsel at Schulte Roth & Zabel LLP, addressed these and other questions.

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  • From Vol. 2 No.10 (May 15, 2013)

    FCPA Charges against Broker-Dealer Stemming From Routine SEC Examination Is “Wake-Up Call” to the Financial Services Industry

    A routine SEC examination of a New York-based broker-dealer has resulted in FCPA, Travel Act and money laundering charges against two employees in its Miami office.  It’s the first in which individuals were targeted for bribery during the sale of financial services.  Acting Assistant Attorney General Mythili Raman warned in a statement that the case “is a wake-up call to anyone in the financial services industry who thinks bribery is the way to get ahead.”  In an irregular move in a corruption case, prosecutors also charged the foreign official the employees allegedly bribed with violating the anti-money laundering statutes and the Travel Act.  This article distills the compliance takeaways and summarizes the complaints.

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  • From Vol. 2 No.2 (Jan. 23, 2013)

    JPMorgan Chase Anti-Money Laundering Consent Orders Highlight the Role of Risk in Structuring Compliance Programs

    On January 14, 2013, JPMorgan Chase Bank, N.A., JPMorgan Bank and Trust Company, N.A., and Chase Bank USA, N.A. (together, the Banks) and their parent holding company, JPMorgan Chase & Co. (JPMC), entered into a consent order with the Office of the Comptroller of the Currency of the United States (OCC) and a separate consent order with the Board of Governors of the Federal Reserve System (Fed).  The orders follow regulatory examinations of JPMC and the Banks occasioned by JPMC’s revelation that one of its traders, Bruno Iksil, known in the industry as the “London Whale,” made huge derivative bets that cost JPMC billions.  While the consent orders primarily focus on shortcomings in JPMC’s anti-money laundering efforts and how those efforts may be improved, they more generally espouse the view – apparently shared by the SEC and DOJ in their FCPA enforcement programs – that compliance efforts should be risk-based.  See “Comprehensive FCPA Guidance Provides a Roadmap for Companies to Reevaluate and Revise Their Compliance Policies,” The FCPA Report, Vol. 1, No. 13 (Nov. 28, 2012).  This article describes the orders in detail.

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  • From Vol. 2 No.1 (Jan. 9, 2013)

    How Private Fund Managers Can Manage FCPA Risks When Investing in Emerging Markets

    Anti-corruption enforcement efforts have dramatically increased over the last few years.  Every day it seems there is a new headline about an investigation involving alleged violations of the FCPA.  Federal authorities have indicated that their FCPA enforcement efforts are increasingly focused on the financial services industry and, in particular, private fund managers that invest in emerging markets.  Given this heightened level of government scrutiny, it is important that private equity firms, hedge fund managers and other investors that conduct business in foreign markets understand the associated FCPA risks.  Such risks can arise in the context of raising funds overseas, working with joint venture partners and third party agents, and investing in companies that operate in countries known for corruption.  A potential misstep in these areas can result in a fund manager and its employees facing significant civil penalties and possible criminal prosecution or, at a minimum, having to respond to government subpoenas or requests for information in connection with an investigation by federal authorities, thus resulting in the unnecessary expenditure of time and money and the attraction of unwanted attention.  In a guest article, Justin V. Shur and Joel M. Melendez, partner and associate, respectively, at Molo Lamken LLP, consider some of the important and recurring FCPA risks that arise for investors in emerging markets, and offer practical guidance to help private fund managers and their employees avoid or minimize liability in this area.

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  • From Vol. 1 No.4 (Jul. 25, 2012)

    International Corruption Risks Facing Financial Institutions

    For many years, financial institutions had not been frequent targets of FCPA enforcement.  However, the past two years have revealed that regulators have not forgotten about this industry.  The financial crisis increased regulatory scrutiny both from an investigative and a legislative perspective.  The SEC and DOJ are investigating financial institutions for violations of securities laws, the FCPA, anti-money laundering rules, and similar regulations.  As discussed in this article, and as the various reviews by regulators reveal, banks, private equity firms, and other financial institutions face several avenues of potential liability due to the nature of their overseas business under a myriad of domestic and international statutes.  To properly navigate this complex regulatory framework requires an effective and regularly updated compliance program, consistent with the recommended government standards (and perhaps building off of their current anti-money laundering procedures), and any responses to regulatory requests demand a carefully structured internal review.  In a guest article, Palmina Fava and Alan Brudner, both partners at Paul Hastings LLP, and Mor Wetzler, an associate at Paul Hastings, discuss: the regulatory focus on financial firms; guidance for anti-corruption compliance derived from anti-money laundering initiatives; the potential for anti-corruption liability without actual knowledge of the relevant corruption; the strict liability provisions of the U.K. Bribery Act; common sources of liability for financial institutions; specific compliance considerations raised by dealings with sovereign wealth funds and state-owned enterprises; and the risk of required offset funds.

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