The FCPA Report

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

Articles By Topic

By Topic: Financial Services

  • From Vol. 5 No.22 (Nov. 9, 2016)

    Och-Ziff’s Settlement Offers Five Compliance Lessons for Hedge Fund Managers and Private Equity Investors 

    Och-Ziff’s recent settlements with both the SEC and DOJ for violations of the FCPA should be a wakeup call for hedge fund managers and private equity investors. “Although the enforcement authorities have historically focused their FCPA attention elsewhere, the DOJ and SEC are increasingly turning their attention to sophisticated financial firms,” Jason Jones, a partner at King & Spalding, explained. “Hedge funds, private equity firms, banks, and other firms often focus the majority of their compliance resources on anti-money laundering and sanctions programs, but anti-corruption must not be neglected,” he said. The details of the case, along with the terms of the company’s settlement, offer five key compliance lessons for firms in this industry. For details on the facts underlying the case and the terms of the settlement see our companion article “Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives” (Oct. 26, 2016).

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  • From Vol. 5 No.21 (Oct. 26, 2016)

    Dirty Dealings in Africa Result in SEC and DOJ Settlements for Och-Ziff and Two Executives

    After months of speculation, the SEC and DOJ recently announced a settlement with Och-Ziff Capital Management and two of its employees for more than $400 million. The settlement papers indicate that Och-Ziff’s varied dealings in Africa – both in terms of procuring investors and making private equity investments – were characterized by a nonchalant attitude toward compliance. The company routinely worked with intermediaries with questionable backgrounds and known ties to government officials. Once deals were made, little effort was put into ensuring that funds were spent appropriately. According to a team of attorneys at MoloLamken, the settlement is a “significant development” in both the FCPA and hedge fund worlds. “For a number of years, DOJ and the SEC have indicated that their FCPA enforcement efforts are focused on private equity and hedge funds,” they said, “but the Och-Ziff settlement is the first major move in that direction. And it’s a significant one: the case represents one of the largest FCPA settlements in history against one of the world’s largest hedge funds.” A companion article in our next issue will distill further compliance takeaways from the case. See “Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part One of Two)” (Jun. 24, 2015); Part Two (Jul. 8, 2015). 

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  • From Vol. 5 No.10 (May 18, 2016)

    Resolutions in the Direct Access Partners Matter and the Panama Papers: A Caution for Financial Sector Anti-Corruption Compliance

    In May 2013, the DOJ unsealed criminal FCPA, Travel Act, money laundering and conspiracy charges against two employees of the New York broker-dealer Direct Access Partners, as well as Travel Act, money laundering and conspiracy charges against Maria de Los Angeles Gonzalez de Hernandez, vice president for finance of the Economic and Social Development Bank of Venezuela. In the three years since the original indictments, the case expanded, with additional indictments, amended SEC complaints, guilty pleas, sentencing and, in early April 2016, final judgments being entered in the SEC civil action. In a guest article, Sean Hecker and Andrew Levine, partners, and Philip Rohlik, counsel at Debevoise & Plimpton highlight the lessons companies can learn from the DAP case and other recent events. See “Why the Direct Access Partners Case Matters for Financial Sector Anti-Corruption Compliance” (Oct. 23, 2013).

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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.17 (Aug. 19, 2015)

    Mayer Brown Attorneys Discuss Global Corruption Risk in the Financial Services Industry

    Financial services firms – including banks, financial advisors and private equity investors – have recently been the subjects of an increasing number of anti-corruption enforcement actions.  Will the enforcement agencies remain focused on the financial services industry, or is it just a passing phenomenon?  During a recent event hosted by Mayer Brown, a panel of experts discussed whether financial services firms are actually facing additional exposure and provided strategies for limiting that exposure.  The panel included three Mayer Brown partners: Alistair Graham of the firm’s London office, John Hickin, based in Hong Kong, and Laurence Urgenson, based in D.C.  See also “Five Corruption Risks in the Financial Services Industry,” The FCPA Report, Vol. 3, No. 15 (Jul. 23, 2014).

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  • From Vol. 4 No.14 (Jul. 8, 2015)

    Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part Two of Two)

    Considerable uncertainty can arise when parties co-invest alongside one another in the same entity, leading to an array of potential corruption and compliance risks.  Co-investor relationships can take many forms – from garden-variety joint venture partnerships, to investments with state-owned entities, to sophisticated private equity transactions – each with different risk profiles.  Adding to the complexity, the DOJ and the SEC expect co-investors to self-police for corruption, even while co-investors are often left in the dark about the contours of appropriate compliance and anti-corruption efforts.  In a recent Practising Law Institute event, experts with diverse perspectives from Goldman Sachs, Cerberus Capital, Gibson Dunn, WilmerHale and Ropes & Gray discussed the complications that can occur throughout the lifecycle of co-investor relationships.  This article, the second of two, discusses essential compliance provisions when formalizing the new venture; the challenges of holding a minority stake in a joint venture; and best practices for conducting an investigation if there is a corruption issue.  The first article described important due diligence steps for both the co-investor and the target to take before the transaction.  See also “FCPA Compliance in Non-Controlled Joint Ventures,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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  • From Vol. 4 No.13 (Jun. 24, 2015)

    Addressing Corruption Risks and Compliance Strategies for Co-Investors (Part One of Two)

    Considerable uncertainty can arise when parties co-invest alongside one another in the same entity.  The sheer variety of co-investor relationships – from garden-variety joint venture partnerships to investments with state-owned entities to sophisticated private equity transactions – attests to the array of potential corruption and compliance risks created by co-investments and how to deal with them.  Adding to the confusion, the DOJ and the SEC expect co-investors to self-police for corruption, but co-investors are often left in the dark about the contours of appropriate compliance and anti-corruption efforts.  In a recent Practising Law Institute event, experts with diverse perspectives from Goldman Sachs, Cerberus Capital, Gibson Dunn, WilmerHale and Ropes & Gray discussed the complications that can occur throughout the lifecycle of co-investor relationships.  This article, the first of two, describes important due diligence steps for both the co-investor and the target to take before the transaction.  The second article will discuss essential compliance provisions when formalizing the new venture; the challenges of holding a minority stake in a joint venture; and best practices for conducting an investigation if there is a corruption issue.  See also “FCPA Compliance in Non-Controlled Joint Ventures,” The FCPA Report, Vol. 3, No. 10 (May 14, 2014).

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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. 3 No.25 (Dec. 17, 2014)

    Weil Attorneys Address Six Key U.S. and E.U. Cybersecurity Risks

    The extensive cybersecurity breaches at major public companies such as Target, Home Depot and JPMorgan Chase have placed cybersecurity issues on the radar of both regulators and the private sector.  Cyber breaches can give rise to regulatory, reputational and enterprise risk.  A recent panel discussion sponsored by the Cross-Border Group considered the current regulatory climate on cybersecurity in both the U.S. and the E.U., and six ways to handle cybersecurity risks.  The discussion was moderated by J.P. Wilson, head of the Cross-Border Group and the speakers included Weil, Gotshal & Manges partners Barry Fishley and Kyle C. Krpata, and counsel Paul A. Ferrillo.  See also “Seven Steps the Legal Department Can Take to Decrease Cybersecurity Risk,” The FCPA Report, Vol. 3, No. 22 (Nov. 5, 2014).

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  • From Vol. 3 No.15 (Jul. 23, 2014)

    Sanctions for Retaliating Against Whistleblower Highlight the Importance of Incentivizing Internal Reporting

    What, if anything, can companies do with respect to a whistleblower’s employment without violating the anti-retaliation provisions in the Exchange Act?  In a recent order, the first of its kind, the SEC sanctioned a private fund manager for taking adverse employment actions against a whistleblower who reported principal transaction compliance shortcomings to the SEC.  In light of this decision, what legal or operational options are available to a company that fails to incentivize internal reporting of FCPA and other compliance violations?  See also “Seven Steps Companies Can Take to Incentivize Internal Reporting of FCPA Violations,” The FCPA Report, Vol. 1, No. 3 (Jul. 11, 2012). 

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  • From Vol. 2 No.25 (Dec. 18, 2013)

    What Private Fund Managers Must Know About FCPA Enforcement

    “Hedge funds are under the FCPA microscope now,” Lauren Resnick, a partner at Baker Hostetler LLP, warned at a recent panel discussing the corruption risks that private fund managers, including hedge fund managers, face.  She and her colleague Marc Kornfeld, along with James “Bucky” Canales, Chief Operating Officer of StoneWater Capital, detailed how the FCPA affects the private funds industry and what hedge fund managers and others should be doing to minimize the risk of an FCPA violation, or the violation of other global anti-bribery laws.  See also “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).

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