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William Byrnes (Texas A&M) tax & compliance articles

Posts Tagged ‘anti money laundering’

Federal Government After Decades Tries To Stop Local Authorities From Profiting on Asset Seizure Abuse Justified by Federal Law (But What About State Abuse)?

Posted by William Byrnes on January 19, 2015


Read the Notice sent to State Enforcement today, and links of previous coverage of this issue – at http://lawprofessors.typepad.com/intfinlaw/2015/01/federal-government-after-decades-tries-to-stop-local-authorities-from-profiting-on-asset-seizure-abu.html

 

01701_11_1_coverUse your Lexis subscription to access LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide – This treatise by William Byrnes with commentary and analysis of hundreds of AML experts from over 100 countries,  is designed to provide the compliance officer accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources. This multi-volume treatise is organized around five main themes: 1. Money Laundering Risk and Compliance; 2. The Law of Anti-Money Laundering and Compliance; 3. Criminal and Civil Forfeiture; 4. Compliance and 5. International Cooperation.  As these unlawful activities can occur in any given country, it is important to identify the international participants who are cooperating to develop methods to obstruct these criminal activities.

Posted in Money Laundering | Tagged: , , | Leave a Comment »

How does a small California Chinese sourcing operation end up violating Weapons of Mass Destruction Sanctions?

Posted by William Byrnes on July 17, 2014


Tofasco Inc. of La Verne, California, according to its website, sources Chinese manufactured consumer goods for sale to US retailers.   In an OFAC enforcement announcement of of July 17, 2014, US Treasury described Tofasco as a “small company lacking the sophistication of a larger company conducting international trade”.    Yet, Tofasco settled potential civil liability for an alleged violation of the Weapons of Mass Destruction Proliferators Sanctions Regulations (the “WMDPSR”).  How does a small California Chinese sourcing operation and importer allegedly violate the Weapons of Mass Destruction Proliferators Sanctions Regulations?

Tofasco initially presented trade documents to a bank in connection with a blocked letter of credit transaction representing payment for a shipment of recreational chairs with a substitute bill of lading omitting reference to the Islamic Republic of Iran Shipping Lines (“IRISL”), an entity whose property and interests in property are blocked pursuant to the WMDPSR. However, the bank refused to advise the letter of credit transaction due to IRISL’s involvement.  Tofasco knew of IRISL’s involvement in the transactions.   The Treasury stated that on or about April 16, 2009, Tofasco approached another bank to undertake the blocked property transaction.  Tofasco undertook deliberate steps to evade or avoid U.S. sanctions requirements by obtaining and submitting altered bill of lading documents that concealed IRISL’s involvement.

Thus, the US Treasury found that Tofasco demonstrated reckless disregard for U.S. sanctions requirements in its presentation of trade documents to a second bank and by making payment for ocean freight for an underlying shipment of recreational chairs after the trade documents were rejected by a prior bank.  Moreover, US Treasury found that Tofasco did not appear to have had an OFAC compliance program in place at the time of the apparent violation and Tofasco did not make a voluntary self-disclosure.

Treasury stated that Tofasco appeared to have violated §544.201(a) and §544.205 of the WMDPSR.  §544.201(a) addresses prohibited transactions involving blocked property.

(a) … all property and interests in property that are in the United States, that hereafter come within the United States, or that are or hereafter come within the possession or control of U.S. persons, including their overseas branches, of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in:

(1) Any person listed in the Annex to Executive Order 13382 of June 28, 2005…;

(2) Any foreign person determined … to have engaged, or attempted to engage, in activities or transactions that have materially contributed to, or pose a risk of materially contributing to, the proliferation of weapons of mass destruction or their means of delivery (including missiles capable of delivering such weapons), including any efforts to manufacture, acquire, possess, develop, transport, transfer or use such items, by any person or foreign country of proliferation concern;

(3) Any person determined … to have provided, or attempted to provide, financial, material, technological or other support for, or goods or services in support of, any activity or transaction described in paragraph (a)(2) of this section, or any person whose property and interests in property are blocked pursuant to this section; and

(4) Any person determined… to be owned or controlled by, or acting or purporting to act for or on behalf of, directly or indirectly, any person whose property and interests in property are blocked ….

Although US Treasury determined that Tofasco demonstrated reckless disregard, it did not find that the conduct constituted an “egregious case”.   An egregious case, and the penalty enhancement, is described in my previous article about BNP Paribas’ transactions with Sudan and Iran.   The maximum statutory penalty amount for this was $250,000, and
the base penalty amount was $25,000.  Tofasco did not have a prior OFAC sanctions history.  Tofasco settled the potential civil liability for $21,375.

book cover

LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide – This eBook with commentary and analysis by hundreds of AML experts from over 100 countries,  is designed to provide the compliance officer accurate analyses of the AML/CTF Financial and Legal Intelligence, law and practice in the nations of the world with the most current references and resources. The eBook is organized around five main themes: 1. Money Laundering Risk and Compliance; 2. The Law of Anti-Money Laundering and Compliance; 3. Criminal and Civil Forfeiture; 4. Compliance and 5. International Cooperation.  As these unlawful activities can occur in any given country, it is important to identify the international participants who are cooperating to develop methods to obstruct these criminal activities.

Posted in Compliance | Tagged: , , , , , | Leave a Comment »

compliance jobs on upward trajectory after recent enforcement actions

Posted by William Byrnes on July 15, 2014


Read about Citi’s increase to 30,000 compliance positions by end of year, JP Morgan’s 30% compliance staffing increase and Bank of America’s doubling of audit staffing in last three years….

I’ve written several articles about compliance “whitewashing” on this blog (look under the tab compliance and money laundering). Compliance staffing at many banks has increased since the Patriot Act and renewed enforcement efforts against money laundering. More recently (in the past five years), financial institutions have been called out on dishonest activities with valuation of securities, on dishonest dealings with consumers (see my recent articles about the bank that simply threw away millions of customer mortgage workout files and sent mass mailing denials), on providing financial channels for a government involved in genocide…. I will not go though the entire list.  These cases just stand out as particularly egregious. Compliance looked at, and was in some cases involved with, these transactions.  So, throwing more staff into the cauldron does not quench the fire, nor, hopefully, will this mere fact  satisfy the regulators.

By example, as a regulator, I would need to understand the educational foundation qualification that maps to the employment position. What degree in compliance does the new staff member have? Or is it that persons have been moved into compliance positions without the requisite underlying knowledge to execute the compliance role?

Market Watch at: http://blogs.marketwatch.com/thetell/2014/07/14/citi-will-have-almost-30000-employees-in-compliance-by-year-end/

book cover

Read about financial institutions / banks compliance department requirements in the 5,000 page treatise and compendium of LexisNexis’ Money Laundering, Asset Forfeiture and Recovery and Compliance: A Global Guide

Posted in Uncategorized | Tagged: , , , , | Leave a Comment »

 
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