Compliance Insider

Issue 21 > Compliance Alerts

Prince-ling corruption case nears resolution

The JP Morgan Chase ‘prince-ling’ (and ‘princess-ling’) Foreign Corrupt Practices Act (FCPA) investigation has been well known for some time. Back in 2013, the Financial Times (FT) reported on the hiring of sons and daughters of Chinese government officials by the United States bank, in what now might be called the ‘Era of the Prince-lings’. However, it appears that this era is now closed. “Amid a United States regulatory probe and a new political climate in China, the era is coming to an end,” reported the FT, in an article that detailed how the practice of hiring the sons and daughters of high government officials began in the early 1990s. The practice seems to have commenced with the hiring of the first princess-ling – Margaret Ren, the daughter-in-law of a former Chinese Premier. The question was whether these hirings were made in violation of the FCPA.

Issue 21 > Compliance Alerts

United States seeks massive civil forfeiture in 1MDB corruption scandal

In 2014, then United States Attorney General Eric Holder announced the formation of a new Kleptocracy squad within the Federal Bureau of Investigation (FBI) that would investigate and prosecute corruption cases across the globe. At the time, Holder said: “This specialised unit will partner with our Asset Forfeiture and Money Laundering Section to aggressively investigate and prosecute corruption cases – not only in Ukraine, but around the world. The squad of about a dozen personnel will consist of case agents and forensic analysts who are capable of unravelling the intricate money laundering transactions commonly employed by kleptocrats. Their sophisticated work will be supported by deputy marshals from the United States Marshals Service and analysts from FinCEN, which is our financial intelligence unit. And this new initiative will provide the United States with increased capacity to respond rapidly to political crises as they arise – so we can help prevent stolen assets from being dissipated or secreted away by deposed regimes.”

Issue 21 > Compliance Alerts

1MDB investigation exposes weaknesses in KYC policies in Singapore financial institutions

A joint statement regarding the ongoing investigation into the 1MDB money trail throughout Singapore has recently been released by the Monetary Authority of Singapore (MAS), the Attorney-General’s Chambers and the Commercial Affairs Department of the Singapore Police Force.

Issue 21 > Compliance Alerts

DOJ alleges false claims violations against Iraqi contractor

The United States Department of Justice (DOJ) has filed a False Claims Act complaint against a contractor in Iraq that, it argues, knowingly submitted inflated claims in connection with a government contract to train Iraqi police forces. The case serves as a useful reminder for companies operating in Iraq to conduct due diligence on local partners in the country in order to avoid any unnecessary legal issues that may lead to financial loss and potentially-irreversible reputational harm.

Issue 21 > Compliance Alerts

Oil refiner settlements show need for environmental compliance

A recent settlement by two oil refiners with the United States Department of Justice (DOJ) and Environmental Protection Agency (EPA) has once again highlighted the integrity and compliance risks that can emanate from environmental misconduct. Every organisation needs to make sure that their suppliers are not polluting the environment while providing products and services to them. In addition, no organisation wants to be associated with a supplier that engages in environmental misconduct, even if it has nothing to do with the products or services that are being provided to them.

Issue 21 > Compliance Alerts

What Privacy Shield means for your company going forward

What does the new Privacy Shield mean going forward? About the best I can say now is that I am cautiously optimistic that it may bring some certainty. The new Privacy Shield affords companies the opportunity to enlist in the legal right to transfer data to the United States from European Union (EU) member states without breaking privacy laws. This is designed to replace the prior Safe Harbor, which was struck down by the European Court of Justice in its Schrems decision in October 2015.

Issue 21 > Compliance Alerts

Theranos and Ethical Leadership

What is ethical leadership? When does pushing the mechanical envelope around what is and what is not technically possible move from possible to wishful thinking to downright fraud? Is it the responsibility of a leader to accurately represent his or her company’s technical capabilities when they fall short of all measurable standards?

Issue 21 > Compliance Alerts

Hackers target US fast food chain

Hackers and criminals are not selective on the type of organisations they will attack. They are opportunists and will take full advantage of any vulnerable database that could contain valuable data. This has been confirmed once again when a popular US fast food chain was hit by a massive cyber attack.

Issue 21 > Compliance Alerts

Bangladesh's garment industry shaken in the wake of Dhaka attack

Natural disaster, accidents, loss of information, labour strikes and other disruptions can unexpectedly stop or slow the sourcing of materials required for the manufacture of products. For example, the recent attack in Dhaka, Bangladesh has raised concerns over the future of the country's garment industry.

Issue 21 > Compliance Alerts

Hackers not picky when selecting victims of cyberattacks, reinforces need for security

A slew of cyber intrusions in different business sectors in North America have once again highlighted the necessity for companies to implement more secure information storage solutions. The healthcare industry is one industry that has seen data breaches in the past few months and just recently, the Stamford Podiatry Group in Connecticut has fallen victim to an attack.

Issue 21 > Compliance Alerts

Malta banks named in Panama Papers deny links to fraudulent law firm

The effects of the Panama Papers scandal continue to be felt in various industries around the world. Many companies and individuals that were previously identified have taken steps to mitigate reputational damage and distance themselves from Mossack Fonseca. Three banks in Malta have released statements about their relationships with Mossack Fonseca, the law firm that allegedly helped international corporations open shell corporations and offshore accounts in order to hide ill-gotten wealth.

Issue 21 > Compliance Alerts

Google’s recent diversity report underscores improvements, pushes diversity for tech

Businesses are aware that having a diverse supplier pool or employee base is a major competitive advantage, which is why many tech companies are making the effort to improve diversity in the work place. Google is displaying its progress with diversity and the fruits of a US$150 million investment made in 2015 by way of an official blog post regarding the recent improvements.

Issue 21 > Compliance Alerts

United States demotes Myanmar on human trafficking list

Myanmar is known as a high risk country for conducting business due to a poor human trafficking record and abusive labour practices. Myanmar was recently demoted to "Tier 3" in the United States' global list of worst offenders in human trafficking, officially putting the country alongside Iran, North Korea and Syria.

Issue 21 > Compliance Alerts

How compliance firms can partner with law firms to reduce risk

The demand for individuals and companies who are well-versed in various state, federal and international regulations and research regarding third party risk management is increasing. This dictates an increased need for legal professionals as well as specialised professional services firms. Companies have a growing need for compliance services due to increased regulation and legislation related to supply chain transparency and third party accountability. This includes the United Kingdom Modern Slavery Act, Conflict Minerals Act and the California Transparency in Supply Chains Act, along with high profile scandals such as the Panama Papers and Unaoil. Existing compliance consulting firms are starting to gain prominence with large, multinational companies that need to know more about their third parties, the risks they present and how to mitigate that risk.

Issue 21 > Compliance Alerts

Palm oil sustainability issues prompt audit improvements

Despite the creation last year of a group dedicated to promoting the use of sustainable palm oil products, the number of instances where sustainability is not practiced within companies continues to increase. In response to growing criticism and increased international scrutiny, the Roundtable on Sustainable Palm Oil (RSPO) – a body of consumers, green groups and plantation firms – has announced that it will be implementing even more rigorous auditing to ensure that assessments are done correctly.

Issue 21 > Compliance Alerts

AML breach rise in Hong Kong confirms need for KYC compliance

Hong Kong’s securities regulator has reported a huge surge in the number of occasions when financial institutions in the city have failed to comply with anti-money laundering (AML) guidelines. In its annual report for 2015-2016, the Securities and Futures Commission (SFC) confirmed that the number of rule breaches in the year ending 31 March had risen by an astonishing 91 percent from 117 to 223 incidents. Financial penalties imposed during the year were also up by 58 percent to US$11.2 million, and this included a penalty of almost US$4 million imposed on JP Morgan in December for a series of control failures. The results of the SFC report are a reminder to companies of the need to implement a rigorous know-your-customer (KYC) process.

Issue 21 > Compliance Alerts

Brazil’s ‘other’ corruption probe could be bigger than Petrobras

The post-Petrobras compliance landscape in Brazil is about to receive its first serious test with the news that a tax evasion scandal could have even more serious implications. Christened Operation Zelotes by police, the scandal reportedly involves more than 70 Brazilian companies, banks and multinationals who allegedly cheated the state out of R$19 billion (US$5.5 billion) by bribing officials to reduce or waive tax payments. The news that prosecutors are ramping up their investigation into Zelotes comes in the wake of a new anti-corruption decree, which sets a strict liability system.