Compliance Insider

Issue 16 > Compliance Alerts

Former California senator pleads guilty to corruption

A former California senator has pleaded guilty to racketeering in an organised crime and public corruption case linked to activity in San Francisco’s Chinatown. Leland Yee was one of 20 people who were arrested by the United States Federal Bureau of Investigation (FBI) during several raids in 2014. One of the raids centred on Chinese fraternal organisation Ghee Kung Tong, with Yee allegedly providing help to the organisation in exchange for bribes. Yee will be sentenced in October and could spend up to 20 years in jail.

Issue 16 > Compliance Alerts

China seeks extradition agreement with sin haven Australia

China is continuing to pressure Australia into ratifying an agreement to extradite Chinese financial criminals back to their home country. After the United States and Canada, Australia is the third most popular destination for financial fugitives of the Communist Party. Australia has been dubbed a “haven for escaping sin” by China’s state media. This is in part because of its reluctance to extradite criminals back to China which, argue some, is due to its commitment to uphold human rights and the rule of law. China has recent ramped up its efforts to repatriate fleeing nationals who have committed crimes.

Issue 16 > Compliance Alerts

Activists call for whistleblower review at catering firm

Anti-corruption activists have sent a letter to the British home secretary Theresa May asking for a review of the whistleblowing case involving FTSE 100 catering firm Compass Group. They claim that the case, which involves former Compass finance director Karim Pabani, only appeared on the radar of United Kingdom prosecutors after prompting by the United States Federal Bureau of Investigation (FBI). Pabani claimed that he was fired after he blew the whistle on a company subsidiary that allegedly paid brides to customs officials in Kazakhstan.

Issue 16 > Compliance Alerts

Indonesia removed from money laundering blacklist

The global taskforce for money laundering and terrorist financing has removed Indonesia from its black list due to the Southeast Asian nation’s success at combatting terrorist-related financial crime. Making the announcement in Brisbane, the Financial Action Task Force of Money Laundering (FAFT) stated that Indonesia had complied with its requirements on financial securities and had subsequently been removed from the list.

Issue 16 > Compliance Alerts

China state auditor reveals massive bookkeeping hole

China’s state auditor has exposed major irregularities in bookkeeping, including a missing 366.4 billion yuan (US$59 billion) from land sales over the last six years. Commenting on the audit of the central government’s 2014 budget, National Audit Office head Liu Jiayi told lawmakers that the office had investigated more than 2,200 government officials for major fiscal fraud. Among its findings, he said, were millions of yuan spent on expensive alcohol at state-owned firms.

Issue 16 > Spotlights

Petrobras scandal could engulf Eletrobras and foreign firms

The scandal surrounding Brazil’s largest oil and gas company Petrobras is set to expand and could engulf the country’s largest electric utility Eletrobras and more than a dozen foreign firms, according to a lead prosecutor. Carlos Fernando dos Santos Lima said that Eletrobras may have operated a scheme similar to the one at Petrobras, which saw the company offer kickbacks and bribes to politicians. In particular, the prosecutor said that Eletrobras may have acted unethically during projects such as nuclear reactor Angra 3 and the US$13 billion Belo Monte hydroelectric dam in the Amazon.

Issue 16 > Compliance Alerts

Romanian lawmaker accused of frying pan bribery

A Romania lawmaker is facing a criminal inquiry for allegedly trying to secure the votes of Moldovans for Prime Minister Victor Ponta by bribing them with frying pans. Romania’s anti-graft prosecutors (DNA) announced that they are investigating Sebastian Ghita, who is a close ally of the Prime Minister as well as a lawmaker from the country’s ruling coalition. Ghita has denied any wrongdoing and has accused the prosecutors of abusing their power.

Issue 16 > Compliance Alerts

SEC working with hacked companies on insider trading probe

The United States Securities and Exchange Commission (SEC) has asked at least eight companies for information on their data breaches as it investigates a group of hackers that appear to have infiltrated corporate email threads. The hackers allegedly stole information in the emails, such as details on mergers and acquisitions, in order to gain commercially. The unusual request by the United States securities regulator suggests growing concerns about cyberattacks on United States companies and government agencies.

Issue 16 > Compliance Alerts

Former FIFA VP denies bribery but confirms vote swapping

A former FIFA and Brazilian powerbroker has denied that he took bribes in exchange for voting for Qatar to host the 2022 World Cup, but has admitted to trading votes. Former FIFA vice president Ricardo Teixeira said that Spain and Portugal’s joint bid to host the 2018 World Cup needed votes and so he organised meetings “and got some votes from Asia, thanks to Qatar”. In exchange, Teixeira supported Qatar’s bid for the 2022 tournament. FIFA president Sepp Blatter has previously admitted that some of the bidding process for the 2018 and 2022 World Cups had involved vote trading.

Issue 16 > Compliance Alerts

Italian prosecutors accuse Bank of China of money laundering

Italian prosecutors have alleged that the Milan branch of Bank of China was responsible for a money laundering scheme in which approximately €4.5 billion (US$5.1 billion) was transferred from Italy to China. Prosecutors in Florence want to indict the Chinese bank’s branch and almost 300 people over the scheme, the funds of which they say were earned through prostitution, counterfeiting, tax evasion and labour exploitation. Four of those facing possible prosecution are senior managers with Bank of China, according to Italian news agency ANSA.

Issue 16 > Compliance Alerts

New FIFA voting process will not eliminate corruption risk

Reforms to the way in which FIFA nominates a World Cup host nation will not eliminate the possibility of corruption but will make the process more transparent, according to the official spearheading the changes. Head of FIFA’s independent audit and compliance committee Domenico Scala is overseeing the implementation of changes that will see all 209 member nations openly vote for a tournament host, rather than the current process where the 24-member executive committee votes in a closed ballot.

Issue 16 > Compliance Alerts

KFC China attempts to manage the social media message

United States fast food company Yum! Brands is suing three Chinese firms that used social media to spread rumours that damaged the reputation of its fried chicken restaurant chain KFC. Among the more colourful rumours was one that suggested that KFC chickens were genetically modified to have eight legs and six wings. In a case in Shanghai, Yum! is seeking an apology and 1.5 million yuan (US$248,000) for damages caused. The three Chinese firms are Shanxi Weilukuang Technology, Taiyuan Zero Point Technology and Yingchenanzhi Success and Culture Communication.

Issue 16 > Compliance Alerts

PetroTiger voluntary disclosure leads to another sentenced executive

The former co-chief executive officer of oil and gas services company PetroTiger will be sentenced today after pleading guilty to conspiring to pay bribes to a foreign government official. Joseph Sigelman admitted in the District Court of New Jersey to conspiring with co-CEO Knut Hammarskjold, former general counsel Gregory Weisman and others in violation of the Foreign Corrupt Practices Act (FCPA). Sigelman is the third PetroTiger executive to plead guilty in a case where the company voluntarily disclosed the misconduct and subsequently avoided prosecution.

Issue 16 > Compliance Alerts

Hackers target German Chancellor after parliament breach

Media reports in Germany have stated that malware has been located on the parliamentary-office computer of Chancellor Angela Merkel. A spokesperson for Merkel’s Christian Democrats (CDU) refused to comment on the reports by newspaper Bild am Sonntag, which were not able to confirm whether the malware had successfully managed to compromise any information. The suspected breach follows the recent hacking of the computer system at Germany’s lower house of parliament, also known as the Bundestag.

Issue 16 > Compliance Alerts

Gold refiners urged to examine Ghanaian mines for child labour

Gold sourced from Ghana may have come from unlicensed gold mines that exploit child labour, according to a recent report by Human Rights Watch (HRW). The organisation said that “refiners should take immediate steps to eliminate child labour in their supply chains”. The report estimates that thousands of children, often between the ages of 15 and 17 but sometimes younger, work in hazardous conditions in Ghana’s unlicensed mines. Such conditions often violate Ghanaian and international law, with workers pulling gold ore out of shafts, carrying and crushing the ore, and then processing it with toxic mercury.

Issue 16 > Compliance Alerts

Cybersecurity specialists question government approach to breach notification

Cybersecurity specialists have questioned the wisdom of a decision by the United States Office of Personnel Management (OPM) to notify via email those affected by the recent massive data breach at the agency, which was disclosed last week. The OPM has started contacting the almost four million current and former employees warning them of the additional threats they now face, and will continue to do so until 19 June. However, specialists have warned of the likelihood of victims now being ‘phished’.

Issue 16 > Compliance Alerts

Former Croatian transport minister charged with corruption

A former transport minister in Croatia, together with 12 other people, has been charged with corruption and abusing public funds. Bozidar Kalmeta allegedly headed a scheme to illegally take funds from state road management companies HAC and HC between 2005 and 2010. Croatia’s police anti-corruption unit USKOK alleged that Kalmeta and the others secured up to US$4.47 million from the two companies. Two of the others charged are former senior officials in the companies.

Issue 16 > Compliance Alerts

KPMG role in FIFA scandal questioned

KPMG may have missed all evidence of corruption at FIFA despite assuming the role of external auditor to football’s world governing organisation. The Big Four accounting and consulting firm's Swiss member is not only responsible for auditing FIFA, but also a large sample of member associations around the world that receive annual funding by FIFA. KPMG also prepares a compilation of financial reports at the end of each four-year World Cup cycle.