Revised OFAC Rule Requires Rejected Transaction Reporting

On June 21, the Department of the Treasury’s Office of Foreign Assets Control (“OFAC”)(1) issued an interim final rule(2) that included, among others, new requirements for all US Persons to file reports on rejected transactions. In the past the requirement to report on rejected transactions only applied to financial institutions that rejected a “funds transfer” where processing the transaction may violate OFAC’s rules.

Reports on Rejected Transactions

The rule revises § 501.604(3) to:

  • Clarify that the section applies to all rejected transactions (not only to rejected funds transfers)

    • OFAC replaced references to “rejected fund transfers” with references to “rejected transactions” and added a definition for the term “transactions”

    • The term transaction includes transactions related to wire transfers, trade finance, securities, checks, foreign exchange, and goods or services(3);

  • Provide additional details around the information that should be provided to OFAC in connection with reports on rejected transactions;

  • Provide guidance on where/how to report the information on rejected transactions; and

  • Make other technical and conforming changes.

Other Revisions

  • Revising § 501.603(4) to provide more detail regarding information to be reported in connection with blocking reports;

  • Revising § 501.801(5) to include information regarding OFAC’s electronic license application procedures; and

  • Other technical and conforming changes to § 501.602(6), § 501.701(7), and § 501.806(8).

The interim final rule was effective on June 21, 2019 and comments were allowed to be submitted until July 22, 2019.

Contact our Advisory team to learn more about this rule change.

References

  1. US Department of the Treasury - Office of Foreign Assets Control

  2. 84 FR 29055-29062

  3. 31 CFR 501.604

  4. 31 CFR 501.603

  5. 31 CFR 501.801

  6. 31 CFR 501.602

  7. 31 CFR 501.701

  8. 31 CFR 501.806

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Wells Fargo Manager Pleads Guilty to $14 Million Fraud Scheme | NBC

“A former Wells Fargo bank manager pleaded guilty Monday for his part in a money laundering, tax fraud and identity theft scheme that led to $14 million in bogus tax refunds, federal prosecutors said.” (Click here for the article) - USA

PACCAR Settles $1.7 Million of OFAC Penalty for DAF Misstep | Freightwaves

“The Treasury Department’s Office of Foreign Assets Control on Aug. 6 announced a $1.7 million settlement agreement with Bellevue, Wash.-based PACCAR to settle allegations that the truck maker’s European subsidiary illegally engaged in the sale of 63 trucks from Europe to Iran between October 2013 and February 2015.” (Click here for the article) - USA, Netherlands, Germany, Bulgaria

FBI Targets Johnson & Johnson, Siemens, GE, in Brazil Graft Cases | CNBC

“The FBI is investigating corporate giants Johnson & Johnson, Siemens, General Electric, and Philips for allegedly paying kickbacks as part of a scheme involving medical equipment sales in Brazil, two Brazilian investigators have told Reuters.” (Click here for the article) - USA, Brazil

China Devalues Currency, Halts Purchases of US Agricultural Products, Threatens Additional Tariffs | Miller Proctor Law

“China’s Ministry of Commerce suspended purchases of U.S. agricultural products, lowered the value of its currency and indicated that it may impose import tariffs on U.S. agricultural products. China’s escalation of the trade conflict with the United States is in response to the Trump Administration’s announcement last week that 10% tariffs would be imposed on all remaining Chinese-origin goods exported to the United States (valued at roughly $300 billion).” (Click here for the article) - USA, China

US Expands Sanctions Against Venezuela Into an Embargo | Wall Street Journal

“The Trump administration imposed a total economic embargo against the government of Venezuela, a significant escalation of pressure against the regime of President Nicolás Maduro and countries including Russia and China that continue to support him, a senior administration official said.)” (Click here for the article) - USA, Venezuela, Russia, China

Bill Seeks to Capture the Demand Side of Foreign Bribery | FCPA Professor

“The Foreign Corrupt Practices Act only captures one participant in a bribery scheme (the so-called supply side) in what is nearly always a two participant scheme. For more on this dynamic, see this recent FCPA Flash podcast episode with Tom Firestone (Baker & McKenzie) for how the demand side of bribery can be best addressed from a legal and policy perspective.” (Click here for the article) - USA

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

China’s #2 Auditor Accused of Faking Data; Client’s IPOs Halted | Yicai Global

“China's securities regulator has suspended 43 initial public offerings and refinancing cases being handled by the country's second-largest accounting firm, including IPOs on the country's new Nasdaq-style trading venue, as the company is probed for allegedly falsifying information.” (Click here for the article) - China

Trump Administration, Democrats Make Progress on New NAFTA | AP News

“Congressional Democrats appear to be moving from “no way” to “maybe” on President Donald Trump’s rewrite of a trade pact with Canada and Mexico.” (Click here for the article) - US, Canada, Mexico

Increase in Trade Circumvention Practices to Evade US Tariffs on Chinese Imports | Resilience 360

“Over recent weeks, several alleged cases of trade circumvention by foreign companies, mostly believed to be from China, have been reported in Vietnam and Cambodia. These companies are allegedly transshipping and re-routing exported goods through third-party countries in a bid to evade U.S. tariffs during a period of ongoing trade tensions between the United States and China.” (Click here for the article) - US, China, Cambodia, Vietnam

Chinese Billionaire Indicted on Charges of Evading Nearly $2 Billion in Tariffs | Wall Street Journal

“A powerful Chinese billionaire has been indicted by a federal grand jury on charges that he evaded nearly $2 billion in tariffs as part of a conspiracy to smuggle massive quantities of aluminum into the U.S.” (Click here for the article) - US, China, Mexico

ICC Announces Launch Date for Incoterms® 2020 | ICC

“The International Chamber of Commerce (ICC) will release Incoterms® 2020 in early September 2019, providing certainty and clarity to businesses trading across borders everywhere.” (Click here for the article) - Global

Inside the Lose-Lose Trade Fight Between Japan and South Korea | Nikkei Asian Review

“As Japan’s controls on chemical exports threaten South Korea’s high-tech sector, politicians and businesses are digging in for the long haul.” (Click here for the article) - Japan, South Korea, US, China

Trump Announces 10% Tariffs on $300 Billion of Chinese Goods | Nikkei Asian Review

“U.S. President Donald Trump said Thursday that he will impose additional 10% tariffs on $300 billion worth of Chinese imports starting Sept. 1, blaming Beijing's foot-dragging on agricultural purchases and other promises made during previous negotiations.” (Click here for the article) - US, China

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

The Only Way to End Corruption in Laos | The Diplomat

“Is Laos’ ruling communist party building up to an anti-corruption campaign similar to the ones we’ve seen in China and Vietnam? Since Prime Minister Thongloun Sisoulith came to power in early 2016, more officials have been dismissed because of graft, and new laws created to tackle it.” (Click here for the article) - Laos, China, Vietnam

US Nonprofit Takes on Corruption in Middle East | Inside Sources

“The Global Justice Foundation hopes to improve global business ethics, specifically in countries where government officials and business leaders engage in illegal activities to create an uneven playing field in the marketplace.” (Click here for the article) - Global

Switzerland to Tighten Anti-Money Laundering Rules | OCCRP

“Known for the banking secrecy that has given the country its reputation as a “dirty money hub,” Switzerland now plans to tighten its anti-money laundering regulations and bring them in line with international standards.” (Click here for the article) - Switzerland

Justice Department to Open Broad New Anti-Trust Review of Big Tech Companies | Wall Street Journal

“The Justice Department is opening a broad antitrust review into whether dominant technology firms are unlawfully stifling competition, adding a new Washington threat for companies such as Facebook Inc., Google, Amazon.com Inc. and Apple Inc.” (Click here for the article) - United States

Malta’s Anti-Money Laundering Regime Fails Final Moneyval Review | KYC360

“Malta’s anti-money laundering regime has failed a review by international experts and the island now has a year to get its house in order or face potential blacklisting procedures.” (Click here for the article) - Malta

It’s All About Relationships with Freight Brokers | Global Trade Magazine

“…When it comes to freight brokers – the licensed intermediaries who work to connect carriers and manufacturers – the ability to run a successful operation relies on a foundation of business relationships.” (Click here for the article) - Global

Vietnam Cracks Down on Tariff Export Detours | Nikkei Asian Review

“The Vietnamese government has begun taking steps to clamp down on shipments of products from China and elsewhere that pass through Vietnam and are relabeled as Vietnamese to avoid U.S. tariffs.” (Click here for the article) - Vietnam, China, United States

US Sanctions Compliance Fines Hit Decade High | Wall Street Journal

“Fines issued by the U.S. regulator enforcing sanctions compliance have hit a decade high at a time when the Trump administration is increasingly using sanctions as a foreign policy tool.” (Click here for the article) - Global

US DOJ Antitrust Division Announces New Policy to Incentivize Compliance

On Thursday, July 11 the US Department of Justice - Antitrust Division(1) announced(2) a new policy that will incentivize companies to implement antitrust compliance programs. The new policy allows prosecutors to consider compliance during the charging and sentencing stage in a criminal antitrust investigation.

The Justice Manual(3) previously stated that “credit should not be given at the charging stage for a (antitrust) compliance program.” The Division has now revised it’s manual and published a guidance document(4) that outlines what prosecutors should look for when they evaluate antitrust compliance programs.

Guidance Document Summary

  • The guidance document focuses on “the evaluation of compliance programs in the context of criminal violations of the Sherman Act such as price fixing, bid rigging, and market allocation”.(4)

  • The guidance was developed based on the Antitrust Division’s own experience and expertise, other resources within the DOJ, the Criminal Division’s guidance on Corporate Compliance Programs(5), and the US Sentencing Guidelines(6) evaluation of effective compliance programs (U.S.S.G. § 8B2.1).

  • The guidance document states that “a truly effective antitrust compliance program gives a company the best chance to obtain the significant benefits available under the Division’s Corporate Leniency program(7).”(4)

  • The evaluation of a company’s compliance program is only one of many other important factors that are considered during charging and sentencing. When prosecutors decide whether to bring criminal charges they must consider the Principles of Federal Prosecution and the Principles of Federal Prosecution of Business Organizations(8).

  • Division prosecutors recognize that the size of the company affects the resources that can be allocated to antitrust compliance and the extent of their antitrust compliance program.

Key Questions

There are three overarching questions prosecutors will ask themselves, when evaluating the effectiveness of a compliance program, at the time of an offense and at the time of a charging decision(4,8):

  • Is the program well designed?

  • Is the program effectively implemented (or applied earnestly and in good faith)?

  • Does the compliance program actually work in practice?

Preliminary questions that a prosecutor will ask when evaluating the effectiveness of a corporations antitrust compliance program include:

  • Does the company’s compliance program address and prohibit criminal antitrust violations?

  • Did the antitrust compliance program detect and facilitate prompt reporting of the violation?

  • To what extent was a company’s senior management involved in the violation?

Elements of an Effective Compliance Program

Factors that prosecutors should consider when evaluating the effectiveness of an antitrust compliance program include (click here to access the guidance document to read all questions evaluated for each factor listed below):

  • The design and comprehensiveness of the program

    • The Justice Manual requires prosecutors to evaluate whether or not a compliance program is a paper program or one that has been effectively implemented.

  • The culture of compliance within the company

  • Responsibility for, and resources dedicated to, antitrust compliance

    • Are there compliance personnel dedicated to compliance responsibilities?

  • Antitrust risk assessment techniques

    • What information or metrics has the company collected and used to help detect antitrust violations?

  • Compliance training and communication to employees

    • How has the company communicated its antitrust policies and procedures to all employees?

    • Are antitrust policies and procedures included in the company’s Code of Conduct?

  • Monitoring and auditing techniques, including continued review, evaluation, and revision of the compliance program

    • An effective compliance program includes monitoring and auditing functions to ensure that employees follow the compliance program.”(4)

    • What monitoring or auditing mechanisms does the company have in place to detect antitrust violations?

  • Reporting mechanisms

    • Is there a publicized system in place whereby employees may report or seek guidance about potentially illegal conduct?

  • Compliance incentives and discipline

    • Also relevant to an antitrust compliance program’s effectiveness are the systems of incentives and discipline that ensure the compliance program is well-integrated into the company’s operations and workforce.”(4)

  • Remediation methods

    • Early detection and self-policing are hallmarks of an effective compliance program and frequently will enable a company to be the first applicant for leniency under the Division’s Corporate Leniency Policy.”(4)

Contact us to learn more about the Antitrust Divisions guidance and to find out how GCSG’s Advisory and Audit teams can guide and partner with you to reduce your antitrust compliance risk and help to protect your company’s bottom line and reputation.

References

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Chinese Bank Involved in Probe | Washington Post

“A U.S. judge has found three large Chinese banks in contempt for refusing to comply with subpoenas in an investigation into North Korean sanctions violations.” (Click here for the article) - United States, China, N. Korea

France Moves Toward US Model in Corp. Led Investigations | Wall Street Journal

“French authorities are encouraging companies to conduct internal investigations when seeking to settle allegations of certain financial crimes—the latest in a series of reforms that brings the country closer to the U.S. model of corporate crime and punishment.” (Click here for the article) - United States, France

Albania’s Self-Consuming Corruption Undermining Path to EU Accession | Emerging Europe

“At a time when Albania was expected to make significant progress in its accession talks with the European Union, some member states are unwilling to support negotiations with Albania and North Macedonia.” (Click here for the article) - Albania, N. Macedonia, France

Biggest Problem Nigeria Faces is Corruption | PM News

“A former aide to President Muhammadu Buhari on Financial Crimes in the Federal Ministry of Justice, Mr. Biodun Aikomo has revealed that “the biggest problem Nigeria faces is corruption, as resources meant for everybody are in the pockets of individuals.” (Click here for the article) - Nigeria

There is a “New Awareness” About Fraud, Corruption - KNZ Finance Head  | The Citizen

“KwaZulu-Natal’s newly appointed head of finance said on Wednesday that government officials were experiencing “a new awareness” when it came to fraud and corruption. MEC Ravi Pillay said there was a “new culture and a new climate” in the country when it came to addressing corruption.” (Click here for the article) - KwaZulu-Natal

African Leaders Launch Landmark 55-nation Trade Zone  | DW News

“It took African countries four years to agree to a free-trade deal in March. The trade zone will unite 1.3 billion people, create a $3.4 trillion economic bloc and usher in a new era of development across the continent.” (Click here for the article) - Africa

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

India - US Trade Conflict | TRADEWIN

“Last year during March, the US Government announced a 25% tariff on steel and a 10% import duty on aluminum products. This move struck the Indian steel industry severely as the US is the seventh largest market for this particular industry. In response, India also proposed to impose duties on goods originating in or exported from the USA in June 2018.” (Click here for the article) - India, United States

US proposes tariffs on another $4 billion of EU goods | American Journal of Transportation

“The U.S. added new products from the European Union to potentially target with retaliatory tariffs in a long-running trans-Atlantic subsidy dispute between Boeing Co. and Airbus SE.” (Click here for the article) - European Union, United States

Customs Value - EU Commission abolishes ‘Domestic Sale’ | Kneppelhout Korthals Lawyers

“…This guidance currently mentions that a ‘domestic sale’, being a sale between a seller and a buyer which are both established in the EU, is not considered a sale for export. This particular guidance is however about to change. The ‘Customs Expert Group on Customs Valuation’ of the EU Commission has recently decided to delete all references to a ‘domestic sale’ from the Guidance Document...” (Click here for the article) - European Union

The Importance of Managing Customs Data Elements Upstream | TRADEWIN

“Like salmon swimming up the river to find a place to spawn, it benefits importers to look at the flow of shipments, ultimately to move upstream to gather relevant data. If you wait until the last minute to get something done, it can feel like a tidal wave of activity coming at you. You may ultimately see delays in the customs clearance of your shipment, for example.” (Click here for the article) - Global

Asia-Pacific: Little to no progress on Anti-Corruption | Transparency International

“With an average score of just 44 for three consecutive years, the Asia Pacific region is making little progress in the fight against corruption. Compared to other regions, Asia Pacific is on par with the Americas (average score: 44) in its lack of progress and behind Western Europe and the European Union (average score: 66).” (Click here for the article) - Global

EU mechanism for trade with Iran now operational | Deutsche Welle

“The European Union announced that its INSTEX mechanism to facilitate trade with Iran was up and running on Friday. France, Germany, and the United Kingdom informed participants that INSTEX had been made operational and available to all EU member states, and that the first transactions are being processed," said an EU statement. INSTEX, which stands for Instrument in Support of Trade Exchanges, is a payment system that will allow companies to trade with Iran despite harsh US sanctions.” (Click here for the article) - European Union, France, Germany, United Kingdom, United States, Iran

US terminates Turkey’s preferential trade agreement, reduced tariffs on steel | Reuters

“The United States on Thursday terminated Turkey’s preferential trade treatment that allowed some exports to enter the country duty free, but it has halved its tariffs on imports of Turkish steel to 25%.” (Click here for the article) - Turkey, United States

Corruption in Africa - The Crisis of our Time? | Africa.com

“Imagine a continent where six of its countries are among the ten countries considered most corrupt in the world, according to Transparency International. Or one where persons empowered by various states to enforce the law, to protect people and property, and to prevent crime and civil disorder are equally as corrupt as the elected representatives of those states. Or think of living in a place where the cost of corruption is higher than the total combined amount of development aid that is received from foreign donors.” (Click here for the article) - Africa

OFAC Publishes a Framework for Compliance

On May 2, 2019 the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC)(1) published “A Framework for OFAC Compliance Commitments”(2). The publication is intended to provide OFAC’s perspective, to entities subject to US jurisdiction, on what are essential components of an effective sanctions compliance program.

OFAC developed this framework in our continuing effort to strengthen sanctions compliance practices across the boardThis underlines our commitment to engage with the private sector to further promote understanding of, and compliance with, sanction requirements.” - Andrea M. Gacki, Director of the Office of Foreign Assets Control (3)

Summary

  • OFAC continues to emphasize and “strongly encourage” entities subject to U.S. jurisdiction to take a risk-based approach to sanctions compliance by “developing, implementing, and routinely updating a sanctions compliance program (“SCP”).

  • Regardless of company size, sophistication, products/services, geographic locations, etc…each SCP should incorporate at least these five (5) components: management commitment, risk assessment, internal controls, testing and auditing, and training.

  • In enforcement cases, OFAC will evaluate an entities SCP against the Economic Sanctions Enforcement Guidelines (the “Guidelines”)(4) and when applying the Guidelines will favorably consider an entity that had an effective SCP in place at the time a violation occurred.

A Few Key Points

  • Management Commitment

    • Effective senior management commitment, among others, includes providing adequate resources for compliance and support for the authority of compliance personnel within the organization.

    • Adequate resources includes ensuring there are enough personnel with sufficient expertise dedicated to compliance, and adequate information technology, and other resources, as appropriate.

  • Risk Assessment(5)

    • OFAC recommends a risk-based approach to implementation of a SCP and one of the integral components of this approach is to conduct periodic risk assessments.

    • The assessment should include, among others, a review of customers, vendors, products, services, third-party intermediaries, and geographic locations.

  • Internal Controls

    • An effective SCP should include policies and procedures. These policies and procedures should be enforced and updated when weaknesses are detected or requirements change.

    • Sufficient personnel should be appointed to ensure proper integration of the company’s policies and procedures into the daily operation of the company.

    • The organization should clearly communicate their policies and procedures to all relevant staff.

  • Testing and Auditing

    • An effective SCP include’s a comprehensive and objective testing or audit function that identifies program weaknesses and deficiencies.

    • Any deficiencies identified, including software systems, should be addressed.

  • Training

    • An effective training program is considered an integral component of a successful SCP. The training should be provided to all appropriate employees and personnel on a periodic basis (at a minimum, annually).

  • Root Causes of OFAC Compliance Program Breakdowns - OFAC has identified the following common areas where deficiencies resulted in sanctions compliance failures:

    • Lack of a formal OFAC sanctions compliance program;

    • Misinterpreting, or failing to understand the applicability of, OFAC’s regulations;

    • Facilitating transactions by non-US persons (including through or by overseas subsidiaries or affiliates);

    • Exporting or re-exporting US-origin goods, technology, or services to OFAC sanctioned persons or countries;

    • Utilizing the US financial system, or processing payments to or through US financial institutions, for commercial transactions involving OFAC-sanctioned persons or countries;

    • Sanctions screening software or filter failures;

    • Improper due diligence on customers/clients;

    • De-centralized compliance functions and inconsistent application of their SCP; and

    • Utilizing non-standard payment or commercial practices.

Contact us to learn more about OFAC’s guidance and to find out how GCSG’s Advisory and Audit teams can guide and partner with you to reduce your sanctions compliance risk and protect your company’s bottom line and reputation.

References

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Bribes and Backdoor Deals Help Foreign Firms Sell to China’s Hospitals | The New York Times

“A review of dozens of Chinese court cases and internal corporate documents as well as interviews with company insiders showed how foreign firms have become deeply enmeshed in the corruption pervading China’s health care industry.” (Click here for the article) - China, Global

Expedia Settles Alleged Violations of U.S. Sanctions on Cuba | Wall Street Journal

“Expedia Group Inc. agreed to pay more than $325,000 to settle allegations that it violated U.S. sanctions on Cuba, the Treasury Department said.” (Click here for the article) - Cuba, United States

Exploring the causes of persistent corruption | PHYS ORG

“Corruption impedes equitable development, destabilizes societies, and undermines the institutions and values of democracy. It is viewed by many as one of the world's greatest problems. According to a Gallup poll, a majority of people even place its negative impacts ahead of global problems like climate change, poverty and terrorism.” (Click here for the article) - Global

Europol highlights Russian money as biggest laundering threat | Reuters

“Europe's Baltic states are at risk from further Russian money laundering, a top European police official said after several big banks were hit by scandals centred on the region.” (Click here for the article) - Russia, China, Latvia, Lithuania, Estonia

Treasury Sanctions Iran’s Largest Petrochemical Holding Group | U.S. Department of the Treasury

“The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) took action today against Iran’s largest and most profitable petrochemical holding group, Persian Gulf Petrochemical Industries Company (PGPIC), for providing financial support to Khatam al-Anbiya Construction Headquarters (Khatam al-Anbiya), the engineering conglomerate of the Islamic Revolutionary Guard Corps (IRGC).  In addition to PGPIC, OFAC is designating PGPIC’s vast network of 39 subsidiary petrochemical companies and foreign-based sales agents.” (Click here for the article) - Iran, USA

Mexico joins the anti-bribery enforcement bandwagon | The FCPA Blog

“Anti-corruption law has never been thought to hold much sway in Mexican affairs. Despite a nominal prohibition of bribery and graft and an abundance of recent corruption scandals, the country’s history of minimal enforcement has fostered an expectation of impunity...That may no longer be the case. In his successful campaign for office last year, Mexico’s President Lopez Obrador promised an administration that would fight corruption by taking on the “mafias of power” -- politicians and industry magnates who have enriched themselves through dubious federal contracting practices.” (Click here for the article) - Mexico

House begins debate on new NAFTA ratification bill | CTV News

“Members of Parliament began debating the new NAFTA implementation bill in the House of Commons on Tuesday. Foreign Affairs Minister Chrystia Freeland began the debate by extolling the benefits of the deal, saying Canada is ready to ratify the trilateral trade pact, as soon as the U.S. and Mexico are.” (Click here for the article) - Canada, Mexico, US

Vietnam says some Chinese exporters are using fake ‘Made-in-Vietnam’ labels to avoid US tariffs | The Daily Caller

“Some Chinese exporters are putting fake “Made-in-Vietnam'“ stickers to try to avoid U.S. tariffs, Vietnam alleged Sunday.” (Click here for the article) - Vietnam, China, US

India lost over 90,000 crore to trade misinvoicing, says GFI report | livemint

“India lost a staggering $13 billion, over ₹90,000 crore, to trade misinvoicing, equivalent to 5.5% of the value of the country's total revenue collections in 2016, according to a report by the US-based think tank Global Financial Integrity.” (Click here for the article) - India, China

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Chinese Goods Navigate Alternate Trade Routes to US Shores | Nikkei Asian Review

“Higher U.S. tariffs from the trade war with China are altering patterns of world trade as exporters use third countries to bypass the duties, data reveals.” (Click here for the article) - Japan, Vietnam, China, US

As Trade Wars Move to Mexico, Companies Lose a Safe Harbor | New York Times

“When trade tensions with China flared last year, many companies sought refuge in a country with a long, stable relationship with the United States: Mexico.” (Click here for the article) - US, China, Mexico

Historic Africa Free Trade Agreement Enters Into Force | AP News

“African leaders are celebrating the entry into force of a continental free trade agreement that creates what they call the world’s largest trading market of 1.2 billion people.” (Click here for the article) - Africa

Report Shows Counterfeit Trade Increase in 2019 | Global Trade Magazine

“A report released by OECD and the EU’s Intellectual Property Office confirmed that counterfeit and pirated goods in trade reached 3.3 percent this year.” (Click here for the article) - Europe, China

Global Customs and Trade: It’s Relevance and Why You Should Consider Specialists | Harvey John

“In recent years, shifts in regulatory processes, legislation, and the prominent presence of Brexit, has made an increasing impact on how businesses deal with cross-border affairs.” (Click here for the article) - Global

Dispute Resolution along the Belt and Road | East Asia Forum

“The prospect of disputes arising in respect of projects under China’s Belt and Road Initiative has generated considerable interest, accompanied by positioning on the part of governments, government institutions, lawyers and academics who see potential opportunities.” (Click here for the article) - China

US Scientists, Policy Advisors Oppose Restrictions on Collaboration with China | Xinhuanet News

“The recent U.S. moves to throw a wrench into its scientific collaboration with China are "counterproductive" and could "backfire," scientists and policy advisors here have warned.” (Click here for the article) - US, China

Former Workers Arrested for Embezzling Nearly $1M from Mississippi Community College | Fox13

“Two former Coahoma County Community College employees are facing criminal charges after investigators said they embezzled $750,000.” (Click here for the article) - US

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Guide to the General Data Protection Regulation  | Information Commissioner’s Office

“The Guide to the GDPR is part of our Guide to Data Protection. It is for DPOs and others who have day-to-day responsibility for data protection.” (Click here for the article) - United Kingdom

German Business Down with Iran as US Sanctions Bite | National Post

“A German business group says German companies’ trade with Iran has declined sharply as the United States turns up the economic heat on Tehran.” (Click here for the article) - Germany, Iran, US

Americans Snap Up Imports from Vietnam at China’s Expense | Bloomberg

“Vietnam was one of the fastest-growing sources of American imports from Asia last quarter, and could potentially overtake the U.K. as a bigger supplier to the U.S. if it keeps up that pace.” (Click here for the article) - Vietnam, UK, US, China

Businessman Admits Offenses in Citgo Bribe Case | The FCPA Blog

“An executive who controlled several U.S.-based companies pleaded guilty Wednesday to bribing officials at subsidiaries of Venezuela's state energy company.” (Click here for the article) - US, Venezuela

Trump’s 5% Tariff on Goods Imported from Mexico doesn’t Sit Well with US Businesses | Supply Chain 24/7

“President Trump’s threat to impose across-the-board tariffs on Mexico is stirring widespread opposition and concern among U.S. business groups who say they could have major negative impacts on supply chains and trade activity.” (Click here for the article) - US, Mexico

Southeast Asia Gains New Leverage as China and US Battle for Influence | Asian Review

“There are two "friendship bridges" spanning the Tonle Sap river in the Cambodian capital of Phnom Penh. One is labeled the Cambodia-Japanese friendship bridge; the other is the Cambodia-China friendship bridge. Sitting almost side by side, the bridges are an unintended reflection of the rivalry between Japan and China, in Cambodia and across much of the surrounding Mekong region, where the two countries are the largest donors and investors.” (Click here for the article) - US, China, Cambodia, Japan

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

The anatomy of a scam: How far fraudsters will go to steal your money  | Ottawa Citizen

“Gone are the days a Nigerian prince would email you, promising untold riches in exchange for a small payment upfront. Today’s scams are more intimate. Fraudsters craft tailored messages and emails; fake identities; real world addresses for not-so-real companies; websites; phone numbers; a significant corporate presence online; multiple email addresses; and even apparent news coverage from reputable sources.” (Click here for the article) - Global, Canada

Why corruption matters in the EU elections  | Transparency International

“Over the next four days, citizens from 28 countries across the European Union (EU) will cast their vote in one of the largest democratic elections worldwide. With 751 seats at stake in the European Parliament and each Member of Parliament (MEP) poised to serve a five-year term, there’s a lot riding on these elections.” (Click here for the article) - European Union

How does someone get scammed into buying $160,000 in gift cards?  | Marketplace Morning Report

“How does someone get scammed into buying $160,000 in gift cards? Nordstrom goes small.” (Click here for the article) - Global

Trade War: What Chinese Entrepreneurs Really Think  | FINEWS ASIA

“As the U.S.-Chinese trade tussle weighs heavily in Asia, what do Chinese entrepreneurs truly think about the conflict? finews.asia asked an Asian family office.” (Click here for the article) - USA, China

How to Demonstrate Your Value as an Anti-Fraud Professional  | ACFE

“The biggest challenge people have when working toward professional advancement is understanding how to communicate the value their expertise and experience can bring to decision-makers. Whether it’s a new job, a promotion, or signing on a new client or customer, the message must be about how your expertise and value solve their problems.” (Click here for the article) - Global

New EU-wide whistle-blower rules approved  | GCSG

“On April 16, the European Parliament voted(1) in favor of adopting new European Union (“EU”) wide standards to protect whistle-blowers. The standards are designed to protect whistle-blowers that reveal breaches of EU law in areas of public procurement, financial services and tax, money laundering, product and transport safety, protection of the environment, food and feed safety, animal health and welfare, nuclear safety, public health, security of network and information systems, competition, consumer and data protection, fraud, corruption and any other illegal activity affecting the use of Union expenditures.” (Click here for the article) - European Union

Top 5 Cyber Security Threats for Executives  | Prescient

“High profile cyber incidents such as massive data breaches have become increasingly common across industries, especially in the past two years. Such events speak to the shift in perception for cyber crimes–from an overlooked and niche concern to a public, major security problem for organizations across industries. Everything from manufacturing, healthcare, and traditionally higher risk sectors such as banking and technology have been privy to such incidents. In the corporate realm, senior executives are primary targets of hackers, fraud and phishing scams due to their high level of access to valuable corporate information.” (Click here for the article) - Global

U.S. Terminates Turkey’s Preferential Trade Agreement, Reduces Tariffs on Steel  | US News & World Report

“The United States on Thursday terminated Turkey's preferential trade treatment that allowed some exports to enter the country duty free, but it has halved its tariffs on imports of Turkish steel to 25%.” (Click here for the article) - USA, Turkey

New EU-wide whistle-blower rules approved

On April 16, the European Parliament voted(1) in favor of adopting new European Union (“EU”) wide standards to protect whistle-blowers. The standards are designed to protect whistle-blowers that reveal breaches of EU law in areas of public procurement, financial services and tax, money laundering, product and transport safety, protection of the environment, food and feed safety, animal health and welfare, nuclear safety, public health, security of network and information systems, competition, consumer and data protection, fraud, corruption and any other illegal activity affecting the use of Union expenditures.

The new rules allow whistle-blowers to disclose information either internally to the responsible legal entity, or national authorities, as well as any relevant EU institutions, bodies, offices, and agencies. The law prohibits reprisals and includes safeguards preventing the whistle-blower from being suspended, demoted or from facing other types of retaliation.

Recent scandals such as LuxLeaks, Panama Papers and Football leaks have helped to shine a light on the great precariousness that whistle-blowers suffer today. On the eve of European elections, Parliament has come together to send a strong signal that it has heard the concerns of its citizens, and pushed for robust rules guaranteeing their safety and that of those persons who choose to speak out.” - Virginie Roziere (S&D, FR)

Some Adopted Text

Persons who work for a public or private organisation or are in contact with it in the context of their work-related activities are often the first to know about threats or harm to the public interest which arise in this context. By ‘blowing the whistle’ they play a key role in exposing and preventing breaches of the law that are harmful to the public interest and in safeguarding the welfare of society. However, potential whistleblowers are often discouraged from reporting their concerns or suspicions for fear of retaliation. In this context, the importance of providing balanced and effective whistleblower protection is increasingly acknowledged both at European and international level.”(2)

To enjoy protection, the reporting persons should reasonably believe, in light of the circumstances and the information available to them at the time of the reporting, that the matters reported by them are true. This is an essential safeguard against malicious and frivolous or abusive reports, ensuring that those who, at the time of the reporting, deliberately and knowingly reported wrong or misleading information do not enjoy protection. At the same time, it ensures that protection is not lost where the reporting person made an inaccurate report in honest error. In a similar vein, reporting persons should be entitled to protection under this Directive if they have reasonable grounds to believe that the information reported falls within its scope. The motives of the reporting person in making the report should be irrelevant as to whether or not they should receive protection.”(2)

Next Steps

EU ministers now need to approve the law. Once approved, member states will have two years to come into compliance with the law.

GCSG Advisory Professionals will be keeping up with the progress of this legislation. Contact us to learn more.

References

New DOJ Corporate Compliance Program Guidance

The US Department of Justice - Criminal Division (“USDOJ”) announced(1) on April 30 the release of a new guidance document(2) on the evaluation of corporate compliance programs.

Effective compliance programs play a critical role in preventing misconduct, facilitating investigations, and informing fair resolutions.”(1) - Assistant Attorney General Brian A. Benczkowski

Part I of the document discusses the elements of a “well-designed” compliance program and Part II discusses the features of what an effectively implemented compliance program looks like.

There are three overarching questions prosecutors will ask themselves, when evaluating the effectiveness of a compliance program, at the time of an offense and at the time of a charging decision(2,3):

  • Is the program well designed?

  • Is the program effectively implemented (or applied earnestly and in good faith)?

  • Does the compliance program actually work in practice?

According to the USDOJ’s guidance, the elements of a “Well-Designed” Compliance Program include:

  • Risk Assessment - “Prosecutors should consider whether the program is appropriately designed to detect the particular types of misconduct most likely to occur in a particular corporation’s line of business” and “the manner in which the company’s compliance program has been tailored based on that risk assessment”

  • Policies and Procedures - “Prosecutors should examine whether the company has a code of conduct that sets forth, among other things, the company’s commitment to full compliance with relevant Federal laws that is accessible and applicable to all company employees” and “whether the company has established policies and procedures that incorporate the culture of compliance into it’s day-to-day operations.”

  • Training and Communications - “Prosecutors should assess the steps taken by the company to ensure that policies and procedures have been integrated into the organization, including through periodic training and certification for all directors, officers, relevant employees, and where appropriate, agents and business partners.”

  • Confidential Reporting Structure and Investigation Process - “Prosecutors should assess whether the company’s complaint-handling process includes pro-active measures to create a workplace atmosphere without fear of retaliation, appropriate processes for the submission of complaints, and processes to protect whistleblowers” and “assess the company’s processes for handling investigations of such complaints…”

  • Third-Party Management - “Prosecutors should also assess whether the company knows its third-party partners’ reputations and relationships, if any, with foreign officials, and the business rationale for needing the third party in the transaction” and “assess whether the company engaged in ongoing monitoring of the third-party relationships"…”

  • M&A Due Diligence - “A well-designed compliance program should include comprehensive due diligence of any acquisition targets.”

Today’s guidance document is part of our broader efforts in training, hiring, and enforcement to help promote corporate behaviors that benefit the American public and ensure that prosecutors evaluate the effectiveness of compliance in a rigorous and transparent manner.”(1) - Assistant Attorney General Brian A. Benczkowski

DOJ prosecutors are encouraged to review whether or not a compliance program is a “paper program” or one that has actually been “implemented” and is periodically reviewed and revised when appropriate. According to DOJ guidance some elements of an effectively implemented program include:

  • Commitment by Senior and Middle Management

    • Does the company leadership demonstrate high level commitment to implement a culture of compliance?

  • Autonomy and Resources

    • Is the program adequately resourced with sufficient personnel and funding?

    • Are compliance personnel in senior positions and do they have adequate autonomy?

  • Incentives and Disciplinary Measures - “Prosecutors should assess whether the company has clear disciplinary procedures in place, enforces them consistently across the organization, and ensures that the procedures are commensurate with the violations.”

  • Continuous Improvement, Periodic Testing, and Review - “Prosecutors should likewise look to whether a company has taken reasonable steps to ensure that the organization’s compliance and ethics program is followed, including monitoring and auditing to detect criminal conduct.”

  • Investigation of Misconduct

    • Is there a well-functioning and appropriately funded mechanism for the timely and thorough investigation of any allegations or suspicions of misconduct by the company, its employees, or agents?

  • Analysis and Remediation of Any Underlying Misconduct - “Prosecutors should consider any remedial actions taken by the corporation…”

Contact GCSG Advisory and Audit Professionals today for assistance:

  • In developing a Risk Profile for your business;

  • Evaluating the effectiveness of your existing compliance program;

  • Implementing a compliance program;

  • Providing third-party due diligence; and

  • Providing in-depth compliance audits to detect potential wrongdoing.

References

New US Sanctions on Iran's Iron, Steel, Aluminum, and Copper Sectors

On May 8, 2019, the Trump administration issued an Executive Order (EO)(1) establishing new sanctions on Iran’s iron, steel, aluminum, and copper sectors. A few key points from the EO include, but are not limited to, the following:

  • “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 any United States person(2) of the following persons are blocked and may not be transferred, paid, exported, withdrawn, or otherwise dealt in: any person determined by the Secretary of the Treasury, in consultation with the Secretary of State”:

    • to be operating in the iron, steel, aluminum, or copper sector of Iran, or to be a person that owns, controls, or operates an entity that is part of the iron, steel, aluminum, or copper sector of Iran;

    • to have knowingly engaged, on or after the date of this order, in a significant transaction for the sale, supply, or transfer to Iran of significant goods or services used in connection with the iron, steel, aluminum, or copper sectors of Iran;

    • to have knowingly engaged, on or after the date of this order, in a significant transaction for the purchase, acquisition, sale, transport, or marketing of iron, iron products, aluminum, aluminum products, steel, steel products, copper, or copper products from Iran;….

In addition to the above, there are additional prohibitions on financial institutions and financial transactions (occurring with the noted sectors). The prohibitions included in the EO include:

  • the making of any contribution or provision of funds, goods, or services by, to, or for the benefit of any person whose property and interests in property are blocked; and

  • the receipt of any contribution or provision of funds, goods, or services from any such person.

Contact your GCSG Trade Compliance professionals for assistance in understanding how to reduce your risk and how this EO may affect your business.

References

(1) Executive Order (EO) on “Imposing Sanctions with Respect to the Iron, Steel, Aluminum, and Copper Sectors of Iran” - May 8, 2019

(2) United States person - means any United States citizen, permanent resident alien, entity organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), or any person in the United States.(1)

(3) Knowingly - with respect to conduct, a circumstance, or a result, means that a person has actual knowledge, or should have known, of the conduct, the circumstance, or the result.(1)

(4) Entity - means a partnership, association, trust, joint venture, corporation, group, subgroup, or other organization.(1)

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

When Employees Feel Grateful, They are Less Likely to be Dishonest  | Harvard Business Review

“Dishonesty in the workplace can be a major problem for any business. Recent estimates suggest that theft and fraud by employees reduce the profits of U.S. businesses by $50 billion annually.” Northeastern University Professor’s study reveals “As a result, our findings indicate that gratitude worked the same for everyone: a few moments spent feeling grateful dramatically improved the moral choices people made.” (Click here for the article) - Global

How the (Once) Most Corrupt Country in the World Got Clean(er)  | The Atlantic

“For decades in Indonesia, the corruption was like the humidity: always there. In Transparency International’s initial ranking, in 1995, of nations’ perceived corruption, Indonesia came in dead last. Last year, it clocked in at 89 out of 180: the first time it ever broke into the top half of the chart.” (Click here for the article) - Indonesia

Asian Companies Pull Back from Iran Amid US Pressure  | Wall Street Journal

“Asian companies that had provided a lifeline to Iran after the U.S. reimposed sanctions last year are pulling back, hurting the hobbled Iranian economy and leaving the Islamic Republic with less incentive to stay committed to a multi-nation nuclear deal, Western diplomats say.” (Click here for the article) - Europe, Asia, Iran, US

Trump Pressure will Fail Because Iran has a Ph.D in Sanctions Busting  | NBC News

“President Donald Trump will not succeed in forcing Iran to capitulate to U.S. economic pressure because Tehran has a "Ph.D. in sanctions busting," Iran's Foreign Minister Javad Zarif said.” (Click here for the article) - US, Iran

NSA Reportedly Recommends Retiring Phone Surveillance Program  | CNET

“The National Security Agency has recommended the White House abandon a controversial program that collects and analyzes data on millions of Americans' domestic calls and texts, The Wall Street Journal reported Wednesday.” (Click here for the article) - US

Export Controls to be Introduced to Japanese Universities  | WorldECR

“Japan’s Mainichi newspaper reports that the Japanese government is set to formulate guidelines calling on universities in Japan that collaborate with foreign companies for joint research projects to develop legal compliance systems to prevent technology drain.” (Click here for the article) - US, Japan, China

Trump Cancels Iran Oil Waivers Granted to Major Asian Importers  | Nikkei Asian Review

“The U.S. will end its sanctions exemptions granted to certain oil importers to enforce a total ban on Iranian crude, the White House said Monday, amplifying the American pressure campaign against Tehran and immediately sending petroleum prices higher.” (Click here for the article) - US, Japan, China, South Korea, Taiwan, India, Italy, Greece, Turkey, Iran

Rise of the Chief Ethics Officer | Forbes

“A 2018 survey by Deloitte of 1,400 U.S. executives knowledgeable about artificial intelligence found that 32% ranked ethical issues as one of the top three risks of AI. Much of that work is beginning to find its way to a position that’s also on the rise—the chief ethics officer.” (Click here for the article) - Global

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Denmark’s DSV to Buy Logistics Company Palpina in $4.6 Billion Deal  | Reuters

“Swiss logistics group Panalpina has bowed to an increased 4.6 billion Swiss francs ($4.6 billion) bid from Danish rival DSV, ending a more than two month takeover battle designed to build scale in the consolidating transport sector” (Click here for the article) - Denmark, Switzerland

Corruption Costs $1 Trillion in Tax Revenue Globally: IMC  | Reuters

“Curbing corruption could generate about $1 trillion in tax revenues annually across the world, according to research from the International Monetary Fund.” (Click here for the article) - Global

Canada Ignored its Gigantic Money Laundering Problem for Years  | Financial Post

“Ottawa’s budget earmarked about $200 million over the next five years to address Canada’s massive money laundering problem… but follows years of neglect resulting in the creation of gigantic laundering networks in Canada, the growth of criminal organizations, increased drug trafficking, housing unaffordability, and few prosecutions.” (Click here for the article) - Global

Standard Chartered Enters Global Resolution to Settle “Egregious” Sanctions Case  | Global Investigations Review

“Standard Chartered has agreed to pay $1.1 billion to resolve allegations that it violated sanctions in Myanmar, Cuba, Iran and Syria, seven years after it signed a deferred prosecution agreement over failures to adhere to US sanctions laws.” (Click here for the article) - US, Myanmar, Cuba, Iran, Syria

Treasury Secretary Mnuchin has “Very productive” Trade Meeting with China  | CNBC

“Treasury Secretary Steven Mnuchin said the U.S. and China are making progress on a trade deal, including resolving a key sticking point that’s been dragging out the process.” (Click here for the article) - US, China

MEPs Warn on Corruption in Malta and Slovakia  | KYC360

“Members of the European Parliament are voicing concerns about the rule of law in Malta and Slovakia following the murder of two journalists investigating corruption and organized crime in the countries.” (Click here for the article) - Europe

Italy’s UniCredit to Pay $1.3 Billion to Settle US Sanctions Probe  | Reuters

“Italy’s top bank UniCredit SpA and two subsidiaries have agreed to pay $1.3 billion to U.S. authorities to settle probes of violations of U.S. sanctions on Iran and other countries, U.S. authorities said on Monday.” (Click here for the article) - US, Italy, Iran

Second Round of Product 301 Exclusions Announced  | Mohawk Global

“More good news for importers. The office of the U.S. Trade Representative has announced the second round of product exclusions for Section 301 Tariffs. These exclusions will be retroactive as of July 6, 2018 and will extend for one year after the March 25 notice.” (Click here for the article) - US

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

Network of Iranian Front Companies Disrupted by OFAC | GCSG

On March 26, 2019 the US Department of the Treasury’s Office of Foreign Assets Control announced it had taken action against a network of 25 individuals and entities that had transferred over a billion dollars to the Islamic Revolutionary Guard Corps and Iran’s Ministry of Defense and Armed Forces Logistics. (Click here for the article) - US, Iran

Trump Says Tariffs Will Stay Until China Complies With Deal | AJOT

“President Donald Trump said he’ll keep tariffs on China until he’s sure Beijing is complying with any trade deal, refuting expectations that the two nations will agree to roll back duties as part of a lasting truce to their trade war.“ (Click here for the article) - US, China

How Compliance Can Empower the Business to Manage Risk | Corporate Compliance Insights

“It’s a time of enormous change for organizations of every type. Gartner’s 2018 survey of CEOs shows that CEOs, who have been focused on growth for years, are now prioritizing firm plans to deliver it — plans that involve IT-related transformation and new corporate structures and cultures.“ (Click here for the article) - US

Managing Risk and Enabling Growth in the Age of Innovation | Corporate Governance

“PWC explores how risk leaders can effectively manage innovation related risk, and by doing so, drive growth and performance.“ (Click here for the article) - US

Malabu Oilfield Scandal: How Multinational Companies Aid Corruption in Nigeria | Ventures Africa

“In 2011, British-Dutch Royal Dutch Shell and Italian multinational oil and gas company, Eni reached an agreement with the Nigerian government to purchase the offshore Oil Prospecting License 245 oilfield. … the deal has resulted in one of Nigeria’s largest corruption scandals in the oil industry.“ (Click here for the article) - Global

UK Lawmakers Demand Breakup of Big Four Accounting Companies | Bloomberg

“The “Big Four” accounting firms should be forced to legally separate their “cash cow” consulting work from their auditing businesses, a U.K. Parliament committee said Tuesday.“ (Click here for the article) - UK

China Announces Detailed VAT Reform Measures | International Trade Compliance

“On March 22, 2019, the State Council announced in a press release that authorities announced detailed measures to implement the country’s value-added tax reform on March 21 to further reduce the tax burden on various industries.“ (Click here for the article) - UK

Registry of Beneficial Ownership Aims at Lifting Curtain on Money Laundering and Tax Evasion | Tri-City News

“On March 22, 2019, the State Council announced in a press release that authorities announced detailed measures to implement the country’s value-added tax reform on March 21 to further reduce the tax burden on various industries.“ (Click here for the article) - Canada

Network of Iranian front companies disrupted by OFAC

On March 26, 2019 the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced(1) it had taken action against a network of 25 individuals and entities that had transferred over a billion dollars to the Islamic Revolutionary Guard Corps (IRGC) and Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL).

The evasion scheme included a layered network of front companies and agents based in Iran, UAE, and Turkey that were set up to evade international sanctions and to gain access to the international financial system. The network exchanged devalued Iranian rials for dollars and euros.

We are targeting a vast network of front companies and individuals located in Iran, Turkey, and the UAE to disrupt a scheme the Iranian regime has used to illicitly move more than a billion dollars in fundsCentral to this network and sanctioned today pursuant to our counter terrorism authority is Iran's IRGC-controlled Ansar Bank and its currency exchange arm, Ansar Exchange, both of which used layers of intermediary entities to exchange devalued Iranian rial ultimately for dollars and euros to line the pockets of the IRGC and MODAFL…” (1)

Five front companies- UAE-based Sakan General Trading, Lebra Moon General Trading, and Naria General Trading, and Turkey-based Atlas Doviz, and the Iran-based Hital Exchange provided $800 million in funds to Ansar exchange.

Now more than ever, it is vitally important that global companies implement third-party due diligence and engagement policies. These policies are often risk-based but should be comprehensive and include at a minimum background investigation diligence and ongoing monitoring of distribution networks and contract agents.

Contact our Due Diligence compliance professionals at GCSG today to learn how we can help you mitigate your third-party risk with our due diligence reports, risk-ranking tool, policy development and implementation support, and international boots-on-the-ground third-party Audits.

References

(1) U.S. Department of the Treasury Press Releases - “United States Disrupts Large Scale Front Company Network Transferring Hundreds of Millions of Dollars and Euros to the IRGC and Iran’s Ministry of Defense.” - March 26, 2019

Weekly Compliance News - Around the World

GCSG's Weekly Compliance News feature is a compilation of some of the previous weeks interesting trade compliance, anti-bribery and corruption, fraud, and due diligence news bites, from around the world.

US Court of International Trade Upholds Constitutionality of President’s Power | Lexology

“On March 25, 2019, the U.S. Court of International Trade denied a challenge to the constitutionality of Section 232 of the Trade Expansion Act of 1962 in a lawsuit brought by the American Institute of International Steel and other steel importers.“ (Click here for the article) - Global

Ukraine: Court Ruling on Law Means End for Corruption Cases | ABC News

“Ukraine's Constitutional Court has struck down a law against officials enriching themselves, a move that raised concerns about a weakening of the country's fight against endemic corruption and ability to get more aid from the International Monetary Fund.“ (Click here for the article) - Ukraine

The Risk of Solely Relying on Auditors to Find Fraud | FCPA Blog

“Kick-back schemes, corrupt employees, and violations of your code of conduct are all risks facing businesses every day. To combat these threats, companies often rely on auditors to protect them. But are auditors really the answer? The The Association of Certified Fraud Examiners found in 2018 that 53 percent of occupational fraud is detected by employees.“ (Click here for the article) - Global

The Real Risks of Doing Business in Russia | Klink

“Every day there is a new story on corrupted power in Russia and the United States’ efforts to combat it. We know the key players - oligarchs who acquired government assets after the fall of the Soviet Union. The key question is how do we properly protect US business and political interests?“ (Click here for the article) - US, Russia

New Data Breach Trends: Small Business Identity Records Now #1 Target | CPO Magazine

“A new report by leading cybersecurity and intelligence firm 4iQ is providing the tech world with some eye-popping perspective. This study is of particular interest to small businesses, because it confirms that they are now the favored target of cyber criminals.“ (Click here for the article) - Global

OFAC Designates Iranian Sanctions Evasion Network | EU Sanctions

“OFAC has imposed sanctions on 25 individuals and entities, which comprise a network of front companies based in Iran, the UAE and Turkey used by “the Iranian regime to illicitly move more than a billion dollars in funds” and provide funding to the Islamic Revolutionary Guard Corps and Iran’s Ministry of Defense and Armed Forces Logistics.“ (Click here for the article) - Iran, United Arab Emirates, Turkey

OFAC Agrees $1.86 M Settlement with Stanely Black & Decker | EU Sanctions Blog

“OFAC has announced a $1,869,144 settlement with Stanley Black & Decker and its foreign subsidiary Jiangsu Guoqiang Tools to settle its potential civil liability for 23 apparent violations of the Iranian Transactions and Sanctions Regulations.“ (Click here for the article) - Iran, US

Celebrity Parents and Coaches Charged in Vast College Bribery Scheme | Bloomberg

“Wealthy parents, university coaches and a college-admissions counselor were among dozens charged in a sweeping criminal conspiracy that sought to help applicants win admission to elite schools including Yale, Stanford, UCLA and Georgetown.“ (Click here for the article) - US