The ongoing FIFA investigation, involving the extraterritorial application of United States law, has alerted banks and financial institutions to the need to invest in compliance if they were not doing so before, according to William Roppolo, a partner with the law firm Baker & McKenzie in Miami.
The current enforcement trends include prosecution of individual bankers as well as fining the institutions themselves, said Roppolo at the Monday session of the fourth annual Anti-Money Laundering/Counter-Financing of Terrorism Conference in New Kingston.
Also speaking at the same event, David Wildner, the head of the compliance at BNY Mellon, said AML enforcement actions had reached US$9 billion, a banking fine levied against one institution. This compared to a top fine of US$17 million a decade ago.
Roppolo said the prosecuting environment now reflects increased global enforcement of anti-corruption laws, more cross-border enforcement agency cooperation, as well as expanded charges as agencies use anti-money laundering laws to widen jurisdiction to non-US public officials.
Other trends, the lawyer said, included greater compliance awareness among companies and employees, resulting in higher whistle-blower risk.
Wildner cited the case of BNP Paribas which, on June 30, 2014, was the subject of a joint enforcement action among cross-national and US agencies under which the bank was penalised with a US$8.9-billion fine.
The charges were that BNP actively "stripped" information from wire transfers related to Sudan to get around sanctions, while BNP senior management knowingly endorsed steps to facilitate sanctions avoidance. BNP senior management were also alleged to have "actively endorsed processes that required non-US employees to deceive US-based employees about the involvement of sanctioned entities in transactions."
Wildner also cited that case of JPMorgan Chase, which on January 6, 2014, entered into a Deferred Prosecution Agreement with federal prosecutors under which it paid a fine of US$2 billion.
According to Wildner, JPMorgan Chase had failed to maintain an effective AML programme, principally related to the detection and reporting of suspicious activity by convicted investment adviser Bernie Madoff.
FOCUS ON INDIVIDUALS
US officials alleged that Chase relationship managers failed to perform appropriate periodic reviews, did not understand the purpose or use of the accounts, or the magnitude of transactions and did not review key 'know your customer' documents about Madoff Securities, such as financials and regulatory filings.
Roppolo told the conference that prosecuting agencies appear to be increasingly focused on criminal charges against individuals.
"If you used to brush once a day, now you need to brush and floss and to do it three times a day," he said, citing the FIFA prosecutions as a game changer.
Arising from the investigations, he said several highly ranked people are likely to see "significant prison time".
On May 27, 2015, the United States District Court for the Eastern District of New York unsealed an indictment charging 14 individuals in a long-running investigation into bribery and corruption at FIFA. The soccer officials were charged with conspiring to solicit and receive well over US$150 million in bribes and kickbacks in exchange for their official support, according to the US Department of Justice.
Defining money laundering as "the process by which one conceals the existence of an illegal source of income and then disguises that income to make it appear legitimate", Roppolo told bankers at the New Kingston conference to be on the lookout for red flags such as offshore intermediaries and payments, kickbacks to officials of government-owned customers, requests for charitable donations and social contributions, and sponsorship of overseas travel and educational meetings.
Local banks, he said, should be proactive and engage in rigorous risk assessment, internal investigation, training and updating compliance programmes.
Wildner added that financial institutions should pay experts to do AML training instead of using compliance staff for the function.