FCPA / Anti-Corruption

Asia Pacific (APAC) countries continue to “stagnate” in their rankings in 2023, only minimally above the global average, with most well below, according to two anti-corruption due diligence tools, TRACE’s 2023 Bribery Risk Matrix (TRACE Matrix) and Transparency International’s 2023 Corruption Perceptions Index (TI CPI). While the two ranking systems share the same view of the least and most risky countries, the TRACE Matrix presents a slightly more positive view overall, ranking most Asia Pacific counties as moderate risk. In contrast, the TI CPI ranks most as being high risk. When considered together, the two systems allow for a more complete and accurate view of the risks and opportunities offered in the APAC region based on their different methodologies and factors.  

TRACE considers just a quarter of the countries in the region to be high to very high risk, but two thirds are at least moderate risk. However, for the TI CPI, the average score of APAC countries was above the global average score (45 versus 43, as for the past four years), with more than half perceived as high to very high, hence TI’s description of the region’s scores as stagnating. The 2023 TRACE Matrix publication packet is available at https://www.traceinternational.org/trace-matrix, and the 2023 TI CPI is available at https://www.transparency.org/en/cpi/2023.

Although these tools offer a good starting point for assessing risk, they are not a substitute for adequate risk-based due diligence on counterparties in the region. Notably, many international bribery cases involve companies headquartered or conducting business operations in jurisdictions with very low-risk rankings. This is probably because their anti-corruption efforts support the investigation and prosecution of bribery. Countries with no track record of meaningful enforcement against their own companies for overseas bribery should be closely reviewed for bribery and corruption risks. These bribery risk tools should also be supplemented with other publicly available reports on money laundering and bank secrecy risks, as these are also indirect indicators of bribery and corruption risk.Continue Reading Asia Pacific 2023 Anti-Corruption Rankings: Transparency International’s CPI and the TRACE Bribery Risk Matrix

On December 6, 2021, the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an Advance Notice of Proposed Rulemaking (ANPRM) seeking public comment on how FinCEN should regulate “all-cash” residential and commercial real estate transactions in the United States to address money laundering risks.

The ANPRM coincided with the publication of the Biden administration’s US Strategy on Countering Corruption, which highlights the real estate sector’s vulnerability to money laundering, particularly in regard to proceeds of foreign corruption. The Strategy also suggests the White House could work with Congress to adopt new regulations for other financial “gatekeepers” such as lawyers, accountants, and trust service providers who may facilitate transactions involving illicit property.Continue Reading FinCEN Launches Rulemaking Process for All-Cash Real Estate Deals

Two important anti-corruption due diligence tools published their 2020 results in November 2020 and January 2021. While the results are largely consistent, there are some important differences and some key improvements and declines in the Transparency International 2020 Corruption Perceptions Index and the TRACE 2020 Bribery Risk Matrix.

To comprehensively understand the risks and take

In late December, the United States Court of Appeals for the Second Circuit affirmed the conviction of Chi Ping Patrick Ho on seven counts alleging multiple FCPA and money laundering (and related conspiracy) violations.[1] The decision is notable for its construction of various FCPA provisions, and further demonstrates the expansive jurisdictional reach of anti-money laundering laws to dollar-denominated transfers.

Ho, a citizen of Hong Kong, served as an officer and director of the Hong Kong-based non-governmental organization China Energy Fund Committee (CEFC-NGO), which was funded by Shanghai-based energy conglomerate China CEFC Energy Company Limited (CEFC).[2] Ho also served as an officer and director of a CEFC-affiliated US non-profit (US NGO), funded by CEFC NGO.[3]

Ho’s conviction, for which he was sentenced to 36 months imprisonment and a US$400,000 fine,[4] stemmed from two alleged bribery schemes involving (1) an attempted US$2 million cash delivery to the President of Chad (which was purportedly rejected by the President) and (2) a US$500,000 wire transfer to a charity associated with the foreign minister of Uganda.[5] Notably, the US dollar-denominated wire originated from a bank in Hong Kong, which was transmitted through its operating unit in the United States as a correspondent to another bank in New York, which in turn was acting as a correspondent for a beneficiary bank in Uganda for final credit to an ultimate beneficiary NGO. Both acts were allegedly made for the benefit of CEFC’s commercial interests in Africa.[6]

On appeal, Ho challenged his 2018 conviction on a number of grounds.[7]Continue Reading United States v. Ho

Skirting over financial crime due diligence when considering a quick transaction in an emerging market can cost you dearly down the line when regulators or shareholders discover issues with regulatory compliance after your transaction. The safer and ultimately more cost-effective course may be an independent assessment of the financial crimes compliance risks before completing cross-border

On July 3, the US Department of Justice (DOJ) and Securities and Exchange Commission (SEC) issued the second edition of the Resource Guide to the US Foreign Corrupt Practices Act (the 2020 Guide), the first full-scope overhaul of the Resource Guide since its issuance in 2012.

As with the original edition, the 2020 Guide will

For decades the US Department of Justice (DOJ) has investigated and prosecuted individuals for violations of the Foreign Corrupt Practices Act (FCPA) and other US federal laws with an extraterritorial focus, even if the conduct transpired outside the United States.  For experienced people doing business across borders, that is not a new topic.  However, what may be unknown to some executives, entrepreneurs, and others is the possibility of also running afoul of the US Internal Revenue Service (IRS) and DOJ Tax Division.

Many corporate executives in China, India, and elsewhere studied at universities in the United States and obtained US citizenship or permanent resident status before returning to their native country to start their own business or to rise up the ranks at an existing company.  There are also many native-born Americans working and living overseas.  This is notable because US citizens and permanent residents are subject to US federal income tax on their worldwide income no matter where earned.  In the author’s experience, having practiced in Hong Kong for several years, this reporting obligation has not historically been widely understood by many expats.  IRS enforcement mechanisms, such as the Foreign Account Tax Compliance Act (FATCA) and tax information exchange agreements, are improving but there is still a very large “tax gap” of unreported tax liability.  Some expats living abroad gamble that the IRS will not uncover their noncompliance, while others are simply unaware of or confused about their reporting obligations.Continue Reading US Tax Compliance Adds to Risks for US Citizens, Permanent Residents Abroad

On 17 June, the European Commission released its White Paper “on levelling the playing field as regards foreign subsidies.” The White Paper is built on the conclusion that foreign subsidies can undermine competition and distort the EU internal market. It aims at introduction of new EU legislation to address the regulatory “gap” between the EU state aid rules applying to subsidies granted by the EU Member States to EU entities and the current lack of rules to redress the behavior of corporate actors in the EU whose market actions are unfairly facilitated by unregulated foreign subsidies. Beyond mergers in the EU involving foreign subsidized companies, the legislation would also address concerns about foreign subsidized actors in the context of EU public procurement and access to EU funding.

At the start of her mandate, Commission President Ursula von der Leyen had announced her wish to develop tools and policies to better tackle the distortive effects of foreign state ownership and subsidies in the internal market. The COVID-19 crisis encouraged a swift move on this initiative, as pointed out by Executive Vice-President Margrethe Vestager and Commissioner Thierry Breton, who are co-responsible for this dossier.Continue Reading The European Commission releases a White Paper on foreign subsidies in the Single Market

The UK Financial Conduct Authority (FCA) has fined Commerzbank AG’s London branch (Commerzbank London) £37.8 million for failing to institute adequate anti-money laundering (AML) controls from 2012 to 2017 in violation of Principle 3 of the FCA’s Principles for Businesses.

Mark Steward, the FCA’s Executive Director of Enforcement and Market Oversight stated that “Commerzbank London’s failings over several years created a significant risk that financial and other crime might be undetected,” although the FCA did not identify any evidence of financial crime having been caused or facilitated by Commerzbank London’s AML control failings.

Financial institutions operating in the United Kingdom, such as Commerzbank London, are responsible for minimizing their risk of being used for criminal purposes, including the risk of being used to facilitate money laundering or terrorist financing.  UK firms are required to mitigate this risk by organizing and controlling their affairs responsibly and effectively, establishing and maintaining an effective, risk-based AML control framework and complying with the applicable Money Laundering Regulations.Continue Reading UK Financial Conduct Authority Fines Commerzbank’s London Branch £37.8 Million for Anti-Money Laundering Control Failings

On June 1, 2020, the US Department of Justice (DOJ) Criminal Division, with little fanfare, issued updated guidance on the Evaluation of Corporate Compliance Programs (2020 Guidance). The document, which was released without any accompanying public announcement or explanation, updates an April 30, 2019 version of the document (2019 Guidance), as discussed in our May 9, 2019 Advisory. The 2019 Guidance updated original guidance published by the Division’s Fraud Section on February 8, 2017 (2017 Guidance), as discussed in our 2017 FCPA Mid-Year Review.

The DOJ’s evaluation of the effectiveness of a company’s compliance program continues to be a relevant factor to charging decisions under the Principles of Federal Prosecution of Business Organizations in the Justice Manual, as well as to an organization’s eligibility to receive a reduction in criminal fines calculated under the US Sentencing Guidelines (USSG); it is also important to the DOJ’s assessment of whether a monitor is warranted.Continue Reading Client Advisory: DOJ Updates Corporate Compliance Program Guidance, Emphasizes Role of Data