7K0A0116Yesterday I began an exploration of the potential individual liability of a Chief Compliance Officer (CCO) based upon the Financial Industry Regulatory Authority (FINRA) enforcement action against Raymond James Inc. and its former CCO, Linda Busby. Today, I will consider the specific deficiencies laid out in the Letter of Acceptance, Waiver and Consent (Letter of Acceptance) and what lessons might be drawn going forward.

It is incumbent to note the basis of liability is FINRA Rule 3310, which requires the company to “develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the requirements of the Bank Secrecy Act…” The required policies and procedures needed are to detect and report suspicious activity and monitor transactions for specified red flags. If such red flags were detected, additional investigation was required and any clearance of such a red flag required documentation. Some of the specifics of 3310 included appropriate due diligence on both customers and corresponding accounts for foreign financial institutions, a risk-based assessment of new clients and a review of red flags that might be raised in the above. Busby, as CCO, was required to implement the foregoing.

As noted yesterday, Busby was sorely understaffed, underfunded and probably could never have overseen a functioning and effective compliance program, had the company deigned to put one in place. However, the company obviously thought it did not have to do so. As noted in the Letter of Acceptance, the company “did not have a single written procedures manual describing AML procedures; rather to the extent written procedures existed addressing supervision related to AML, they were scattered through various departments.” Moreover, Busby did not have control or even oversight into individuals in other departments handing anti-money laundering (AML) issues. Finally, the company did not have any oversight for monitoring suspicious activity. The Letter of Acceptance noted these shortcomings were failures of both the company and Busby.

FINRA dived deeper into the weeds when it faulted both the company and Busby for not monitoring known high-risk transactions or individuals. The Letter of Acceptance listed high-risk activity as:

  • Transfers of funds to unrelated accounts without any apparent business purpose;
  • Journaling securities and cash between unrelated accounts for no apparent business purpose, particularly internal transfers of cash from customer accounts to employee or employee-related accounts; and
  • Movement of funds, by wire transfer or otherwise, from multiple accounts to the same third party account.
  • The company did not have any procedures “in place to reasonably monitor for high-risk incoming wire activity, such as third-party wires and wires received from known money laundering or high-risk jurisdictions.”

All of this meant that neither the company nor Busby were able to monitor or later investigate suspicious activity. FINRA turned up 513 accounts that engaged in high-risk activity that were never even spotted let alone investigated. There was no overall risk assessment performed which might have allowed Busby to marshal her limited resources and focus on the highest risk transactions. As you would expect there was no technological solution in place that allowed Busby to “conduct any trend or pattern analysis or otherwise combine information generated by the multiple reports to look for patterns”. All of Busby’s analysis had to be done the old fashioned way, through manual review.

While there were some reports generated by the company that might have been of use in an AML analysis, they were either deficient or not tied to similar reports. Even when the information was available there was no overall risk ranking for the company’s customers that would have allowed transaction monitoring on a more proactive basis. Finally, and this one is perhaps the most unbelievable, there was no linking of customer accounts so no pattern of single customer activity could be reviewed.

In addition to these overall AML program deficiencies, the Letter of Acceptance listed failures by Busby when sufficient information was available to her. There were thousands of alerts generated regarding suspicious activities each month that were closed out with no documentation as to the rationale for closing the suspicious activity alert. There was no documented clearance of red flags raised, even in the process the company did have in place.

The customer due diligence report was not even provided to Busby or the AML team but to the company’s credit department, one of those departments that Busby had no visibility into. When there was sufficient information to investigate customers, Busby and her team failed to do so and the Letter of Acceptance listed several instances where Busby failed to document that customers had been sanctioned by the US Department of the Treasury. The Letter of Acceptance laid out some useful indicia of suspicious transactions including (1) rounded dollar amounts; (2) purpose of payment inconsistent with the customer’s prior activities; (3) the domicile of the individual receiving the funds was not the location where the funds were transferred; (4) the Letter of Authorization provided to the company was dated at or near the date of transfer.

Finally, and to no doubt warm the heart of every process analysis and professional out there, FINRA criticized the lack of oversight. Busby was criticized for failing to engage in appropriate oversight of the company’s AML risk. But the company also failed in its oversight role of providing oversight to the CCO and the compliance function. If it had done so perhaps the company would have realized the impossible position Busby was in and the utterly impossible role she had to accomplish.

Fortunately for the Foreign Corrupt Practices Act (FCPA) compliance CCO, the financial services industry has specific rules that require compliance programs. Such regulations do not exist around the FCPA. However the analysis that FINRA used to bring charges against Busby could well bleed over to CCOs and compliance professionals in the future. With the new Department of Justice (DOJ) compliance counsel, the role of the CCO may be given more scrutiny going forward. It is painful to picture an anti-corruption CCO assessed with liability for a corporation which views compliance as poorly as did Raymond James but they are out there.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

Mister Ed

A horse is a horse, of course, of course,

and no one can talk to a horse, of course.

That is, of course, unless the horse is the famous Mister Ed.

Those lines were the opening verse to the theme song of the TV comedy Mr. Ed, which we celebrate today with the passing of (non-horse) star Alan Young who died this past week. While the name Mr. Ed may not mean much to the current television watching audience, his role as Wilburrrr, the foil of that universally famous talking horse Mr. Ed, should bring a few smiles to faces out there. Mr. Ed had an initial run from 1961-1966 on CBS and then reintroduced itself to an entire new audience on Nickelodeon network on the ubiquitous Nick at Nite in the 1980s and 1990s.

Mr. Ed and his ongoing antics and shenanigans seemed a good introduction to the this issue of individual liability of a Chief Compliance Officer (CCO) in the financial services industry and whether that individual liability may bleed over into the wider anti-corruption compliance world. For when should a CCO have liability and should the regulators, whether in the financial services industry or in the broader anti-corruption world of the Foreign Corrupt Practices Act (FCPA), have such individual liability? While the financial services world is regulated by both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) they have specific regulations requiring companies they regulate to have anti-money laundering (AML) compliance programs, the FCPA does not have any such requirements, either written directly into the statute or by interpretation therefrom.

In late 2014, SEC Enforcement Chief, Andrew Ceresney, gave a speech where he laid out the three areas of potential individual liability for a CCO. He said that CCOs should be concerned: (1) where there is actual willful misconduct with participation in the illegal activity; (2) when they have helped misleading regulators; and (3) where there is the clear responsibility to implement compliance programs or policies and a wholly fail to carry out those responsibilities. I do not think there would be any debate that a CCO who engages in illegal conduct should be sanctioned or one who wholly fails to engage in the statutorily mandated duties of position. However, if regulators are going to move into evaluating the specific compliance program implementation and execution by CCOs, that would provide a sea-change in enforcement and potential personal liability for CCOs.

Last year there were two SEC individual enforcement actions against CCOs in the financial services industry. The two enforcement actions were styled Blackrock Advisors LLC and Bartholomew A. Battista (Blackrock) and SFX Financial Advisory Management Enterprises, Inc. and Eugene S. Mason (SFX). The Blackrock case involved an internal conflict of interest which led to a $12MM fine paid by the company. The company had a conflict of interest policy. However, according to the Cease and Desist Order, the CCO liability turned on “BlackRock’s CCO, Battista was responsible for the design and implementation of BlackRock’s written policies and procedures reasonably designed to prevent violations of the Advisers Act and its rules. Battista knew and approved of numerous outside activities engaged in by BlackRock employees (including Rice), but did not recommend written policies and procedures to assess and monitor those outside activities and to disclose conflicts of interest to the funds’ boards and to advisory clients. As such, Battista caused BlackRock’s failure to adopt and implement these policies and procedures.” Battista was fined $60,000 separately.

According to the SFX Cease and Desist Order, the company President, Brian Ourand, “misappropriated at least $670,000 in assets from three client accounts.” The company was ordered to pay a civil penalty of $150,000. However, the SEC accused SFX CCO Eugene Mason of three general violations. First, Mason did not effectively implement “an existing compliance policy requiring that there be a review of “cash flows in client accounts.”” Second Mason did not require an appropriate segregation of duties in that he did not guarantee that account cash flow reviews were done by someone other than the President. This caused the following statement in SFX’s brochure to be untrue: “Client’s cash account used specifically for bill paying is reviewed several times each week by senior management for accuracy and appropriateness.” Finally, and perhaps most troubling, while CCO he was in the midst of an internal investigation following the discovery of [the President’s] misappropriation, the company did not conduct an annual review of its compliance program. The SEC believed that “Mason was responsible for ensuring the annual review was completed and was negligent in failing to conduct the annual review.”

One of the difficulties with assessing these actions in the context of the role of a CCO in the broader FCPA world is that they are the end results of lengthy processes of negotiations. This is particularly true when it comes to the final resolution documents, such as the SEC Cease and Desist Orders, from both cases.

Last week there was an enforcement action initiated by the FINRA against Raymond James and Associates, Inc. and its former CCO Linda Busby (the “Raymond James matter”). Raymond James paid a fine of $17MM and Busby was fined $25,000 and banned from the industry for three months. The resolution was in the form of a Letter of Acceptance, Waiver and Consent (Letter of Acceptance). The facts laid out in the Letter of Acceptance were accepted and consented to by the defendants without admitting or denying same.

In the Letter of Acceptance, FINRA laid out the specific failings of Busby in her role as CCO. The basis of liability is FINRA Rule 3310 that requires a company to “develop and implement a written anti-money laundering program reasonably designed to achieve and monitor the member’s compliance with the requirements of the Bank Secrecy Act…” The required policies and procedures to detect and report suspicious activity and monitor transactions for specified red flags. If such red flags were detected, additional investigation was required and any clearance of such a red flag required documentation.

Busby’s role within the company, from 2002-2013, was to ensure that the company’s AML compliance program was “tailored to the Firm’s business and for appropriately monitoring, detecting and reporting suspicious activity.” Unfortunately for Busby, she was the Lone Ranger of Raymond James compliance from 2002-2012. She did, however, increase head count in the compliance function by 100% in late 2012 “by adding a second employee.” The size of this compliance function, when compared to the size of the company as laid out in the Letter of Acceptance, is stunning, “the firm’s “size increased from approximately 2,398 registered persons in 190 branches in 2006, to approximately 5,294 registered persons in 445 branches in January 2014.” Busby oversaw all of their work and one might see how her position was untenable to start with before there was any analysis of her work.

These head count numbers are rendered starker when one considers the number of transactions of the company. By 2014, the company had approximately 2.2 million accounts, generating “over 51 million transactions” annually. Busby and her team (such that it was) “were responsible for, among other things, reviewing more than a dozen lengthy AML exception reports for suspicious activity across the millions of accounts, filing suspicious activity reports (SARs), and communicating with branch managers and registered representatives regarding client actions and account activity.” It sure does not sound like a position set up for success.

Tomorrow, we will review that work and see what lessons may be drawn…stay tuned.

 

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

 

Days of the WeekThere are many different types of risk that an entity may face. However I confess I had rarely thought about a day of the week as a risk until I read a story on the Wall Street Journal (WSJ), by Syed Zain Al-Mahmood and Cris Larano, entitled “From the Fed to the Philippines: Bangladesh’s Stolen-Money Trail”. Their article detailed the initial investigations around the fraudulent transfer of money from the bank account of the Central Bank of Bangladesh, out of the Federal Reserve Bank of New York (the Fed).

The theft occurred in early February but was not publicly reported until early March. On Friday, February 5, the Fed began to receive requests for wire transfers purportedly from the central bank of Bangladesh. Some $101 million was wired out from the Fed on that Friday but there were requests for an additional $950 million to go out as well. In Bangladesh, the weekend is Friday and Saturday. It turned out that the Fed had sent out 35 separate requests for confirmation that the requests were legitimate and requesting the Bangladesh central bank reconfirm the initial requests to transfer the money. However, “The computer terminal that connected Bangladesh’s central-bank computers to the secure interbank messaging system knows as Swift was “unresponsive” on Feb. 6, the morning after the theft, a senior official working at the bank’s secure server room said in the police report seen by The Wall Street Journal.” Moreover, “According to the report, Zubair Bin Huda, the senior official in charge of the glass-walled server room – known as the “Dealing Room” – was concerned when a printer connected to the terminal couldn’t print out the interbank messages received during the night.”

It was not until the Bangladesh workweek began on Sunday that Bangladesh central bank employees hooked up a backup server and printed out the 35 messages from the Fed. They were able to stop the fraudulent transfers at that point, thus averting another set of transfers for the remaining $950 million, which had been requested, but $101 million had already been transferred out. The Bangladesh central bank then “sent urgent messages to the Philippines central bank on Feb. 8 asking it to freeze four accounts” where the money had been sent but by then it was too late.

Of the $101 million, “$20 million [went] to Sri Lanka … to the account of a newly formed nongovernmental organization, according to the officials in Dhaka. The Sri Lankan bank handling the account reported the unusual transaction to the country’s central bank and authorities reversed the transfer.” Unfortunately the remaining $81 million was wired to a bank in the Philippines. On Monday, February 8 (the first day of the workweek in the Philippines), “Senior Bangladeshi officials sent urgent messages to the Philippines central bank on Feb. 8 asking it to freeze four accounts at the RCBC where $81 million had flowed”.

An executive at Rizal Commercial Banking Corp (RCBC), Romualdo Agarrado, testified at a Philippine Senate hearing that the bank did receive the requests from Bangladesh, on February 9, they did issue stop orders internally but one bank manager “Maia Santos Deguito ignored it. Instead, she moved the money to a foreign-currency account opened Feb. 5 under the name of Centurytex Trading, a local brokerage firm owned by businessman William Go, Mr. Agarrado testified.”

From there the money was then washed out through casinos in the Philippines. In an article in the Financial Times (FT), entitled “Philippines eyes reform in wake of $81m heist”, Avantika Chilkoti reported, “$50m was passed on to two casino groups and another $31m delivered in cash to a “junket agent” organizing trips for gamblers.” The Philippines, with one of the most porous anti-money laundering (AML) regimes around, has completely exempted the country’s casinos from its even more paltry laws.

This was clearly a very sophisticated crime, with many moving parts. However the basic timing is something that companies need to consider as a risk going forward. Have you thought about getting a request to make a payment late Friday as suspicious? What about a suspicious payment request on a Thursday? Did you consider the weekend days of the country where the payments were being wired to? Did you send a request for confirmation as the Fed did, 35 times?

What if there was no response, as was the case from the central bank of Bangladesh. Does that mean the bank was incompetent? How about a potential inside job that took the primary server down so the individual requests for confirmation could not be printed out? Or maybe they are all simply out at the beach for the weekend?

The reason you need to continually evaluate risk is because the risks change. Risks change because the bad guys change in their approaches to getting your money. Whether those bad guys are within your organization or without, you need to evolve your risk assessments and risk management as new risks arise.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2016

Eiffel Tower after attacksThe attacks in Paris and subsequent events have horrified any right-minded person. The slaughter of innocent civilians sickened the world and the outpouring of support for the city of Paris; the country of France and the French people has been universal. One of the things that I thought about in the aftermath is the intersection of corruption and terrorism. The EU open border policy and its banks notoriously lax money laundering regimes and enforcement could certainly have contributed to some of the underlying factors leading to the attack. I am sure there will be aggressive and robust responses from governments across the globe involving new and beefed up anti-money laundering (AML) laws. This is something the anti-corruption compliance practitioner and all US companies need to prepare for in the days and weeks to come, largely in response to the attacks in Paris.

Most anti-corruption compliance practitioner and most US companies do not focus on AML compliance or corporate AML controls. However, the bad guys think about how to move money around from their ill-gotten gains quite a bit, using the most innocuous types of business. In an article Los Angeles Times (LAT), entitled “Cartels use legitimate trade to launder money, US and Mexico say”, reporters Tracy Wilkinson and Ken Ellingwood described a process whereby teams of money launderers working for cartels use dollars to purchase a commodity from the US and then export the commodity to Mexico or Colombia. A key is that “Paperwork is generated that gives a patina of propriety” which means that drug money is given the appearance of legitimate proceeds from a legitimate commercial transaction. An Immigration and Customs official interviewed said, “It’s such a great scheme. You could hide dirty money in so much legitimate business, and they do. You can audit their books all day long and all you see is goods being imported and exported.” Another scheme involved several executives of Angel Toy Company, who conspired with Mexican drug cartels to launder drug money through a scheme to purchase Teddy Bears (of all things), for shipment back to and for resale in Mexico. The plan was straightforward, just under $10K of cash for each shipment of Teddy Bears, which were then resold in Mexico.

The key is that the commodities being purchased are so mild that large bulk purchases will rarely, if ever, draw any official scrutiny. The goods purchased can be red tomatoes or bolts of cotton fabric. In either case, the commodity itself does not matter, as the simple fact of purchasing in the US, shipping into, and reselling in Mexico allows the drug cartels to “transfer earnings back home to pay bills and buy new drug supplies while converting dollars to pesos in a transaction relatively easy to explain to authorities.”

However, now money launderers use even more sophisticated tactics such as “overvaluing and undervaluing invoices and customs declarations.” There is even a new term “trade-based money-laundering” used to denominate the schemes. It was reported that in another operation, which was estimated to launder over $1MM every three weeks, money launderers were exporting from the US to Mexico polypropylene pellets that are used to make plastic. However, the money launderers inflated the value declared on the high-volume shipments and this eventually attracted suspicion of US bank investigators, “who shut down the export operation by discontinuing letters of credit that the suspected launderers were using.” One official noted, “You generate all this paperwork on both sides of the border showing that the product you’re importing has this much value on it, when in reality you paid less for it. Now you’ve got paper earnings of a million dollar and the million dollars in my bank account – it’s legitimate. It came from this here, see?”

Transactional based due diligence and internal controls are mandatory components of Foreign Corrupt Practices Act (FCPA) minimum best practices compliance program. In addition to due diligence on agents, distributors or others in the sales distribution chain, companies need to perform due diligence on those to whom they sell. If someone from Mexico suddenly comes to your business and wants to buy widgets with cash, this needs to send up a huge Red Flag.

Banks and financial institutions have led the way in fighting money laundering through their robust AML controls. Below I have listed some AML Red Flags that you can begin to use now:

  1. Legitimacy of the party and/or assets are undeterminable through due diligence or independent verification;
  2. The party proffers false, misleading or substantially incorrect information and documentation;
  3. The party suggests transactions involving cash or insists on dealing only in cash equivalents;
  4. The party refuses to disclose or to provide documentation concerning identity, nature of business, or nature and source of assets;
  5. The party refuses to identify a principal or beneficial owner;
  6. The party appears to be acting as an agent for an undisclosed principal or beneficial owner, but is reluctant to provide information, or is otherwise evasive, regarding the identity of the principal or beneficial owner;
  7. The party is a shell company and refuses to disclose the identity of the party’s beneficial owner;
  8. The party has assets that are well beyond its known income or resources;
  9. The party requests that funds be transferred to an unrelated third party and is unable to provide sufficient legitimate and independently verifiable justification for such request;
  10. The party requests a wire transfer to a jurisdiction other than the one in which the party is located and is unable to provide sufficient legitimate and independently verifiable justification for such request, particularly if located in an “offshore” bank secrecy or tax haven;
  11. The party engages in transactions that appear to have been structured so as to avoid government reporting requirements, especially if the cash or monetary instruments are in an amount just below reporting or recording thresholds;
  12. The party exhibits unusual concern about compliance with government reporting requirements;
  13. The party exhibits a lack of concern regarding risks or other transaction costs;
  14. The party wishes to engage in a transaction that lacks business sense, economic substance or apparent investment strategy;
  15. The party lacks general knowledge of its industry or lacks adequate facilities or qualified staff to perform the required tasks or work;
  16. The party requests that a transaction be processed in a manner that circumvents procedures or avoids documentation requirements;
  17. The party is included on list of Specially Designated Nationals, or similar lists maintained by the U.S. Government and the United Nations, or is associated with such individuals and entities;
  18. The party is located or has accounts or financial dealings in countries either identified as being non-cooperative with international efforts against money laundering by the Financial Action Task Force, or against whom the U.S. Treasury Department has issued an advisory;
  19. The party, or any person associated with the party, is or has been the subject of any formal or informal allegations (including in the reputable media) regarding possible criminal, civil or regulatory violations or infractions; and
  20. The independent due diligence conducted uncovers allegations that raise concerns regarding the party’s integrity.

Obviously there is a large overlap with anti-corruption due diligence and red flags. While most anti-corruption compliance practitioners understand the basic concepts behind KnowYourCustomer programs, including due diligence and policies and procedures, most of corporate America is quite far behind banks and financial institutions in the sophistication around detecting, investigating and reporting suspicious transactions. I think companies will need to take a look at the steps they place around AML compliance and the sooner the better.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015

DOJA colleague recently posed that question to me. I thought it was an interesting one and although at first blush the response to me might appear self-evident, the fact that it was posed means that my view may not be universal. The more I thought about how to respond to my friend’s query, the longer my response became. So today, I begin a three-part series on why Americans should care about the Department of Justice (DOJ) bringing their indictments against the 14 named defendants who were all associated with the governing body of international soccer, the Fédération Internationale de Football Association (FIFA).

Over the weekend, I went to England to attend the wedding of my sister-in-law. My wife has numerous aunts, uncles, nieces, nephews and cousins and they all attend such family events. One of the more interesting comments I heard was from one of my wife’s cousins who said, “only America was big enough to take on FIFA” and that “you can say what you want about Americans but they get things done.” I realize the sample size may have been small to fully validate these perceptions but consider the headline from the lead editorial in the Sunday Times today which read “JUSTICE 1, FIFA O” where the Times discussed the revelations that Sepp Blatter himself is now under investigation by the US DOJ for direct involvement of the $10MM bribe paid to Jack Warner to swing his vote to award South Africa the 2010 World Cup.

The statement by my cousin-in-law presages something that is not discussed consistently about prosecutions under the Foreign Corrupt Practices Act (FCPA); that is the US government is the undisputed worldwide leader in the global fight against corruption and bribery. For all the discussion about whether it is fair or right to prosecute companies with headquarters outside the US for FCPA violations, the bottom line is if the US government did not engage in such prosecutions, no one else would do so. But these are not companies that lie outside the jurisdiction limit of US justice; these are companies that have voluntarily subjected themselves to US jurisdiction. Remember TOTAL, who howled about how unfair it was that the US government was prosecuting them? It turned out that they wired part of their bribes through the US banking system. Alstom was another company that fought the DOJ over jurisdiction. Yet it has listed securities on certain US exchanges which invoked FCPA jurisdiction, engaged in illegal conduct in the US and involved US citizens in the bribery and corruption allegations against it.

This fact of US leadership in the global fight against corruption and bribery was driven home even more so with the FIFA indictments. The Sunday Times had been investigating FIFA through investigative journalism for years. As far back as 2010, the Sunday Times published evidence that votes of FIFA executives could be purchased for votes to secure World Cup tournaments. The Sunday Times handed over wire tapes, videotapes and transcripts confirming these allegations to FIFA officials. FIFA’s response was to discipline those who had talked with reporters from the Sunday Times. Most amazingly, in May 2011 the Sunday Times provided this evidence to a British Parliamentary commission.

Did anything come about from this evidence being handed over to the UK government? A generous response might be not that we know of, as yet. This is in the face that the UK has arguably the strongest anti-corruption law on the books, the UK Bribery Act, which makes illegal the paying and receiving of bribes in both the public and private sector. So the laws are in the books in the UK, if the UK government wanted to enforce them.

The DOJ has made clear they will use all tools available to them in the fight against international corruption and bribery. For US companies or others subject to the FCPA, that means using a supply-side law, which criminalizes the conduct of the bribe payor. But there are numerous other laws that criminalize the conduct of the bribe receiver. We saw a couple of those at play with the FIFA indictments. These include money laundering and tax evasion, with tax evasion first. Ever since the conviction of Al Capone, the government has made use of laws against evading taxes on monies you are paid for criminal activity. Under FCPA cases, the companies seem to report the income from their ill-gotten gain accurately so we have not seen that tool used in FCPA prosecutions. However individuals who receive bribe payments generally do not report the income because they cannot account for receiving it for any honest or legal services. Since they do not report it, they do not pay taxes on it.

Anti-money laundering (AML) laws are an important tool in the fight against international bribery and corruption. My colleague Mike Brown, no doubt channeling his inner Woodward and Bernstein, often says that when it comes to bribery and corruption, you should “follow the money”. This is the basic truth about money laundering and why it is such an important tool in the fight against corruption. We have seen it used occasionally as an adjunct to FCPA prosecutions. Most recently was the money laundering charge against María de los Ángeles González de Hernandez, the official at a state-owned Venezuelan bank, Banco de Desarrollo Económico y Social de Venezuela (BANDES) who was paid upward of $5MM in bribes to win bond trading work. She was extradited to the US and pled guilty.

The bottom line is that only the US government has the wherewithal to engage in such a worldwide investigation and coordinate the actions of numerous of countries in providing assistance. Do you think the Swiss police would have been so involved if it was not for the US government lead in this investigation? From President Obama on down, the US government has made clear that it will lead the international fight against bribery and corruption. The FIFA indictments are yet one more indication that they will continue to do so.

But the US is no longer alone in this fight. Witness the large numbers of countries that have passed domestically and internationally focused laws against bribery and corruption. Whatever the motives behind the Chinese government prosecution of GlaxoSmithKline PLC (GSK) in China, the fact of the prosecution sent shock waves through western companies doing business in China that the old ways of bribing officials was no longer acceptable. The effect was that western companies doing business in China beefed up their compliance function and oversight of compliance. The same has been true from the burgeoning Petrobras corruption scandal in Brazil. Brazil itself has only recently enacted domestic anti-corruption legislation and it may have been the political fallout from the Petrobras corruption scandal that finally led the President of the country to accede to having the law made effective.

FIFA is the biggest sports empire in the world. The National Football League (NFL) is downright paltry when it comes to the monies, numbers and passions around international soccer. However the US government became aware of the inherent corruption at FIFA; whether through the investigative work of The Sunday Times, a whistleblower, an unrelated investigation into other criminal activities or some other means, Americans should care about the FIFA indictments because it shows the US government continues to lead the world’s fight against bribery and corruption.

Why should Americans care about the FIFA indictments? First as a measure of national pride, we have a Justice Department that has the wherewithal to take on the world’s largest sports organization, particularly one which thought itself above the law. While the US certainly did not bring the indictments against FIFA alone, it clearly was the leader in this effort to continue the fight against global corruption and bribery. For if America does not lead, others will not follow in this fight so Americans should care greatly that the DOJ is continuing to lead this fight with the laws available to it.

This publication contains general information only and is based on the experiences and research of the author. The author is not, by means of this publication, rendering business, legal advice, or other professional advice or services. This publication is not a substitute for such legal advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified legal advisor. The author, his affiliates, and related entities shall not be responsible for any loss sustained by any person or entity that relies on this publication. The Author gives his permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author. The author can be reached at tfox@tfoxlaw.com.

© Thomas R. Fox, 2015