Financial Regulatory Forum

Less drug-money traffic at HSBC may mean more risk for other banks in U.S.

By Brett Wolf, Compliance Complete

NEW YORK, Dec. 13 (Thomson Reuters Accelus) – HSBC was a hotspot for Mexican drug traffickers trying to launder the proceeds of their illicit U.S. sales during the 2000s, as suggested by a Senate report released in July and verified by a deferred prosecution agreement announced by the Justice Department on Tuesday. But now that the British banking giant has been forced to take steps to clean up its anti-money laundering act, Mexican cartels are making moves that may mean more risk for other banks, sources said.

Eager to move cash through the teller windows of HSBC’s Mexico unit in the largest amounts possible — sometimes as much as hundreds of thousands of dollars per day — drug traffickers designed specially shaped boxes, a document released by the Justice Department on Tuesday states. Once the cash was in HSBC accounts, brokers wired it to exporters in New York City and elsewhere in the United States as payment for goods destined for Colombian businesses, according to a”statement of facts” that was filed in federal court in Brooklyn along with a deferred prosecution agreement (DPA). (more…)

Internal compliance reporting programs must consider motivations for acting, experts say

By Stuart Gittleman, Compliance Complete

NEW YORK, Dec. 10 (Thomson Reuters Accelus) – Preventing fraud, not just reacting once it occurs, should be the goal of every corporate compliance program, but business has a mixed record in encouraging employees to report suspected misconduct internally, speakers at a Thomson Reuters forum said Tuesday.

Preventing fraud and encouraging internal reporting has also been mandatory for public companies since 2002. Among other things, Section 301 of the Sarbanes-Oxley Act requires issuers’ audit committees to establish procedures for employees to confidentially and anonymously submit concerns over questionable accounting or auditing matters. And Section 806 of Sarbanes-Oxley generally prohibits issuers from retaliating against employees for raising these concerns. (more…)

Europe’s naked short selling ban leaves investors with skin in the game

By Christopher Elias

LONDON/NEW YORK, Dec. 4 (Business Law Currents) – New European short selling regulations are dressing naked short sellers in a regulatory straightjacket, but ill-fitting provisions may leave investors with skin in the game.

In force since 1 November 2012, the regulations were supposed to curb naked short selling and to provide transparency on those trading against European sovereign debt. However, with gaps between short selling methods and alternatives popping up in exchange traded futures and synthetic forms, the holes are already becoming apparent. (more…)

Consumer groups see momentum building against more White House authority over regulators

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Nov. 20 (Thomson Reuters Accelus) - A coalition of public-interest groups is urging Congress to reject a bill that would allow the White House to review major rules proposed by the Securities and Exchange Commission and the Commodities Futures Trading Commission.

The “Independent Agency Regulatory Analysis Act” which was introduced by Republican Senator Rob Portman of Ohio, would give the White House’s Office of Information and Regulatory Affairs the power to ask independent agencies such as the SEC to submit a cost-benefit analysis on “significant rules” or rules that have an economic impact of $100 million.  (more…)

Anti-laundering officers and regulatory official call for U.S. guidance on banking marijuana businesses

By Brett Wolf

ST. LOUIS/NEW YORK, (Thomson Reuters Accelus) - Anti-money laundering officers and a top official with a federal banking regulator on Monday called on the U.S. Treasury and Justice departments to clarify for banks whether they can provide services to marijuana businesses.

These calls to action, which were offered during a discussion panel at an anti-money laundering conference in the U.S. capital were prompted by the ballot measures that last week made Colorado and Washington state the first states to permit recreational marijuana sale and use.  (more…)

U.S. Treasury to lead review of anti-money laundering rules

By Brett Wolf

ST. LOUIS/NEW YORK, (Thomson Reuters Accelus) – The Obama administration will review a sprawling net of anti-money laundering rules and seek to correct “gaps, redundancies or inefficiencies,” in the U.S. system now more than 40 years old, the Treasury Department’s top official overseeing the issue said on Monday.

David Cohen, Treasury undersecretary for terrorism and financial intelligence, said the department had launched an anti-money laundering task force along with federal regulators and law enforcement agencies. The initiative comes as federal authorities crack down harder on anti-money laundering lapses, with high profile cases against financial institutions. (more…)

U.S. broker-dealers scrutinized for anti-laundering compliance in Venezuelan currency swaps

By Brett Wolf

NEW YORK, Nov. 13 (Thomson Reuters Accelus) - Securities industry regulators are beginning to ask U.S. broker-dealers tough questions about how they are mitigating money laundering and sanctions risks associated with their involvement in a 2-year-old currency exchange system run by the Venezuelan government, sources familiar with the issue said.

“There are a lot of questions being asked by regulators and compliance officers,” said Sven Stumbauer, managing director of Veris Consulting Inc’s Miami office. “And some broker-dealers, especially small introducing brokers, cannot answer them.” (more…)

Post-election SEC could emphasize enforcement over rule-writing, says former chair

By Emmanuel Olaoye

WASHINGTON/NEW YORK (Thomson Reuters Accelus) - With the U.S. Congress still politically divided after the elections that returned President Barack Obama to office, the U.S. Securities and Exchange Commission is likely to take an enforcement approach to supervision rather than look to change conduct by writing new rules, former commission chair Harvey Pitt said.

A divided Congress, he said, would struggle to check an SEC that turned to enforcement actions to implement policies it saw as in keeping with the Dodd-Frank Act.

“If you’ve got a split Congress, effectively it means that Congress’s principal weapon (against a regulator) will be holding hearings … That is a lot less of a potent weapon than the notions that if Congress doesn’t like what you do, they may pass a law that curtails your ability to do what you’ve been doing.”

States’ legalization of marijuana sales fails to address legal quandary for banks

By Brett Wolf

ST. LOUIS/NEW YORK (Thomson Reuters Accelus) - Although Colorado and Washington became the first states to legalize the recreational use and sale of marijuana with the passage of ballot measures on Tuesday, financial institutions across the country should continue to refuse to do business with marijuana businesses, anti-money laundering experts said.
“If financial institutions are federally licensed or insured, they must comply with federal regulations, and those regulations are clear about conducting financial transactions with money generated by the sale of narcotics,” said Jim Dowling, a former Internal Revenue Service special agent who also acted as an anti-money laundering advisor to the Office of National Drug Control Policy.  (more…)

Firms subject to U.S. FATCA advised to press on with preparing despite rule delay

By Emmanuel Olaoye

WASHINGTON/NEW YORK, Nov. 6 (Thomson Reuters Accelus) - Financial institutions should take advantage of the U.S. Internal Revenue Service’s decision to postpone key start dates in the Foreign Account Tax Compliance Act (FATCA) and not wait for the U.S. Treasury to issue its final rules before they start their preparations, experts told Compliance Complete.

“If you put off your efforts or suspend them for too long I think you’ll fall way too far behind. I think you’ll have a very difficult time doing what you have to do. At this point you should have a very clear idea of what your current systems and procedures can and can’t do and how they are going to have to be modified,” said John Staples, managing partner of the law firm Burt, Staples & Maner, LLP. (more…)

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