Financial Regulatory Forum

BNP’s ‘huge’ role in undermining U.S. Sudan sanctions behind looming tough penalty, sources say

By Brett Wolf, Compliance Complete ST. LOUIS, June 18 – The pivotal role BNP Paribas played in helping Sudan sell oil in violation of U.S. sanctions is the major reason U.S. authorities are pushing for harsh penalties against the French banking giant, two sources with firsthand knowledge of the matter said.”BNP basically was the Sudanese economy. They were just huge in helping the government of Sudan evade U.S. sanctions,” one of the sources said.BNP’s role involved removing references to Sudanese parties from wire-transfer messages, so U.S. dollar oil payments could clear through New York and move into accounts controlled by Khartoum, the sources said. The sources declined to name the buyers of the Sudanese oil or to say what Khartoum did with the revenue.

The dollar is the primary currency for the global oil trade.

The prohibited transactions ran into the “many billions of dollars,” and their “sheer volume” weakened the U.S. sanctions from 2002 and “well beyond 2009,” the other source said. He added that the sums involved and the damage to sanctions “factored into the mix” as authorities calculated the approximate size of the penalty that would be demanded from the bank.

When asked whether U.S. authorities plan to pursue criminal charges against any current or former BNP executives, one of the sources said such decisions will not be made until after the case against the bank has been resolved. “That’s something that is being looked at closely,” the source said.

Both sources spoke on condition of anonymity because they were not authorized to discuss the matter.

U.S. prosecutors have been pushing the bank to plead guilty to unspecified criminal charges as part of a resolution that is expected to include a multi-billion dollar penalty, sources have said. Neither source cited above was willing to say precisely how much U.S. authorities have sought during the continuing negotiations. Reuters has reported a figure of $10 billion.

SEC faces challenges before fast-trading reforms can go on the books

By Emmanuel Olaoye, Compliance Complete

The Securities and Exchange Commission has rolled out its intentions to regulate high-frequency trading, making stricter regulation in some form a strong possibility, but the agency faces more work and some challenging obstacles before it can put new rules in the books.

SEC Chair Mary Jo White in a speech last week outlined her goals for regulating high-frequency trading (HFT), at a time when political interest over the fairness and risks of the practice has surged in the wake of a best-selling book by financial writer Michael Lewis.

White‘s intentions for regulating high-frequency trading, which has taken a dominant role in U.S. equity markets, include registration requirements for proprietary fast-traders. Under such rules, firms registering as broker dealers would have to meet net capital requirements and establish adequate risk management controls.

Canadian regulators propose reduced disclosure requirements for smaller issuers

By Daniel Seleanu, Compliance Complete

TORONTO, June 6, 2014 (Thomson Reuters Accelus) - Smaller public companies in Canada may soon benefit from relaxed disclosure requirements. The Canadian Securities Administrators (CSA), the country’s securities standard-setter, recently proposed several amendments that address continuous disclosures, prospectus disclosures, and certain governance obligations.  (more…)

Exclusive: U.S. Treasury unit seeks to resolve suit challenging Patriot Act power over foreign banks

By Brett Wolf, Compliance Complete

NEW YORK, June 3, 2014 (Thomson Reuters Accelus) - The U.S. Treasury Department’s anti-money laundering arm is quietly attempting to resolve a lawsuit challenging its use of a potent Patriot Act power against a Macau bank as well as the constitutionality of that authority, documents filed in federal court in Washington suggest.
The effort by Treasury’s Financial Crimes Enforcement Network (FinCEN) to avoid litigating the lawsuit brought by Banco Delta Asia (BDA) suggests the bureau is hoping to avoid a court battle that could weaken or perhaps even kill the extraterritorial power prized by U.S. authorities, Section 311 of the Patriot Act, former Treasury officials say.  (more…)

SEC bars, fines advisory owner for misrepresenting GIPS compliance

By Stuart Gittleman, Compliance Complete

NEW YORK, June 3, 2014 (Thomson Reuters Accelus) - The Securities and Exchange Commission has barred an investment adviser’s president and owner from the advisory and brokerage industries for misrepresenting his firm’s performance and its compliance with GIPS, the global investment performance standards.

Tuesday’s ruling, by SEC administrative law judge Cameron Elliot, may be the first formal SEC sanction against an adviser or an associated person for misrepresenting its compliance with GIPS, which is voluntary, although the SEC has sanctioned a firm that also invented a client with large investments with the firm. The SEC has warned that its examiners will focus on disclosures over fees, expenses and performance. (more…)

U.S. compliance salary report: More jobs, higher pay, but post-crisis boost is limited

By Emmanuel Olaoye and Stuart Gittleman, Compliance Complete

NEW YORK, May 29, 2014 (Thomson Reuters Accelus) - The job market for compliance professionals is picking up. But the high fines and complicated investigations financial services firms face as regulators and enforcers sharpen their scrutiny after the 2008 financial crisis have had a limited impact on compensation trends, boutique recruiters and global firms told Compliance Complete.

Average starting salaries in a broad range of financial compliance positions rose 2.3 percent to 4.2 percent in 2013, according to figures from Robert Half, an international recruitment firm. (See chart) That compares with about 3.4 percent among financial professionals as a group. (more…)

In bid to punish individual, FinCEN pursued MoneyGram business leaders, but caught compliance chief – source

By Brett Wolf, Compliance Complete

NEW YORK, May 20, 2014 (Thomson Reuters Accelus) - Although investigators with Treasury’s anti-money laundering unit tried to identify a senior business leader at MoneyGram International Inc who could be penalized over the money transfer giant’s admitted compliance failures, available evidence left them only one viable target – the firm’s former chief compliance officer, a former official with firsthand knowledge of the investigation said.

The push by Treasury’s Financial Crimes Enforcement Network (FinCEN) to send a stern message to the financial services community by targeting one of its own with a large fine began roughly a year and a half ago due to pressure from Capitol Hill. FinCEN investigators eyed a number of current and former MoneyGram employees, but found that senior business leaders had not left an evidence trail to follow. (more…)

Focus on bad bankers, not just their banks, New York’s Lawsky says

By Stuart Gittleman, Compliance Complete

NEW YORK, May 13, 2014 (Thomson Reuters Accelus) – Banks don’t do bad things – people do – so the people behind the alleged violations should face more regulatory scrutiny and personal accountability, said Benjamin Lawsky, Superintendent of the New York State Department of Financial Services.

Focusing on individuals could better deter misconduct , and could also stop sending signals that the bank where the individuals worked – and the banking industry overall – are bad, Lawsky told reporters at a Reuters financial services regulatory summit in Manhattan. (more…)

“Super managers,” governance spotlighted in economist Piketty’s blockbuster capitalism critique

By Henry Engler, Compliance Complete

NEW YORK – May 8, 2014 (Thomson Reuters Accelus) - How much of a role have corporate boards played in rising income inequality in the United States, the UK and elsewhere?

If one reads between the lines of French economist Thomas Piketty’s best-selling blockbuster book on capitalism and inequality – “Capital in the Twenty-First Century” – the answer might be: quite a bit.

The core of Piketty’s thesis and empirical evidence focuses on the long-term relationship between returns on capital and economic growth. Specifically, over long periods of time, when the return on capital exceeds the rate of economic growth, inequality tends to ensue. On the other hand, when growth exceeds capital’s return, income equality tends to improve as wealth is driven more by wage growth. Since 1970, according to Piketty, we have been living in world dominated by the former, with rising returns to holders of capital the primary force behind widening income gaps in the United States and certain European economies. In economic terms “r” – the return on capital – has been greater than “g” – the rate of growth – for some time. (more…)

INSIGHT: SEC cyber-risk exam guidelines set template for firms

By Abel Picardi, Compliance Complete

NEW YORK, May 6, 2014 (Thomson Reuters Accelus) - As the U.S. Securities and Exchange Commission tightens its supervision of technology security on Wall Street, with plans to examine cybersecurity preparedness at more than 50 broker-dealers and investment advisers, the agency has released a checklist intended to help firms review their controls whether or not they come into the crosshairs of examiners.

The move is in keeping with a cybersecurity push by SEC Chair Mary Jo White, as well as principles outlined in February by the National Institute of Standards and Technology. (more…)

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