FinCEN imposes $1.5m fine for Bank Secrecy Act violations
The Financial Crimes Enforcement Network (FinCEN) has conducted a civil enforcement investigation against The Kingdom Trust Company (Kingdom Trust) for violations of the Bank Secrecy Act (BSA) and its implementing regulations. The consent order states:
“Kingdom Trust’s process for identifying and reporting potentially suspicious activity … was severely underdeveloped and ad hoc, resulting in Kingdom Trust’s willful failure to timely and accurately file SARs. Kingdom Trust personnel with AML responsibilities have acknowledged not fully understanding federal SAR filing requirements and that they may have missed important information about some of their riskiest clients as the result of maintaining other, non-AML responsibilities.”
FinCEN’s Acting Director Himamauli Das said: “This enforcement action is an important statement that we will not tolerate trust companies with weak compliance programs that fail to identify and report suspicious activities, particularly with respect to high-risk customers whose businesses pose an elevated risk of money laundering.”
Two recent SEC charges
The Securities and Exchange Commission (SEC) has fined Carlos Eduardo Reyes Alvarez disgorgement of $368,045, prejudgment interest of $76,843, and a civil penalty of $160,000 for breaching the antifraud and anti-manipulation provisions of the federal securities laws stemming from his manipulation of at least 28 microcap stocks.
The SEC has also charged Tyler L. Andrews for making false statements while raising over $1 million from investors in an unregistered offering of securities for a luxury travel business, Platinum Travel and Entertainment, LLC, whose owner Gregory A. Ciccone fraudulently diverted all the money raised. The SEC previously charged Platinum and Ciccone with fraud. Andrews consented to permanent injunctions, $14,990 of disgorgement with prejudgment interest and a $75,000 civil penalty.
ASIC issues ‘greenwashing’ infringement notice
The Australian Securities and Investments Commission (ASIC) has issued an infringement notice to Future Super Investment Services Pty Ltd (Future Super), the promotor of the Future Super Fund, for a Facebook post that ASIC claims may have been false or misleading. The post in question made a statement about moving $400 million out of fossil fuels, which ASIC believes overstated the positive environmental impact of the Fund.
At the time of the post, Future Super had approximately $400 million in total funds under management but had no basis to represent that the entirety of those funds had been invested in fossil fuels prior to being invested in the Fund.
ASIC Deputy Chair Sarah Court stated that this action should serve as a message to the financial services industry that ASIC is continuing to focus on greenwashing and that industry using social media to promote green claims are not immune from ASIC action. ASIC expects the industry to be able to stand by their sustainability statements and back these up with evidence.
Future Super has paid a $13,320 infringement notice penalty.
FDIC publishes new report proposing reform to deposit insurance system
The Federal Deposit Insurance Corporation (FDIC) has published a comprehensive overview of the deposit insurance system and options for reform to address financial stability concerns stemming from recent bank failures.
The report discusses the bank failures of March 2023, and the history of deposit insurance in the United States. It then discusses the objectives and possible consequences of deposit insurance, and tools that may be used to support the objectives and address possible consequences. The report examines three options for deposit insurance reform that range in their departure from the status quo: Limited Coverage, Unlimited Coverage, and Targeted Coverage.
The FDIC believes targeted coverage best meets the objectives of deposit insurance of financial stability and depositor protection relative to its costs.
CFTC charges operator with fraudulently allocating trades
The Commodity Futures Trading Commission (CFTC) has filed a complaint against Systematic Alpha Management (SAM) and its owner, Peter Kambolin, for unfairly allocating trades between commodity pools and managed accounts, misrepresenting information to pool participants and managed account customers, and violating CFTC regulations. The CFTC seeks monetary penalties, disgorgement, restitution, registration and trading bans, and a permanent injunction against further violations. SAM and Kambolin defrauded pool participants and managed account customers, generating at least $1,451,559 in total trading profits for their proprietary accounts. The court has frozen their assets and granted the CFTC immediate access to their books and records, with a preliminary injunction hearing scheduled for May 8.
CFTC restitution for fraud
The Commodity Futures Trading Commission (CFTC) has confirmed a US District Court consent order for a permanent injunction, restitution, and equitable relief against Jared J Davis who conducted business as Erie Marketing, LLC. The order resolves a CFTC action filed on September 17, 2019, which alleged that Davis defrauded customers through a global binary options business he created and operated. The order requires Davis to pay $561,971 in restitution to victims of the fraudulent scheme and permanently prohibits him from engaging in further violations of the Commodity Exchange Act and CFTC regulations, as charged, and imposes permanent registration and trading bans. The CFTC warns that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets..
HKMA publishes Annual Report
The Hong Kong monetary Authority has published its Annual Report for 2022. As well as reviewing the previous year, the report highlights many of the authority’s priorities for 2023 and beyond. These fall under a num,ber of headings within the report including:
- Maintaining banking stability
- Building a safe and inclusive banking sector
- Future-proofing the banking sector
HKMA CEO Eddi Yue says in his foreword to the report: “At the HKMA, we will continue to fulfill our mandate of safeguarding monetary and banking stability in Hong Kong, and actively pursue developmental opportunities to showcase and strengthen our competitiveness as an IFC. We also remain committed to contributing to a more climate resilient and sustainable world.”
Where next for the Basel Committee?
Pablo Hernández de Cos, Chair of the Basel Committee on Banking Supervision, addressed an audience at the Eurofi High-level Seminar in Stockholm on the future of Basel.
The speech identified five main themes that the Basel committee is focusing on over the next five years:
Emerging risks: including several horizon-scanning initiatives looking at bank and supervisory implications of risks related to inflation, as well as risks specific to emerging market economies and cross-border booking models.
Digitalization of finance: including forthcoming publication of a report on the bank and supervisory implications of the ongoing digitalization of finance and a review by the end of 2023 of the treatment of permissionless blockchains
Climate-related financial risks: with work across all three pillars of regulation, supervision and disclosure.
Monitoring and review of existing standards and guidance: including a review of the Committee’s Core principles for effective banking supervision, an update of its Sound practices for banks’ interactions with highly leveraged institutions, and development os updated supervisory principles on banks’ outsourcing practices and their reliance on third- and fourth-party service providers.
Implementation and evaluation: The final theme in the speech was the full, timely and consistent implementation of Basel III with Hernández de Cos noting: “implementing the outstanding Basel III standards in a full and consistent manner in all jurisdictions is a critical step towards safeguarding the resilience of our banking system.”
FCA publishes Handbook Notice No 109
The Financial Conduct Authority has publishjed its latest summary of changes to the FCA Handbook. It includes changes made to the following sections of the Handbook:
- SUP 16 Annex 45AR, 16 Annex 45BG
- Commission Delegated Regulation (EU) 2017/587
- Commission Delegated Regulation (EU) 2017/583
- Commission Delegated Regulation (EU) 2017/588
FCA sees scope for improvement in AML measures of professional bodies
The Office for Professional Body Anti-Money Laundering Supervision (OPBAS), part of the Financial Conduct Authority, has published its latest progress report,
OPBAS supervises several Professional Body Supervisors in the legal and accountancy sector such as the Law Society and the Institute of Chartered Accountants in England and Wales to ensure they meet the AML standards required.
The report’s main findings are:
- The PBSs assessed have still not implemented a fully effective risk-based approach that prioritizes their AML supervisory and enforcement work.
- Significant weaknesses remain in many PBSs’ supervisory activity.
- None of the PBSs assessed maintained fully effective intelligence and information sharing arrangements.
- PBSs have made some progress in enforcement action, but still need to improve the overall level of effectiveness of their enforcement frameworks.
- PBSs have contributed to the implementation of sanctions following the Russian invasion of Ukraine.
A selected summary of key developments for regulated financial institutions
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