1. Updates to prior stories:

  • SEC’s Whistleblower Program (follow-up to the story in our May 6, 2016 newsletter under “Still Whistling While You Work—Whistleblower Programs Update”)—with the addition of these three recently-announced awards, the SEC said that it has awarded over $68 million to 31 whistleblowers since the program’s inception in 2011:
    • May 20, 2016—SEC announced whistleblower award of $450,000 to be split between two individuals: The SECsaid that the award was made to the two individuals “for a tip that led the agency to open a corporate accounting investigation and for their assistance once the investigation was underway.”
    • May 17, 2016—SEC announced whistleblower award of over $5 million: Billed as the third highest award granted to date under its whistleblower program, the SEC announced that it was awarding “between $5 million and $6 million” to an unidentified “former company insider whose detailed tip led the agency to uncover securities violations that would have been nearly impossible for it to detect but for the whistleblower’s information.”
    • May 13, 2016—SEC announced $3.5 million whistleblower award: The award was made to the unnamed whistleblower for providing information that “significantly contributed to the success” of the SEC’s ongoing investigation in the case. The SEC had previously denied any award to the whistleblower on the grounds that the information provided related to an existing investigation, but reversed its denial after the whistleblower appealed.
  • May 6, 2016—Liberty Reserve founder sentenced to 20 years in prison for money-laundering: Arthur Budovsky was sentenced in the S.D.N.Y. to 20 years imprisonment for running a massive money laundering enterprise through his company Liberty Reserve S.A., a virtual currency once used by cybercriminals around the world to launder the proceeds of their illegal activity. Follow-up to the story about this case in our February 2016 newsletter under “FCPA and Anti-Money Laundering Enforcement Review—‘Follow the Money.’"

2. Briefly Noted

New rulemaking:

  • May 5, 2016—In response to the Panama Papers, the White House announced a series of “Steps to Strengthen Financial Transparency, and Combat Money Laundering, Corruption, and Tax Evasion: The steps set forth in the Fact Sheet released by the Obama Administration are “actions to combat money laundering, terrorist financing and tax evasion,” and include (1) final Department of Treasury/FinCEN regulations issued under the Bank Secrecy Act (BSA) regarding “Customer Due Diligence Requirements for Financial Institutions” that will increase transparency by requiring U.S. financial institutions to “know” and keep records on the true beneficial owners behind the anonymous entities that use their services (posted in Federal Register on May 11, 2016; effective date July 11, 2016; final applicability date May 11, 2018); (2) proposed Treasury/IRS tax rules that would close a loophole that allows foreigners to hide assets or financial activity behind anonymous entities established in the U.S.; and (3) proposed legislation aimed at strengthening the tools in the government’s arsenal to fight corruption and money laundering. The Obama Administration also specifically called upon Congress “to act on long-overdue proposals that help crack down on tax evasion” and “to provide additional tools to combat illicit financial activity and tax evasion.”
  • April 4, 2016—FinCEN proposed an amendment to the definition of “Broker-Dealer in Securities” in the BSA to include “funding portals”: FinCen published the Notice of Proposed Rulemaking in the Federal Register, requesting that comments be submitted by June 3, 2016. FinCen said that it proposed the amendment in order to ensure that funding portals “that are involved in the offering or selling of crowdfunding securities” are required to implement the same policies and procedures designed to achieve compliance with the BSA requirements that are currently applicable to brokers or dealers in securities, including the filing of suspicious activity reports.

April 19, 2016—SEC announced the following two financial fraud cases against “companies and then-executives accused of various accounting failures that left investors without accurate depictions of company finances”:

  • Technology manufacturer Logitech International agreed to pay a $7.5 million penalty for fraudulently inflating its FY 11 financial results to meet earnings guidance and committing other accounting-related violations during a five-year period. Logitech’s then-controller and then-director of accounting agreed to pay penalties of $50,000 and $25,000, respectively, for violations related to Logitech’s warranty accrual accounting and failure to amortize intangibles from an earlier acquisition. The SEC also filed a complaint in federal court against Logitech’s then-CFO and then-acting controller alleging that they deliberately minimized the write-down of millions of dollars of excess component parts for a product for which Logitech had excess inventory in FY11; and
  • Three former executives at battery manufacturer Ener1 agreed to pay penalties for the company’s materially overstated revenues and assets for year-end 2010 and overstated assets in the first quarter of 2011. The financial misstatements stemmed from management’s failure to impair investments and receivables related to an electric car manufacturer that was one of its largest customers. The former CEO and Chairman, former CFO, and former CAO agreed to pay penalties of $100,000, $50,000, and $30,000, respectively.

3. Talks about town:

  • On May 16, 2016, FinCEN Deputy Director Jamal El-Hindi spoke at the Institute of International Bankers Annual Anti-Money Laundering Seminar in New York.
  • On May 12, 2016, SEC Enforcement Director Andrew Ceresney gave the keynote speech at the Securities Enforcement Forum West Conference in San Francisco, California. Assistant Attorney General Leslie R. Caldwell also spoke at the event.
  • On April 18, 2016, Assistant Attorney General Caldwell spoke at the Health Care Compliance Association’s 20th Annual Compliance Institute in Las Vegas.