NYDFS fines Habib Bank for AML violations   

On 7 September 2017, the New York Department of Financial Service ("NYDFS") announced fines against Habib Bank and its New York branch of $225 million for anti-money laundering ("AML") failures.  The fine follows a 2016 NYDFS examination that found weaknesses in the bank’s risk management and compliance measures and the bank’s failure to undertake extensive remedial actions required by a 2015 consent order. As a result of NYDFS’s most-recent findings, Habib Bank has agreed to surrender its license to operate its New York branch and has agreed to fulfil conditions to ensure an orderly wind down of the branch.

US charges several Turkish citizens, including former government officials, with US sanctions violation

On 6 September 2017, the Department of Justice ("DOJ") announced charges against several Turkish citizens which include: conspiring to use the US financial system to conduct transactions on behalf of the Government of Iran and other Iranian entities; laundering funds in connection with those illegal transactions; using millions of dollars in bribe payments; and defrauding several financial institutions by concealing the true nature of these transactions. The DOJ has also charged the former Minister of the Economy in Turkey, alleging that he received tens of millions of dollars’ worth of bribes in cash and jewellery from the proceeds of the scheme to provide services to the Government of Iran and to conceal those services from US government officials.

DOJ charges former army colonel with FCPA violation based on evidence collected from undercover operation

On 29 August 2017, the DOJ announced charges against a retired army colonel for his role in a foreign bribery and money laundering scheme in connection with a planned $84 million port development project in Haiti. The retired colonel, Joseph Baptiste has been charged with one count of conspiracy to violate the Foreign Corrupt Practices Act and to launder money. The complaint filed in the District of Massachusetts alleges that Baptiste solicited bribes from potential investors in infrastructure projects in Haiti, who were in fact undercover agents. The complaint alleges that Baptiste intended to provide bribes to Haitian officials through a non-profit entity that he controlled, and that he would purport to aid impoverished residents of Haiti in order to secure government approval of the project.

US imposes sanctions on Venezuela adopting the Russian sanctions model

On 24 August 2017, President Trump issued a new Executive Order targeting the current Venezuela regime. The next day, the US Department of the Treasury’s Office of Foreign Assets Control ("OFAC") announced the implementation of broad new "sectoral" sanctions applicable to the Government of Venezuela and Venezuelan state-owned entities, including state-owned oil producer Petroleos de Venezuela, S.A. ("PdVSA"). Details of the sanctions can be found in our e-bulletin here.

US imposes sanctions on Chinese and Russian entities for alleged transactions with North Korea

On 22 August 2017, the Department of the Treasury announced the designation of ten entities and six individuals in response to North Korea’s ongoing development of weapons of mass destruction violations of United Nations ("UN") Security Council Resolutions, and attempted evasion of US sanctions. According to the Treasury Department, these sanctions target Chinese and Russian companies and individuals that:

  • assist already-designated persons who support North Korea’s nuclear and ballistic missile programs;
  • deal in the North Korean energy trade;
  • facilitate its exportation of workers; and
  • enable sanctioned North Korean entities to access the US and international financial systems.

Any property or interests in property of the designated persons which are in the possession or control of the US will be blocked and US individuals are prohibited from dealing with the named entities and individuals.

SEC settles with hedge fund advisor for insider trading

On 21 August, 2017, the Securities and Exchange Commission ("SEC") announced that hedge fund advisory firm Deerfield Management Company L.P. has agreed to pay more than $4.6 million to settle charges that it failed to establish, maintain, and enforce policies and procedures reasonably designed to prevent the misuse of inside information, including information about confidential government decisions. The case relates to insider trading charges that the SEC recently filed against current and former Deerfield analysts and others involved in the alleged insider trading scheme.

Multiple states settle with Nationwide Mutual Insurance Company over 2012 data breach

On 9 August 2017, it was announced that 33 states in America had reached a settlement with the Nationwide Mutual Insurance Company and its subsidiary, Allied Property & Casualty Insurance Company, concerning an October 2012 data breach. The data breach, which the states allege had been caused by the failure to apply critical security to prevent hacking or viral infection, resulted in the loss of personal information belonging to 1.27 million consumers. The breach included social security numbers, drivers' license numbers, credit scoring information, and other personal data initially collected to provide insurance quotes to consumers applying for Nationwide insurance plans. In addition to agreeing to improve its data security, Nationwide will pay a total of $5.5 million.

Seventh Circuit upholds first spoofing conviction under Dodd-Frank reforms

On 7 August 2017, the US Court of Appeals for the Seventh Circuit upheld the conviction of Michael Coscia, the first person to be prosecuted under the anti-spoofing provisions implemented through the Dodd-Frank reforms. Mr Coscia had appealed his conviction, arguing that the anti-spoofing statute was void for vagueness and, in any event, that the evidence on that count did not support conviction. The Seventh Circuit disagreed, holding that the anti‐spoofing provision is not unconstitutionally vague as it provides clear notice and does not allow for arbitrary enforcement, and that Mr Coscia's conviction was supported by evidence.

Martin Shkreli found guilty of investor fraud

On 4 August 2014, it was announced that Martin Shkreli was convicted by a federal jury in Brooklyn of three counts of securities fraud and securities fraud conspiracy. Shkreli was the founder and managing member of hedge funds MSMB Capital Management LP ("MSMB Capital") and MSMB Healthcare Management LP ("MSMB Healthcare"), and the former Chief Executive Officer of Retrophin Inc. ("Retrophin"), a biopharmaceutical company. It was found that Shkreli used false representations and omissions to induce investors into supporting his funds. Subsequently, following trading losses, Shkreli sent fabricated performance updates to investors, boasting that the funds had made substantial profits when they had sustained disastrous losses. In addition, Shkreli withdrew more than $200,000 from MSMB Capital, well beyond the one per cent management fee and the 20 per cent net profit incentive allocation permitted by the partnership agreement for the fund. In addition, Shkreli and others conspired to engage in a scheme which recruited individuals, including Retrophin employees and contractors, to be nominee shareholders for the majority of Retrophin’s free trading shares in an attempt to avoid reporting obligations.

When sentenced, Shkreli faces a maximum of 20 years imprisonment on each of the two counts of securities fraud he has been charged with and up to five years imprisonment on the securities fraud conspiracy count found against him.