With continued concerns about instability in the global economy, governments and financial institutions recognize the significant threats caused by economic crimes. Money laundering by narcotics dealers and nations evading sanctions, together with bribery, fraud, misappropriation of assets, identity theft and financial misconduct, all pose serious risks to the strength and security of the international economic landscape.
The annual Cambridge International Symposium on Economic Crime brings together thought leaders from around the world -- lawmakers, regulatory agency officials, judges, law enforcement professionals, compliance and risk management officers, white collar crime attorneys and even scholars -- for an in-depth look at the issues confronting the marketplace today to pose and discuss innovative approaches to disrupting global economic misconduct. Attendees also instruct each other on the techniques for the lawful sharing of information and the structuring of legal responses to the challenges posed.
BakerHostetler Partners John W. Moscow, John J. Carney and Jonathan R. Barr spoke at the most recent symposium, appearing alongside 300 speakers addressing the more than 1,000 delegates who gathered at the University of Cambridge earlier this month. "BakerHostetler has been taking a strong leadership role at this important international event," noted Moscow, who has been a featured speaker and participant since 1989.
Today, these lawyers share with the clients and friends of BakerHostetler some of the major points and themes expressed during the 2012 symposium -- issues that all companies doing business abroad and with business from abroad should consider and should incorporate into their corporate awareness and their compliance programs.
ILLEGAL ACTIVITY WITHIN INSTITUTIONS DEEMED "TOO BIG TO FAIL"
When a vital international financial institution is suspected of engaging in illegal activity or is operating at risk of being insolvent, what should governments consider to ensure that any action taken on the company has minimal impact on the marketplace? As noted during the conference, there are both political and economic implications when a company is considered "too big to fail." Will the institution be forced to shut down, causing disruption within its home country and potentially abroad? Or will enforcement officials receive a less-than-ideal response from the institutions themselves -- that as a vital contributor to the economy, the entity doesn't believe that the government can enforce any kind of severe penalty or punishment that would put the entity in jeopardy. In light of real-world examples of what can happen in these situations, regulators may now be more likely to pursue the individuals involved in the activity rather than the entity itself, to ensure that the company can continue operating and contributing to the economy. The symposium session included discussion of approaches in New York, London, Hong Kong, Tokyo and Singapore.
OFFSHORE FINANCIAL CENTERS AND CUSTOMER KNOWLEDGE
Offshore financial centers often do not require a great deal of knowledge about their customers, and traditionally have marketed that hands-off approach as a selling point. That market advantage is threatened by the United States' enactment of the Foreign Account Tax Compliance Act (FATCA), a broad reporting and withholding regime designed to improve tax compliance involving financial assets held offshore. Beginning in 2013, foreign financial institutions must enter into agreements with the IRS to collect, verify and report certain information about their customers who are U.S. persons, or face 30 percent withholding of certain payments to such institutions from the U.S. No longer will offshore financial centers be able to say that they do not know the identity of their accountholders, as they will be required to specify which customers are U.S. persons. In addition, the hands-off approach of offshore financial centers is further threatened by international concerns of identity theft and cybercrimes, which make the concept of "know your customer" all the more important.
FOREIGN CORRUPT PRACTICES ACT AND THE UK BRIBERY ACT
The UK Bribery Act, which specifically prohibits bribes to both government officials and private parties, is much broader than the similar U.S. Foreign Corrupt Practices Act, which reaches only bribes made to government officials. In this environment of increased international enforcement, there is considerable exposure for companies that fail to implement and maintain strong anti-corruption policies and meaningful employee training programs. Building those compliance programs can be costly and time-intensive -- and in the case of the UK Bribery Act, there is continued discussion of whether the UK's Serious Fraud Office has the resources and funding to fully enforce the law. Given the stakes, however, international companies cannot afford to take the risk of being non-compliant.
INTERNATIONAL FRAUDS AND INSOLVENCIES: GOVERNMENTS, U.S. RECEIVERSHIPS AND UK LIQUIDATORS
There is no question that there have been some successes in pursuing assets that have been improperly transferred as a result of fraud or mismanagement. But there is ongoing debate on how best to undertake that complicated task. One growing practice is coordinating the efforts of government officials and court-appointed receivers. While governments traditionally are more accustomed to pursuing prosecution, receivers, trustees and liquidators have historically had much greater success in making fraud victims whole through the pursuit of assets, although with vastly varying powers. The United States is considered the most efficient and cost-effective forum for international recovery efforts. Foreign entities are encouraged to seek U.S. counsel to assist in the recovery of assets in major frauds and insolvencies, even if the fraud occurred outside the United States (as long as some assets or evidence, such as bank records, reside in the United States).