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Administration’s Anti-Corruption Efforts Likely to Yield Greater FCPA Enforcement in Latin America and Beyond | Womble Bond Dickinson

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Following the White House release, the government moved swiftly to make good on the Biden Administration’s commitment to fight corruption, starting with a region key to the economic and national security of the United States: Latin America. On July 1, the State Department released a list of citizens in three Latin American countries – Guatemala, Honduras, and El Salvador (the “Northern Triangle”) – who have “knowingly engaged in acts that undermine democratic processes or institutions, engaged in significant corruption, or obstructed investigations into such acts of corruption” in those countries. This list, dubbed the “Engel List,” after one of its sponsors, is issued under Section 353 of the United States-Northern Triangle Enhanced Engagement Act, and makes individuals ineligible for visas and admission to the United States. 

The “Engel List,” the Office of Foreign Assets Control’s Specially Designated and Blocked Person’s List, and the imposition of other sanctions are possible ramifications for individuals and companies found to be actively engaging in corrupt behavior in Latin America. But a key component of the Administration’s renewed focus on anti-corruption efforts is sure to be increased use of the Foreign Corrupt Practices Act (“FCPA” or the “Act”) as a tool to fight corruption and graft in the Northern Triangle. The FCPA makes it unlawful for a U.S. person or company to offer, pay, or promise to pay anything of value to a foreign government official, including but not limited to cash payments, for the purpose of obtaining or retaining business. Also covered by the FCPA is the authorization of payment of any gift, money, or promise of anything of value to any person, while knowing that all or a portion of that will be offered or passed on, indirectly or directly, to any foreign office for the purpose of assisting the U.S. person or company in obtaining or retaining business. The FCPA’s accounting provision also requires companies with securities listed on stock exchanges in the United States to make and keep books and records that accurately and fairly reflect the transactions of the corporation and to devise and maintain an adequate system of internal accounting controls.  

What makes increased enforcement of the FCPA a likely tool in the administration’s game plan in its corruption fight in the Northern Triangle is the expansive application of the prohibitions described above.  While the Act obviously applies to companies with their principal places of business in the United States, it also applies to any company issuing stock registered on a United States stock exchange or – importantly – their agents or affiliated entities overseas.

In addition, the FCPA applies to individuals including officers, directors, employees, agents, or any stockholder acting on behalf of a company. The definition of “foreign official” under the FCPA is equally expansive, and can mean a person, political party, candidate for foreign political office, or even family members of these individuals in certain circumstances. In this way, individuals associated with U.S. companies, individuals acting on their own, and many others can and may be subjected to enforcement actions under the FCPA for their dealings with corrupt government actors in Latin America, not just those individuals identified on the Engel List. 

Violations of the FCPA may result in up to five years of imprisonment and/or fines of up to $2,000,000 for corporations and other business entities, and up to $100,000 for individuals associated with such business entities. The penalties are far greater for violations of the FCPA accounting provisions: up to twenty years of imprisonment and $5 million fines for individuals, up to $25 million fines for corporations and other business entities. Not surprisingly, huge sums have been assessed against and ordered disgorged by companies found in violation of the Act.1  An FCPA enforcement action can be costly  in the court of public opinion and in very real terms, as to both economic interests and liberty interests.  The Act has the enforcement teeth to impose significant pain on companies running afoul of its proscriptions.

In light of the impending increased anti-corruption efforts by the government, companies operating in and doing business in Latin America must become ever more vigilant regarding compliance and monitoring. 

  • The identification of corruption as a national security concern and efforts to combat that corruption mean that the government’s enforcement eyes will become focused on companies and individuals doing business in the Northern Triangle.  
  • The FCPA, with its wide ranging applicability capable of facilitating enforcement actions not only against individuals and American companies but also against foreign subsidiaries and agents makes it a versatile tool in reigning in corruption in the Northern Triangle and beyond.
  • On January 1, 2021, Congress passed the Corporate Transparency Act (CTA) as part of the overall 2021 National Defense Authorization Act and under the scope of the Anti-Money Laundering Act of 2020 (AMLA). The passage of the CTA represents a significant legislative effort to combat money laundering, terrorism financing, organized crime, and other financial crimes, which will complement the Administration’s efforts. The AMLA includes a database as a means to facilitate a voluntary public-private information-sharing partnership among law enforcement agencies, national security agencies, financial institutions, and the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury for such purposes. The CTA also requires (1) the establishment of new federal beneficial ownership reporting requirements for certain U.S. domiciled or active entities, including foreign entities that operate in the U.S., and (2) FinCEN’s maintenance of a federal database for the beneficial ownership information collected. 
  • A robust and stringent compliance program is critical for companies doing business in Latin America moving forward.  In fact, the heightened focus on corruption in the Northern Triangle has already arrived and yielded FCPA enforcement actions, as recently disclosed by the companies involved, with two of those investigations involving Northern Triangle countries Guatemala and Honduras.2
  • Monitoring of activities of subsidiaries, agents, officers, and all parties involved will be key to successfully navigating the new world of aggressive anti-corruption efforts in Latin America. 

While the administration has begun its anti-corruption efforts by targeting the Northern Triangle, it is not likely to stop there.  Expect increased enforcement and anti-corruption efforts spreading around throughout the world. Companies should begin preparing now, and having a solid understanding of the FCPA is a good place to start. 

1 For example, in recent years, Petrobras has been ordered to disgorge $933.5 million in 2018; Goldman Sachs $606.3 million in 2020 (in addition to the significant embarrassment and negative press surrounding its involvement in the 1MDB Scandal); Siemens $350 million in 2008; and, Alcoa $161 million in 2014. See Richard L. Cassin., Goldman Sachs lands second on the FCPA disgorgement top ten, FCPA Blog, Nov. 9, 2020.
2 See Henry Cassin, Eight companies disclose new FCPA investigations, FCPA Blog, Aug. 24, 2021.


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Should Oligarchs’ Assets Be Seized for Ukraine Reparations?

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At first blush, it seems only fair that some of the sanctioned assets of Russian oligarchs, human rights abusers, and others high up in the kleptocratic Kremlin regime be diverted to help Ukraine rebuild after the war. The principle behind such a reparations scheme seems straightforward: Those who caused so much destruction in Ukraine should be responsible for making their victims whole. But the principles of tort law don’t apply to warfare. Ukraine deserves help rebuilding once the war is over, but assets seized from Russian kleptocrats shouldn’t finance the recovery.

There’s an important distinction to make here: The assets of Russian individuals should be treated differently than the frozen assets of the Russian government. For one thing, the sum of frozen government assets is about ten times that of frozen individual assets, and they’re more liquid. For another, the legal situation is different. There is a lively debate about whether and how various kinds of Russian government assets can be seized or sold. Treasury Secretary Janet Yellen has asserted that the United States has no legal authority to seize Russian sovereign assets, Philip Zelikow argues that there are precedents in international law for using frozen government assets as reparations; Paul Stephan disagrees; and Laurence Tribe argues that the International Emergency Economic Powers Act (IEEPA), the 1977 law that governs how sanctions are applied, empowers the U.S. government with the authority to give Ukraine the Russian central bank assets already frozen in the United States.

But assets taken by the U.S. government from Russian oligarchs shouldn’t be repurposed for reparations. There isn’t a clear legal authority to do so: Under the IEEPA, the president can freeze the assets of foreign nationals under certain conditions, but not seize them. In other words, the executive branch can prevent foreign nationals from moving or accessing their money or other things of value in an emergency to protect national security, but the frozen assets still ultimately belong to the sanctioned person, not the U.S. government.

Congress could try to create such an asset-seizure power and delegate to the president authority to enforce it as he sees fit, but there would undoubtedly be constitutional objections. When sanctioned people or entities have protested that asset freezes violate the Fourth Amendment’s prohibition of “unreasonable searches and seizures” or the Fifth Amendment’s injunction against the denial of “life, liberty, or property, without due process of law,” the courts have usually deferred to the government’s national security prerogatives. But it’s not clear that they would look so kindly on an asset seizure—a more severe action that’s much harder to reverse.

To seize the sanctioned assets of wealthy (or even not-wealthy) Russians would also be to concede that those assets are the legitimate property of their putative owners, which the U.S. government should not do. There’s a reason why the new sanctions task force led by the Justice Treasury Department is called “KleptoCapture”—the villas, yachts, apartments, and other expensive accouterments of the Russian elite are purchased with money stolen from the Russian people. Corruption in Russia, according to some estimates, could account for as much as 25 percent of its GNP. Some of that sum comes in the form of bribes, but much of it accrues by skimming off the government budget into private bank accounts—often in Cyprus, the Cayman Islands, Switzerland, or other tax havens where neither Western law enforcement nor the Russian mafia state can track it. By seizing and rerouting those stolen funds to Ukraine, the U.S. government would in a sense be retroactively recognizing the very corruption it rightly decries.

None of this is to say that Russia and its leaders shouldn’t remain under sanction. Rather, the frozen fruits of Russian corruption should remain frozen until conditions in Russia permit them to be returned to the Russian people—that is, given back to a democratically legitimate Russian government under the rule of law, and ideally one which has accepted and integrated with the European security order. There is precedent for long-term sanctions ending in such a way: The United States froze Iranian assets for more than thirty years, between the Islamic Revolution of 1979 and the Joint Comprehensive Plan of Action of 2015. As a matter of public diplomacy, the United States should make clear that it stands with the Russian people against the predation and corruption of their government, and is ready to return their money to them as soon as it is safe to do so. Meanwhile, sanctions against the Russian government, government-connected businesses and banks, and the Central Bank of Russia should be maintained at least until Ukraine’s full sovereignty over its entire territory is restored.

As for the Ukrainians, there’s every reason to give them a Marshall Plan as soon as the war ends. Unlike the original Marshall Plan, the United States won’t be solely responsible for reconstructing all of Western Europe. Rather, a large community of North American, European, and Indo-Pacific countries will likely be eager to help Ukraine rebuild. And they will deserve our help. They are, after all, fighting and dying to protect freedom and democracy against the world’s greatest threat to international peace. We shouldn’t pretend that the current war is a dispute between Ukraine, the plaintiff, and Russia, the respondent, and find that the respondent must make the plaintiff whole. The plaintiff is on our side. The respondent is an enemy that has already attacked us in numerous ways.

Every day, it looks more likely that Ukraine will win the war. They will need help if and when they do—help that should come not from the ill-gotten property of Russian oligarchs, but from us.




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Online ‘romance scam’ sees Abbotsford senior lose $270K – North Island Gazette

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An Abbotsford woman is warning others about a “romance scam” that recently resulted in her elderly mom losing $270,000.

“Sandra,” who did not want her real name used, said her mom, “Rita,” cleared out her registered retirement savings plan (RRSP) and was ready to take out a loan on her home before her family discovered what was happening.

The matter has been reported to the Abbotsford Police Department (APD), but investigating officer Det. Daryl Young with the major crime unit said it’s too late for Rita (not her real name).

“The sad reality is the money is gone, and so we’re trying to take more of an educational stance now – trying to get the word out there that these things are scams,” he said.

The fraud against Rita, who is in her late 70s, began last December but her family didn’t find out about it until the end of March. That’s when they were able to put the pieces together.

Rita, who was widowed last year, was active on Facebook, often posting messages about grief and pictures of flowers.

When her account was first set up, Sandra ensured that her mom’s privacy settings were locked down, but at some point, they became wide open.

A man reached out to Rita through Facebook Messenger. He said he had seen her profile picture and that she looked like a lovely person and he would like to get to know her better.

The two began exchanging messages. The scammer, who went by the name “Dr. Eric Wilson,” said he was in his 50s and a U.S. neurosurgeon working in Syria. His profile photo was of a man in a white lab coat with a stethoscope.

He often sent Rita photos of flowers or of his morning coffee, and would use terms of endearment such as “my dear” and “my darling.”

Rita didn’t realize that all the images, including his profile picture, were stock photos that could be obtained anywhere online.

Eric told Rita that his life was in danger in Syria and he needed to get out. He told her he needed help applying for his vacation benefits, but there were taxes that had to be paid first. He insisted she keep the matter between the two of them because he could be “beheaded” if anyone found out he was trying to escape.

“You can’t tell anybody until I have the chance to be there with you. Then I’ll get to meet everybody,” he told her.

Eric urged Rita to wire-transfer money to him that was taken from her RRSP, and coached her on what she should say if bank staff were suspicious.

Three different banks turned her down, saying it appeared that Rita was being defrauded, and one severed all ties with her when Rita refused to believe them.

But she was eventually able to transfer various sums, the largest being $130,000, which she told the bank was for a down payment on a house in the U.S.

She also sent another large sum of $70,000, but was told that Eric needed that to be the equivalent in U.S. funds, resulting in Rita sending another $15,000.

On another occasion, she sent him $16,000 for a “plane ticket.” There were also several smaller amounts.

Rita’s family learned about the scam when she asked her son if she could borrow $25,000, saying she had fallen in love with someone and they were going to get married, but she needed the money to get him out of Syria.

Sandra said the family had to sit down with Rita and tell her that she had been scammed.

“She vehemently denied everything because she was in love with this man and he was coming and he going to pay everything back … She didn’t believe (it was a scam), and she was so angry with us,” Sandra said.

She said her mom was vulnerable because she is trusting of others, was lonely following the death of her husband and is not internet-savvy. Also, because she is an immigrant, she didn’t recognize the poor English being used in Eric’s messages, even though he claimed to be a U.S. citizen.

The family shut down all of Rita’s social media and banking accounts and changed her passwords.

Then, they went to police. Rita didn’t want to report anything, but, because Sandra had set up power of attorney with her parents several years ago, she was able to file a complaint on behalf of her mom.

It wasn’t until police informed Rita she had been scammed that she finally believed it.

Det. Young said there are many similarities between Rita’s case and others. He said the scammers usually belong to an organized crime group – often based in Africa – and find their victims through social media, mostly Facebook, but also on dating apps.

“They’ll often say they have a very important job, and they’re overseas, and they’re stuck for some reason. They’ll say they’re doctors, neurosurgeons or soldiers and they’re in areas where people are in conflict,” Young said.

They will often involve another person – in Rita’s case, she was instructed to send money to Eric’s “employer” – and the email address used will look legitimate.

Young said it’s almost impossible to catch the criminals.

“These files are so hard for us to trace backwards. It’s basically like a spiderweb. There’s a reason why these scams are so successful – they’re very good at hooking people and they’re also very good at insulating themselves,” he said.

The scammers will never participate in video chats or phone calls and often limit the time frame they have available for messaging – usually because they’re busy targeting several other people in a day, Young said.

He said another issue is that the victims, although they are unknowingly being duped, willingly part with their cash.

“Ultimately, we have freedom in Canada to do what we want with our money,” Young said.

He said Rita’s case is similar to others that have occurred in the U.S., and the APD’s major crime unit is working with the FBI in trying to find the perpetrators.

Meanwhile, Sandra said her mom is fortunate to still own her home, which she can sell to replace what she lost.

Sandra said she encourages others, if they have elderly parents, to regularly check on their social media privacy settings and, if they have power of attorney, to ensure the banks have that information. If that had been the case with Sandra, the banks would have called her on her mom’s first attempt to make a large wire transfer.

Anyone who has been the victim of a similar scam can contact their local police. People who haven’t been a victim but want to report a scam can call the Canadian Anti-Fraud Centre (antifraudcentre.ca) at 1-888-495-8501.

FRAUD AWARENESS EVENT

The Abbotsford Police Department, in partnership with Archway Community Services, is holding a fraud information event on Friday, June 10 from 3 to 5 p.m. at Archway, 2420 Montrose Ave. Registration is required by calling 604-870-3763.



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“Dr. Eric Wilson” would sometimes send “Rita” photos of his morning coffee. She didn’t realize they were stock photos found online. (Photo by Fahmi Fakhrudin on Unsplash)

“Dr. Eric Wilson” would sometimes send “Rita” photos of his morning coffee. She didn’t realize they were stock photos found online. (Photo by Fahmi Fakhrudin on Unsplash)




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Woman Arrested in Rancho Cordova Sentenced to Over 7 Years in Prison for Identity Theft and Bank Fraud Scheme | USAO-EDCA

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SACRAMENTO, Calif. — Candice Nicole Freitas, 34, formerly of Martinez, was sentenced today by U.S. District Judge Troy L. Nunley to seven years and 10 months in prison for bank fraud, aggravated identity theft, and possession of reproduced U.S. Postal Service keys, U.S. Attorney Phillip A. Talbert announced.

According to court documents, between April and August 2018, Freitas and her co-defendant Cody Cannon committed a fraud scheme in which they used counterfeit U.S. Postal Service keys to open residential mailboxes, typically in large apartment complexes, and steal hundreds of pieces of U.S. mail throughout Northern California. From the stolen mail, Freitas and Cannon harvested financial information, credit and debit cards, government-issued IDs, and personally identifiable information (PII). They also defrauded banks by using the stolen bankcards to purchase goods and withdraw cash from ATMs in at least Vacaville, Folsom, Rocklin, and Rancho Cordova.

In August 2018, Freitas and Cannon were arrested at their motorhome, which was parked in a hotel parking lot in Rancho Cordova. During a search of the motorhome, law enforcement found hundreds of pieces of stolen mail, checks, and bankcards, as well as documents containing the PII of dozens of identity-theft victims. Law enforcement also found stolen and counterfeit government-issued IDs, including at least 20 California driver’s licenses and two U.S. passports. The U.S. Postal Inspection Service has identified over 1,500 victims of mail and identity theft associated with these offenses.

This case was the product of an investigation by the U.S. Postal Inspection Service, the Sacramento County Sheriff’s Department, the Folsom Police Department, and the Vacaville Police Department. Assistant U.S. Attorney Robert J. Artuz is prosecuting the case.

In October 2019, Cannon was sentenced to four years and nine months in prison for his involvement in this scheme.


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