Alstom’s former exec is in the hot seat, AUSTRAC releases the latest threat assessment for mutual banks and the EU is getting tougher on regulatory enforcement.

We share our financial crime highlights from the week of 28 October 2019.

Former Alstom Executive’s FCPA Trial Begins

The long-awaited trial of a former Alstom SA executive accused in 2013 of violating the U.S. Foreign Corrupt Practices Act (FCPA) officially began on Monday.

A UK citizen and formerly Paris-based senior executive for the French power and rail company, Lawrence Hoskins was allegedly involved in bribing Indonesian officials on behalf of Alstom’s U.S. subsidiary, Alstom Power, Inc.

The bribes paid out between 2005 and 2009, are believed to have been funneled through two outside consultants hired by Alstom Power — to secure a $118 million contract to build a power plant. Although Hoskins retired in 2004, the US government alleges he knew of the scheme, approved the two consultants and actively put all the pieces in place before leaving his post.

Since Hoskins is a foreign national and not a direct employee of Alstom Power, nor was he physically in the US during the alleged misconduct, the verdict will have significant implications for the FCPA’s legal reach.

Already, Hoskins’s case has proved to be challenging for the US government. His defense has resulted in a legal ruling that provides more structure for interpreting the law — prosecutors must prove that Hoskins was acting as an agent for the US subsidiary.

What constitutes an “agent” and whether Hoskins fits that description, as well as the extent to which he was aware of and involved in arranging the bribes, are questions currently before a jury.

Hoskins has maintained his innocence throughout. He asserts that as an employee of Alstom Power’s parent company, he approved the request for the consultants, but that he was not an agent of the US company. Hoskins argues that he’s been made a scapegoat in this scheme.

As for Alstom, the French company separately settled charges with the US government in 2014, agreeing to pay $772 million for FCPA violations relating to a larger corruption scheme that included but wasn’t limited to this case. It is one of the largest FCPA settlements to date.

AUSTRAC Assesses Mutual Banks

AUSTRAC has been going from strength to strength in regulatory toughness in recent months and has just released its risk assessment on mutual banking sector money laundering and terrorism financing.

The Australian regulator has found that the mutual banking sector is at high risk of being used for a variety of financial crimes. The report was created in partnership with the mutual banking sector and is one illustration of how useful public-private relationships can be.

Together they discovered that while mutual banking is at risk of being used for fraud, tax evasion and welfare fraud of the elderly, the main threat is from money laundering.

Nicole Rose, CEO of AUSTRAC commented: “Australians are increasingly using the mutual banking sector as a trusted, community-focused alternative to the major banks. As the sector continues to grow and consolidate, so too will its exposure to criminal exploitation.”

The risk assessment is one of the latest to come out from AUSTRAC in a bid to strengthen Australia’s financial system in the face of increasing misuse. The assessment has been well received by the industry as useful feedback on dealing with the threat of financial crime.

EU Regulatory Enforcement Toughens Up

A new EU body regarding the enforcement of anti-money laundering regulations has been proposed. Reports suggest that the discussions on this new body picked up speed a few months ago, due to a not-insignificant number of money laundering scandals across the bloc.

Just over two weeks ago, on 14 October 2019, former head of Romania’s Anti Corruption Directorate (DNA) Laura Codruţa Kövesi was appointed as the EU’s first chief prosecutor at the European Public Prosecutor’s Office (EPPO). She’s been considered for the post since at least March of this year.

Kövesi was forced from her position at DNA last year due to political maneuvering and was hotly tipped for the role. Current reports don’t name the new body, but if it isn’t EPPO then it stands to reason that the two institutions will be working closely together. Kövesi’s tenure as the chief prosecutor is set to begin properly in  November 2020 when EPPO is up and running.

The move to create a new body with AML powers is supposedly linked to the spate of money laundering scandals across Europe and growing dissatisfaction in the European Parliament with the European Banking Authority (EBA).

Critics assert that creating a new body would take too long to be effective but the EBA has failed to take on board criticism from internal reports relating to the Danske Bank scandal, leaving some Parliament members uncertain that there’s any appetite in the EBA to utilize the AML powers it has. Other authorities in the EU are being considered to have powers endowed to them, such as Europol.

Regardless of whether a new body is granted these powers or the EBA is incentivized to implement its current powers, regulatory enforcement in Europe is sure to change. With 5MLD and 6MLD on the horizon, regulatory requirements in Europe are about to become more demanding than ever.

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