Corruption in football comes to light, APAC regulators provide instructions for financial institutions and FinCEN delivers guidance on the pandemic and PPP.
We share our financial regulatory highlights from the week of 6 April 2020.
Money Laundering Goals
There’s nothing like a scandal to grab attention from other crises in the world. And World Cup Football bribery soaks up attention like nothing else — two former executives from US media company Fox have been charged due to links with the tainted bids for the 2018 and 2022 World Cups.
US federal prosecutors charged the two Fox executives with corruption, bank fraud and money-laundering on 6 April 2020. An employee for Spanish media company Imagina was charged with them.
Bribes were allegedly paid to officials from the football governing bodies in South America, North America, Central America and the Caribbean, CONMEBOL and CONCACAF in exchange for television rights contracts. The contracts spanned from regional competitions to World Cup matches – the case was borne out from the 2015 scandal which saw FIFA President, Sepp Blatter step down from his position.
The prosecution has led to an indictment from 2010 being unsealed and brought to light that two South American FIFA officials received bribery payments in exchange for voting for Qatar’s bid for the 2022 World Cup. Other FIFA officials from Guatemala and Trinidad received bribes to vote for Russia’s 2018 World Cup bid.
Assistant Director in Charge of the FBI’s New York field office, William F. Sweeney Jr, commented on Monday: “The profiteering and bribery in international soccer have been deep-seated and commonly known practices for decades…Their schemes included the use of shell companies, sham consulting contracts and other concealment methods to disguise the bribes and kickback payments and make them appear legitimate”.
Since much of this came to light thanks to the FBI investigation in 2015, the US government has accused 45 individuals and sports companies of over 90 crimes with over $200 million being used for bribes. Only six have been sentenced so far, 22 have pleaded guilty and five have died.
12 have remained in the home countries and are fighting extradition or local legal action. This case is an interesting example of US extra-territoriality with its AML compliance procedures. It’s thanks to the work of the FBI that this information regarding widespread corruption came to light.
FMA and HKMA Issue New Guidance
Regulatory changes are being made across the globe in response to the COVID-19 crisis. Most recently New Zealand’s Financial Markets Authority (FMA) and the Hong Kong Monetary Authority (HKMA) have recently weighed in with guidance for financial institutions (FI).
The FMA has permitted delayed verification for new businesses. However, it warned that there is a risk of FIs products and services being targeted by criminals in this environment. Money laundering and terrorism funding efforts must be identified and suspicious activities should be reported in line with local regulation.
New Zealand’s regulator also warned firms that it is essential to make sure that regular business practices are not interrupted and that AML/CFT risks for FIs should be mitigated via transaction limits and monitoring.
HKMA has issued guidance in line with FATF recommendations for eKYC procedures to achieve remote onboarding. The regulator is also allowing simplified due diligence in certain circumstances where authorized institutions have lowered AML/CFT risks.
Hong Kong’s regulator, like many others, has warned FIs that there is a heightened risk of being exploited by criminals. HKMA issued guidance on specific crimes that are likely to occur, such as face mask scams and changes to customer financial behavior.
FinCEN Guidance for COVID-19
Following its initial message in mid-March, FinCEN offered financial institutions additional guidance on April 3 regarding reporting obligations during the pandemic. Even though companies under US jurisdiction still must comply with the Bank Secrecy Act, like FINTRAC in Canada, FinCEN recognizes that COVID-19 continues to strain resources and that there may be “reasonable delays” in fulfilling obligations as a result.
What constitutes reasonable is left to interpretation. But it’s likely FinCEN will want to see documentation that explains why any delays occurred, as well as the steps taken to avoid them. Steps, like automating manual tasks or implementing innovative approaches to compliance programs — an action FinCEN, reiterates its support for in this April 3 message — will help FinCEN fairly assess compliance even in these challenging times.
The regulator asked companies under US jurisdiction with concerns about complying with reporting obligations during the pandemic to contact them right away. To facilitate such communication, FinCEN created a specific COVID-19 drop-down option on the “Need Assistance” section of its website to help direct inquiries. Financial institutions are encouraged to use this option to communicate concerns.
FinCEN also confirmed the suspension of changes to currency transaction report (CTR) filing obligations, specifically those relating to sole proprietorships and entities using a DBA (doing business as) name. These were to be implemented as a result of a previous ruling by FinCEN on February 6. While financial institutions that have changed their processes can operate under the new obligations, those that haven’t yet should continue operating under the obligations that existed prior to the ruling.
Finally, FinCEN issued guidance related to the disbursal of funds under the recently passed CARES Act. If a loan applicant under the new law’s Paycheck Protection Program (PPP) is an existing customer, re-verification is not required. For non-PPP loan applicants, financial institutions should refer to a FinCEN ruling from September 2018, which offers a level of relief when complying with beneficial ownership requirements when certain criteria are met.