The SEC means business as it cracks down on corrupt individuals, Malta finally receives a full report from Moneyval and powerbrokers in France are feeling the weight of the rule of law.

We share our financial crime highlights from the week of 16 September 2019.

Responding to Foreign Corruption

Following on from one of last week’s stories, the Securities and Exchange Commission (SEC) is continuing to enforce the Foreign Corrupt Practices Act (FCPA). Former COO of Cognizant, Sridhar Thiruvengadam, settled charges on Monday.

The civil charges were brought against him for authorizing a bribe to a government official in India in 2014. While Thiruvengadam has not admitted or denied wrongdoing, he is cooperating with the SEC and must pay a fine of $50,000.

This marks the third executive from the Fortune 200 company implicated by the allegations. According to the SEC, the $2 million bribe was paid in exchange for a planning permit needed in order to continue construction on the company’s facility in Chennai, the capital of Tamil Nadu.

The demand for a bribe, method of payment and method of concealment were discussed during video conferences between Thiruvengadam and three other Cognizant employees, including its former chief legal officer and former president, who both currently face criminal charges related to the incident.

As for the company itself, Cognizant voluntarily reported the scheme in a timely manner and has avoided bearing much of the blame. But that doesn’t mean the company hasn’t suffered, the company paid out a total of $25 million in civil penalties in February. The SEC then announced that they were not pursuing additional legal action.

That the penalty was not more severe, serves as proof to other companies that an effective and responsive compliance program can mean the difference between taking on criminal charges as an entity and only having those responsible face court.

Moneyval and Malta

Revisiting last month’s story on Malta, Moneyval has now released its report detailing the nation’s regulatory shortcomings.

Moneyval has pointed to the need for Maltese authorities to strengthen its application of regulations on money laundering and financing of terrorism. Unfortunately, this message may be lost in the haze of Maltese media focusing on the official bodies of the Maltese government.

Malta does do well in aspects of the report. Moneyval accepts that the Maltese authorities have a broad understanding of its vulnerabilities but certain key issues are either under-analyzed or misunderstood.

The report concludes that obligations are being implemented by all businesses concerned but that major improvements are needed, Maltese-located businesses are in need of enhancing their compliance solutions and Malta itself needs an in-depth analysis of its exposure to money laundering through the various legal arrangements on the island.

Moneyval did end the report on a positive note, referencing Malta’s comprehensive framework, in legislation, for international co-operation.

The Corrupt Mayor of Levallois-Perret

Patrick Balkany was sentenced to four years in jail following hiding millions in euros from tax authorities. Isabelle Balkany, his wife, was sentenced to three years and both have been barred from holding office for 10 years. The Balkanys have held significant power for decades in a wealthy Parisian suburb, Levallois-Perret, where Patrick was mayor.

The case has enthralled French audiences – serving as a test for corruption and whether the entrenched elite could be held to the same standards as others. Since he assumed office in 1983, Balkany has often come under fire for his use of city funds.

In the past, he and his wife have always brushed off the claims as political targeting. However, an upcoming judgment for the couple in October, regarding money laundering and corruption, suggests that excuse has worn thin.

Former president Sarkozy is a friend of the couple, having attended several of his birthdays. The pair have also received previous convictions for the personal use of employees which came with suspended sentences.

The Balkanys have most recently been investigated since 2013 and were found to be hiding assets amounting to €4 million in tax. The investigation was triggered by a former political ally revealing to authorities that he had deposited millions of euros into a Swiss bank account controlled by Balkany.

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