New Sheriff In Town As Rolls-Royce Pays Record Penalty For Foreign Bribery And Corruption

Rolls-RoyceOn 17 January 2017, the UK Serious Fraud Office (“SFO”),[1] the US Department of Justice (“DOJ”),[2] and the Brazilian Ministério Público Federal (“MPF”) announced an $800 million global settlement with Rolls-Royce plc and Rolls-Royce Energy Systems Inc., (together, “Rolls-Royce”) resolving allegations of a long-running scheme to bribe foreign officials in South America, the Middle East, Eastern Europe, and Asia in exchange for assistance in obtaining government contracts. In addition to the payment of disgorgements and fines – the largest ever imposed under the UK’s Bribery Act 2010 (“UK Bribery Act”) – Rolls-Royce has agreed to implement a number of compliance measures and reporting requirements pursuant to deferred prosecution agreements (“DPAs”) with UK, US, and Brazilian authorities. The joint settlement, which was spearheaded by the SFO, heralds a new era in global cooperation and coordination in the enforcement of bribery and corruption laws.

Unprecedented simultaneous tripartite global penalty

Under its DPA with the SFO, Rolls-Royce will pay a penalty of over £497 million (US $612 million), comprising disgorgement of profits of £258 million and a financial penalty of £239 million (US $294 million), plus interest. In addition, Rolls-Royce will pay approximately £13 million (US $16 million) to reimburse the SFO’s full investigation and litigation costs.

In the US, Rolls-Royce has agreed to pay a criminal penalty of nearly $170 million (UK £138 million) for conspiring to violate the Foreign Corrupt Practices Act (“FCPA”) by having paid bribes in excess of $35 million between 2000 and 2013. The penalty reflects a 25-percent reduction from the bottom of the US Sentencing Guidelines fine range and a credit of more than $25 million (UK £20 million) in recognition of the fine paid in Brazil. The settlement with the DOJ falls within the top fifteen largest FCPA settlements of all time.

In Brazil, Rolls-Royce has agreed to a fine of approximately $25 million, reflecting $12 million in profits received from contracts with Brazil’s state-run oil company, Petrobras, $6 million paid in kickbacks paid to intermediaries, and a fine equal to the amount of kickbacks.

DPAs – more than just a fine

In the UK, DPAs are voluntary agreements which result in the suspension of a prosecution in return for the offending company meeting certain obligations including that the company must account for its conduct before a criminal court. The terms of the DPA must be approved by a judge as fair, reasonable, proportionate, and in the interests of justice. A DPA is not available to individuals. Upon review, on 17 January 2017, Sir Brian Leveson, sitting as a judge in the Crown Court, approved the Rolls-Royce DPA noting that the financial penalty was “broadly comparable to a fine that a court would have imposed on conviction following a guilty plea.”[3]

In addition to payment of the fine, under the UK DPA, Rolls-Royce is required to continue the independent compliance review of its approach to anti-bribery and anti-corruption which commenced in January 2013 when Rolls Royce appointed independent lawyer, Lord Gold, to conduct the review. Lord Gold has already produced two interim reports and is due to produce a third report by the end of March 2017. Rolls-Royce has agreed to provide the SFO with Lord Gold’s third report and produce a written Implementation Plan setting out how it will give effect to the third report’s recommendations and any other outstanding recommendations not yet implemented in the first and second reports. Rolls-Royce must implement or have sustainment plans to execute the Implementation Plan to the satisfaction of Lord Gold within 2 years of its commencement. Once the Implementation Plan is complete, Rolls-Royce must obtain a final report from Lord Gold and provide it to the SFO.

In addition to these compliance measures, Rolls Royce has agreed to continue its cooperation with the SFO including the disclosure of all relevant information and material in its possession, custody or control, which is not protected by legal professional privilege, in respect of its activities and those of its present and former directors, employees, agents, consultants, contractors and sub-contractors. It must also use its best efforts to make available for interview, as requested by the SFO, present or former officers, directors, employees, agents and consultants of Rolls-Royce.

Much like in the UK, DPAs in the US set the terms by which prosecutors will decline to pursue a case against the offending company. The DOJ agreed that it will not pursue a criminal or civil case against Rolls-Royce, provided that, within three years, the company pays the $170 million penalty, cooperates fully with US and foreign authorities in all matters related to corrupt payments, implements a compliance program that meets the elements identified in the DPA, and annually reports to the DOJ regarding remediation and implementation of its compliance program. Among other requirements, Rolls-Royce must develop and maintain policies and procedures addressing particular risk areas (e.g., gifts, entertainment, travel, political contributions and charitable donations) through periodic risk-based review, assign one or more senior corporate executives for implementation and oversight of the policies and procedures, implement periodic training and compliance certifications, establish an effective system for internal reporting and investigation, and institute risk-based due diligence and compliance requirements for all agents and business partners. The DPA does not provide any protection against the prosecution of individuals.

Brazilian law empowers the relevant authorities to enter into agreements (“leniency agreements”) with entities that have cooperated with the authorities’ investigations. By satisfying the conditions of the agreements, companies may face lower fines or lesser sanctions. Rolls-Royce reportedly provided the MPF with the results of an internal investigation in early 2015 and agreed to cooperate with Brazilian authorities. The terms of its agreement with the MPF also impose measures designed to ensure that the company enhances its existing compliance programs.

Cooperation can be a mitigating factor

Rolls-Royce’s cooperation with and accountability to regulators appears to have factored into the global settlement. In the UK, the court acknowledged that, despite not initially self-reporting its conduct, Rolls-Royce cooperated extensively with the SFO since 2012, and “[c]ould not have done more to expose its own misconduct.”[4] This extensive cooperation was one of the primary reasons the court concluded that the DPA was in the interests of justice and a relevant factor in mitigation when assessing the value of the agreed penalty. However, the UK settlement does not conclude the matter in its entirety. As noted by the court, the SFO will continue to investigate the conduct of current and former Rolls-Royce employees. These individuals are afforded no protection from prosecution under the DPA and, given the wide-ranging allegations documented in the DPA’s statement of facts, more charges seem likely.

The US also acknowledged Rolls-Royce’s cooperation throughout the government investigation, including its thorough internal investigation, numerous factual presentations, and producing witnesses for interviews. Going forward, Rolls-Royce must continue to cooperate for three years under the terms of its settlement with the DOJ, and must promptly report any evidence or allegations of past or new FCPA violations, truthfully disclose all factual information, provide documents or evidence requested by the DOJ, and use its best efforts to make current and former officer, directors, employees and agents available for interviews or testimony.

SFO led investigation – A new trend?

To date, the US has irrefutably been the global leader in investigating and enforcing anti-bribery and anti-corruption offences. In 2016, twenty-seven companies paid approximately $2.48 billion to resolve criminal and civil FCPA enforcement matters with the DOJ and the Securities and Exchange Commission. In contrast, the SFO has been criticised for failing to undertake comprehensive investigations capable of securing high-profile convictions under the UK Bribery Act. This has led many commentators to conclude that the UK Bribery Act is less effective than the FCPA, despite the fact it is more extensive than the FCPA in terms of its jurisdictional reach and the conduct it prohibits.

Rolls-Royce’s DPA with the SFO is only the third of its kind endorsed by English courts. In each instance, courts have emphasized the importance of self-reporting. Indeed, Sir Brian Leveson noted in his judgment endorsing the Rolls-Royce settlement that a “DPA will likely incentivise the exposure and self-reporting of wrong doing by organisations in similar situations to Rolls-Royce. This is of vital importance in the context of the investigation and prosecution of complex corruption cases in bringing more information to the attention of law enforcement agencies so that crimes can be properly investigated, and prosecuted effectively. Furthermore, the effect of the DPA is to require the company concerned to become a flagship of good practice and an example to others demonstrating what can be done to ensure ethical good practice in the business world.”[5]

The Rolls-Royce settlement may also signal a new trend in global anti-bribery and anti-corruption enforcement. It is the single largest individual investigation the SFO has conducted to date, spanning a four year period, with over 30 million documents reviewed, and numerous arrests and interviews of current and former Rolls-Royce employees (taken both voluntarily and under compulsion). Additionally, the settlement follows in the footsteps of VimpleCom’s $795 million resolution with US and Dutch authorities in 2016, having been reached with the assistance of law enforcement officials in several jurisdictions, including Austria, Germany, the Netherlands, Singapore and Turkey. The scope of the SFO’s investigation and its cooperation with other global law enforcement agencies, together with the resulting penalty, should be a warning to businesses operating internationally that they may face scrutiny from several global regulators simultaneously and expect intense scrutiny of world-wide conduct.

Gone are the days of US authorities being the lone sheriff in town, policing foreign companies that have contacts in the US but consoling themselves to non-intervention by the home countries. Rather, companies must be aware that there are now consequences for non-compliance on their home turf as well. As the SFO and other foreign authorities demonstrate the will to pursue bribery and corruption cases, the US may allow the countries in which corrupt companies are domiciled to police those practices at home.

[1]   See SFO Case Information, Rolls-Royce PLC (17 January 2017), available at

[2]   See Press Release, Rolls-Royce plc Agrees to Pay $170 Million Criminal Penalty to Resolve Foreign Corrupt Practices Act Case (17 January 2017), available at

[3]   See Serious Fraud Office v Rolls Royce PLC Rolls-Royce Energy Systems Inc [2017] at paragraph 63, available at 

[4]   See Serious Fraud Office v Rolls Royce PLC Rolls-Royce Energy Systems Inc [2017] at paragraph  38, available at

[5] See Serious Fraud Office v Rolls Royce PLC Rolls-Royce Energy Systems Inc [2017] at paragraph  60, available at

DOJ Releases its 2016 False Claims Act Recovery Statistics

DOJ False Claims actOn Wednesday, the Department of Justice (DOJ) released its annual False Claims Act (FCA) recovery statistics, which revealed that Fiscal Year 2016 has been another lucrative year for FCA enforcement.  Based on these statistics, DOJ recovered more than $4.7 billion in civil FCA settlements this fiscal year — the third highest annual recovery since the Act was established.  Since 2009 alone, the government has recovered $31.3 billion in FCA settlements and judgments.  This is a truly staggering statistic.  It shows that the government’s reliance on the FCA to combat fraud will continue for the foreseeable future.

The healthcare and financial industries represent the largest portions of this year’s FCA recoveries.  In the healthcare industry alone, DOJ recovered a total of $2.5 billion based on federal enforcements.  DOJ also touted its instrumental role in assisting states recovering funds overpaid under state Medicaid programs.  From the financial industry, the government collected another $1.7 billion, largely as a result of enforcement actions arising from alleged false claims in connection with federally insured residential mortgages.

The number of new FCA matters through both qui tam and non-qui tam actions has increased since last year.  Interestingly, however, the statistics indicate that the share of settlements and judgments for relators declined—the percentage of the total recoveries from qui tam suits decreased from 80.7% in 2015 to 61% in 2016.  Most significantly, the percentage of recoveries for cases where the government declined to intervene decreased from 31% to 2.2% since last year.  Although the cause for this decline is uncertain, one could argue that this indicates that DOJ views the assistance of relators as less valuable in recent years.

Notwithstanding the specific observations related to the industries and types of actions resulting in recoveries this fiscal year, the statistics demonstrate that the FCA remains a powerful tool for the government’s fraud deterrence efforts.

Copyright © 2016, Sheppard Mullin Richter & Hampton LLP.

Multi-Level Tipping: Insider Trading Cartoon Series, Vol. XI [VIDEO]

In this Presidential transition season, we bring you a very special episode of the Insider Trading Cartoon Series.

David Smyth has a wide-ranging enforcement and litigation practice that focuses on representation of individuals and corporations facing action by federal and state authorities.

Part 1 – The Insider Trading Cartoon Series Vol. I — Classical Theory

Part 2 – Insider Trading Cartoon Series, Vol. II — Temporary Insiders

Part 3 – The Insider Trading Cartoon Series, Vol. III — Very Temporary Insiders

Part 4 – Insider Trading Cartoon Series, Vol. IV — Rank-and-File Employees [VIDEO]

Part 5 – Insider Trading Cartoon Series, Vol. V — Misappropriation Theory [VIDEO]

Part 6 – Insider Trading Cartoon Series, Vol. VI — Misappropriation (Part Deux) [VIDEO]

Part 7 – Insider Trading Cartoon Series, Vol. VII — Misappropriation Theory (Part the Third)

Part 8 – Negligence Based Charges – The Insider Trading Cartoon Series, Vol. VIII [VIDEO]

Part 9 – Tender Offers – The Insider Trading Cartoon Series, Vol. IX [VIDEO]

Part 10 – Tipping (Pre-Newman): Insider Trading Cartoon Series, Vol. X

Salman Decision: Supreme Court Weighs in on Insider Trading

insider trading law Supreme CourtSignificant decision comes after nearly two decades of silence. For the first time in nearly 20 years, the US Supreme Court has weighed in on insider trading law and handed a victory to the government and its insider trading enforcement efforts. In Salman v. United States,[1] the Court put to bed confusion generated by the US Court of Appeals for the Second Circuit’s decision in United States v. Newman.[2] In Newman, the Second Circuit held that to be guilty of insider trading, (i) a tippee must know that the insider/tipper breached a duty of confidentiality in exchange for a “personal benefit” and (ii) the personal benefit must be an “an exchange that is objective, consequential, and represents at least a potential gain of a pecuniary or similar valuable nature.”

The second part of this holding posed more questions than it answered because it appeared to conflict with the Supreme Court’s 1983 decision in Dirks v. SEC.[3] The Court in Dirks found that an insider/tipper may be liable for insider trading, and a tippee derivative liable, only if the insider disclosed confidential information in exchange for a personal benefit. And this “personal benefit,” Dirks found, can be shown when an insider “makes a gift of confidential information to a trading relative or friend.” But in 2014, Newman injected a pecuniary-gain element into the personal-benefit test, leaving the government and defense counsel to wonder what is required when a tipper gifts information to a relative or friend who then trades on the information. As discussed below, Salman has dispelled this confusion by following Dirks in holding that an insider’s gift of confidential information to a trading relative is a sufficient personal benefit.

The Newman Case

In Newman, defendants Todd Newman and Anthony Chiasson were “remote” or “downstream” tippees charged with trading on material nonpublic information (MNPI) that they received from other tippees concerning earnings information at two prominent technology companies.

At trial, Newman and Chiasson urged the court to adopt jury instructions that predicated guilt upon a showing that they knew the insiders tipped the MNPI in exchange for a personal benefit. US District Judge Richard J. Sullivan found that although such an instruction could be supported by Dirks, he was obliged to follow the Second Circuit’s decision in SEC v. Obus,[4] which, arguably, only required a showing that the tippee knew of a tipper’s breach of duty to establish scienter.[5] Newman and Chiasson were convicted at trial.

On appeal, the Second Circuit reversed both convictions. The court held that a tippee only knows of the tipper’s breach of fiduciary duty if “he knew the information was confidential and divulged for personal benefit.”[6] In other words, the court agreed with defendants that knowledge of a tipper’s breach of fiduciary duty required knowledge that the confidential tip was made in exchange for a personal benefit.[7] But the court further held that a personal benefit cannot be inferred “by the mere fact of a friendship”; rather, it must be established through “proof of a meaningfully close relationship that generates an exchange that is objective, consequential, and that represents at least a potential gain of a pecuniary or similarly valuable nature.”[8] The government appealed the Second Circuit’s decision, but the Supreme Court declined to hear the case.

The Salman Case

In the summer of 2015, the US Court of Appeals for the Ninth Circuit decided United States v. Salman,[9] in which defendant Bassam Yacoub Salman, a remote tippee, had received and traded on MNPI from his brother-in-law Michael Kara, who in turn had obtained the information from his older brother Maher Kara, an investment banker at a large bank. Evidence showed that Salman was aware that the MNPI originated with Maher, and that from 2004 to 2007, Salman and Michael had profited from trading in securities issued by the bank’s clients just before major transactions were announced, but there was no evidence that Maher received any pecuniary benefit for his tips. Salman was convicted at trial.

On appeal, Salman argued that under Newman, the evidence was insufficient to show that Maher had tipped the information to his brother in exchange for a pecuniary benefit or that Salman knew of any such benefit. The court dismissed this argument as a strained misreading of Newman, holding that Newman did not seek to undermine Dirks’s crucial observation that a tipper may obtain a personal benefit when (s)he “makes a gift of confidential information to a trading relative or friend.” Otherwise, as the court noted, “a corporate insider . . . would be free to disclose [MNPI] to her relatives, and they would be free to trade on it, provided only that she asked for no tangible compensation in return.” Notably, the Ninth Circuit held that Newman’s personal-benefit language must be interpreted in a narrower way than others might attempt to use it, and that to the extent Newman cannot be interpreted so narrowly, the Ninth Circuit would “decline to follow it.”[10] Salman appealed the Ninth Circuit’s holding, and the Supreme Court granted certiorari.

The Supreme Court’s Decision

In Salman v. United States,[11] the Court unanimously affirmed the Ninth Circuit’s holding. The Court squarely rejected Salman’s argument that an insider must receive a pecuniary quid pro quo from a tippee for there to be a sufficient personal benefit. The Court found that Dirks made clear that a tipper breaches a fiduciary duty—and receives a personal benefit—by making a gift of confidential information to a “trading relative or friend,” which clearly happened in this case. Notably, the Court declined to adopt the government’s broader argument that “a tipper personally benefits whenever the tipper discloses confidential trading information for a noncorporate purpose.”[12] Rather, the Court found that Dirks “easily resolves the narrow issue presented here.”[13] In applying Dirks, the Court found that “Maher, a tipper, provided inside information to a close relative, his brother Michael. Dirks makes clear that a tipper breaches a fiduciary duty by making a gift of confidential information to ‘a trading relative,’ and that rule is sufficient to resolve the case at hand.”[14]

Regarding the Second Circuit’s holding in Newman, the Court found that “[t]o the extent the Second Circuit held that the tipper must also receive something of a ‘pecuniary or similarly valuable nature’ in exchange for a gift to family or friends, Newman, 773 F.3d, at 452, we agree with the Ninth Circuit that this requirement is inconsistent with Dirks.”[15] The Court held that Salman’s jury was properly instructed that a personal benefit includes the benefit one would obtain from simply making a gift of confidential information to a trading relative, and, accordingly, upheld the Ninth Circuit’s judgment.

The Supreme Court’s decision is extremely significant. Salman resolves confusion raised by Newman by specifically rejecting—as inconsistent with Dirks—the Second Circuit’s requirement that the tipper must receive something of a “pecuniary or similarly valuable nature” in exchange for the information and that a gift to family or friends was insufficient. In so doing, and on the issue of what constitutes a “personal benefit,” the Salman decision essentially turns back the clock on the law of tipper liability to its status pre-Newman, which had partially derailed the government’s insider trading enforcement efforts. Thus, it appears that Salman is a boon to the government’s ability to get its insider trading efforts back on track.

Copyright © 2016 by Morgan, Lewis & Bockius LLP. All Rights Reserved.

[1] 580 U.S. __ (2016).

[2] 773 F.3d 438, 450 (2d Cir. 2014).

[3] 463 U.S. 646 (1983).

[4] 693 F.3d 276 (2d Cir. 2012).

[5] See United States v. Newman, 1:12-cr-00121-RJS-2, Docket No. 215, pp. 3594-3605 (S.D.N.Y. Dec. 10, 2012).

[6] 773 F.3d 438, 450 (2d Cir. 2014) (emphasis added).

[7] Newman, 773 F.3d at 447-49 (“[W]e conclude that a tippee’s knowledge of the insider’s breach necessarily requires knowledge that the insider disclosed confidential information in exchange for personal benefit.”).

[8] Id., 773 F.3d at 452.

[9] 792 F.3d 1087 (9th Cir. 2015).

[10] Id., 2015 WL 4068903 at *6.

[11] 580 U.S. __ (2016).

[12] Slip op., at 7.

[13] Slip op., at 8.

[14] Slip op., at 9.

[15] Slip op., at 10.

SEC Whistleblower Awards: Can You Hear Whistles Blow? Valued At More Than $100 Million, You Bet You Can!

Some very loud whistles have been blowing across corporate America since 2011 – whistles valued at $107 million, in fact. The United States Securities and Exchange Commission announced on August 30, 2016, that since its whistleblower program began in 2011, they have awarded more than $107 million total to 33 individuals who voluntarily provided the SEC with original and useful information that led to a successful enforcement action. Whistleblower awards can range from 10 percent to 30 percent of the money collected when the SEC’s monetary sanctions in a matter exceed $1 million.

The SEC encourages employees to report suspected wrongdoing, because they, according to Acting Chief Jane Norberg, “are in unique positions behind-the-scenes to unravel complex or deeply buried wrongdoing.” And, last year alone, employees responded by providing nearly 4,000 tips to the agency. With this kind of incentive from the SEC and other government agencies, as well as a growing number of successes in whistleblower lawsuits, it is more important than ever for companies to get advice on a regular basis. Moreover, companies must be strategic and proactive in their approach to implementing an effective whistleblower protection and anti-retaliation system.

Key elements of an effective whistleblower protection and anti-retaliation system include:

  1. Clear and visible leadership commitment and accountability. This is truly the most important piece of the puzzle. Without sincere support from the top, no internal whistleblower program can succeed.

  2. The creation of a true “speak-up” organizational culture focused on prevention, including encouraging employees to raise all suspicions and issues quickly and insuring the fair resolution of such issues.

  3. Independent, protected resolution systems for employees and third-parties who believe they are experiencing retaliation as a result of raising concerns.

  4. Specific training to educate all employees about their rights and available protections (including both internal and external programs).

  5. Specific training for managers who may receive complaints or information from employees, requiring the manager to be considerate of the employee making the report, to be diligent, and, most importantly, to act on the information with no corporate tolerance of the “just telling me as a friend, not as a manager” excuse.

  6. Internal monitoring and measurement of corporate compliance efforts and the effectiveness of the speak-up and non-retaliation culture, without contributing to the suppression of employee reporting.

  7. Independent auditing to determine if the whistleblower protection and anti-retaliation system is actually working.

Post written by Denise K. Drake of Polsinelli LLP.

Lawmakers Continue Focus on TSA Wait Times, While House Spending Panel Approves TSA Funding for FY 2017; Government Officials React to Deadliest Shooting in US History, Worst Terror Attack Since 9/11

TSA wait linesLawmakers Continue Focus on TSA Wait Times, While House Spending Panel Approves TSA Funding for FY 2017

The House Appropriations Committee approved it draft FY 2017 homeland security appropriations measure on Thursday, June 9, including $7.6 billion for the Transportation Security Administration (TSA), $163 million more than in FY 2016 and $21.8 million greater than the Obama Administration’s FY 2017 budget request.  The House Appropriations Committee has yet to approve a request from the U.S. Department of Homeland Security (DHS) for an additional $28 million to help keep airport security lines under control during the ongoing summer travel season.  The Senate Appropriations Committee, which has already approved of its FY 2017 homeland security spending measure increasing funds for TSA, has also signed off on the reallocated funds, the second such request from DHS this year.

On June 7, the House of Representatives approved legislation, the Checkpoint Optimization and Efficiency Act of 2016 (H.R. 5338), aimed at shortening TSA wait times.  The measure would direct both the TSA Administrator and the Government Accountability Office (GAO) to review TSA’s staffing allocation model.  The Act also requires the TSA Administrator to take a number of actions related to the agency’s staffing and resource allocation.  Across the Capitol, TSA Administrator Peter Neffenger testified before a Senate Homeland Security and Governmental Affairs Committee hearing last week, where lawmakers encouraged the agency to increase access to PreCheck, an expedited security screening program.

This Week’s Hearings:

  • Tuesday, June 14: The House Homeland Security Committee Subcommittee on Border and Maritime Security will hold a hearing titled “Overstaying Their Welcome: National Security Risks Posed by Visa Overstays.”

  • Wednesday, June 15: The Senate Homeland Security Committee will hold a hearing titled “America’s Insatiable Demand for Drugs: Examining Alternative Approaches.”

  • Thursday, June 16: The Senate Judiciary Committee will hold a meeting to consider pending legislation and nominations.

Executive Branch Activity

Government Officials React to Deadliest Shooting in US History, Worst Terror Attack Since 9/11

President Barack Obama, senior Administration officials, and lawmakers reacted to the shooting at a crowded Orlando nightclub filled with members of the lesbian, gay, bisexual and transgender community.  As of Sunday night, the shooting, which ended with police storming the club after a three-hour stand-off, had left 50 dead and at least 53 injured.  Reports indicated the alleged shooter had pledged allegiance to ISIS, making it the United States’ worst terror attack since September 11, 2001, and the deadliest mass shooting in the country’s history.

President Obama delivered remarks from the White House early in the day, confirming he had met with his homeland security and national security advisors and assuring Americans that he has “directed that the full resources of the federal government be made available for this investigation.”  Congressman Mike McCaul (R-TX), Chairman of the House Homeland Security Committee, offered thoughts and prayers for the victims and thanked local law enforcement for their efforts responding to the attack, calling it “a sobering reminder that radical Islamists are targeting our country and our way of life.” Senator Ron Johnson (R-WI), Chairman of the Senate Homeland Security and Governmental Affairs Committee, echoed his House colleague, confirming that his committee “will work to support the federal role in investigating this terror attack and protecting against further threats.”  Secretary of Homeland Security Jeh Johnson stated that senior agency officials “are dedicated to investigating this tragedy, along with the FBI and our state and local partners, and supporting the Orlando community in the tragedy’s aftermath.”  Secretary Johnson canceled planned travel to Beijing in light of the attack.

© Copyright 2016 Squire Patton Boggs (US) LLP

U.S. Designations Targeting a Major Panamanian Money Laundering Organization Not Aided by the Panama Papers Leak

Yesterday, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced designations against the Panama-based Waked Money Laundering Organization, including its leaders, network of supporters and associates, and companies. According to press reports, Colombian law enforcement arrested the organization’s leader, Nidal Ahmed Waked Hatum, at a Bogota airport the day prior to the designations.

In total, OFAC added 8 individuals and 68 business entities to the List of Specially Designated Nationals (SDN List) pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act). Narcotics traffickers have used these businesses to obscure the source of drug money through a variety of means, including trade-based money laundering, bulk cash smuggling, real estate development, and illicit financial services.  The designation of Balboa Bank & Trust is particularly noteworthy, as it reflects Treasury’s continued willingness to use the Kingpin Act against financial institutions.  As noted in a previous entry, OFAC had not designated a bank pursuant to the Kingpin Act prior to November 2015.

OFAC clearly anticipates that these designations will cause significant disruptions, as it concurrently issued three General Licenses authorizing certain wind down transactions involving a hotelnewspapers, and a shopping mall.  U.S. persons should carefully consider the scope and expiration dates of these licenses prior to engaging in any dealings with these designated companies.

The designations do not signal the beginning of United States government actions in response to the Panama Papers leak.  Any potential use of those documents will be limited by the legal ethical issues surrounding the use of intentionally disclosed materials likely protected by the attorney-client privilege.  In addition to the legal ethical limitations, the evidentiary which serves as the administrative record for the designations would have required several months for investigation, drafting and interagency approval.  OFAC could not have finalized such an extensive package of designations within one month of the leak.

Copyright Holland & Hart LLP 1995-2016.