Compliance Updater - December 2018

A summary of key compliance stories around the globe in December.

Regulatory and compliance news in brief

‘London Blue’ hackers target CFOs.
A Nigerian-based hacking group known as ‘London Blue’ has compiled a list of 35,000 CFOs, including some at big banks and mortgage companies, and targeted them with bogus requests to transfer money. The emails usually purport to be from the targeted company’s chief executive.

Deutsche Bank’s BVI unit is the centre of an AML probe.
Deutsche Bank’s former unit in the British Virgin Islands (BVI) that has since been sold to Bermudan lender NT Butterfield & Son is the focus of a German probe into anti-money laundering failings. The unit called Regula Limited operated trusts for around 900 clients with €311m in assets. Regula was identified in the 2016 Panama Papers leak.

Tesco executives cleared of fraud charges.
The UK Serious Fraud Office (SFO) case against two former Tesco executives over a £250m accounting fraud collapsed when the Court of Appeal backed their acquittal. It was concluded that the case was too weak for a jury’s consideration. The supermarket chain has already agreed to a £129m deferred prosecution deal with the SFO to avoid prosecution for the offence. The SFO is yet to decide whether to prosecute a third former Tesco executive.

Deutsche cleared 80% of Danske’s Estonian branch flows.
Deutsche Bank is estimated to have cleared around 80% of the €200bn that Danske Bank has identified as flowing through its Estonian branch from Russia and other former Soviet countries. Deutsche acted as correspondent bank for Danske until 2015 and a whistleblower flagged that $230bn of potentially dirty money flowed through Danske’s Estonian branch in 2013 and 2014.

10 arrests made in Danske’s Estonian operation.
Estonian prosecutors detained 10 former employees of Danske Bank’s Estonian branch on suspicion of knowingly enabling money laundering. The arrests relate to the estimates that around €200bn of Russian and ex-Soviet state money that flowed through the Tallinn branch of the Danish bank since 2007, much of it thought to have been dirty money.

Australia’s banking regulator targets executives at wealth manager.
Five senior executives and directors of IOOF Holdings, a substantial Australian wealth management firm, are facing potential disqualification from the Australian Prudential Regulation Authority. The case revolves around a failure to address conflicts of interest including compensating clients of funds with the fund’s own money rather than making payments from the service provider owned by IOOF Holdings.

FCA to try again on insider dealing case.
The UK’s Financial Conduct Authority (FCA) is to seek a retrial on a five-count insider dealing charge against ex-UBS Compliance Officer Fabiana Abdel-Malek and day trader Wahid Anis Choucair. The original jury failed to reach a majority decision on whether Ms Abdel-Malek passed information gathered from internal UBS databases to Mr Choucair to enable him to earn illicit profits estimated at £1.4m.

UK competition regulator proposes auditor shake up.
The UK’s Competition and Markets Authority published a report on how to deal with the oligopoly and conflicts of interest issues in the audit market. The interim findings include suggestions that the big four audit firms – PwC, EY, KPMG and Deloitte – legally separate audit staff from the rest of the business, and that large listed companies use two audit firms. A further report reviewed the auditors’ regulator – the Financial Reporting Council – suggesting a more powerful and independent watchdog was required.

Malaysia charges Goldman Sachs over 1MDB.
Malaysian prosecutors filed criminal charges against Goldman Sachs and two of its bankers for their role in the alleged embezzlement of billions of dollars from the country’s state investment fund 1MDB. Goldman Sachs is accused of helping ‘dishonestly misappropriate’ $2.7bn from bonds issued by 1MDB and the two bankers are accused of bribing Malaysian officials to secure involvement in the auction of the bonds. Malaysia’s finance minister subsequently said Goldman Sachs should pay $7.5bn in reparations – returning $6.5bn it raised in the bond issues in 2012 and 2013 plus a further $600m to cover excessive fees and $400m for coupons that were higher than the market rate.

US fines Barclays over whistleblowing incident.
The New York Department of Financial Services has fined Barclays $15m over the attempts its chief executive (Jes Staley) made to uncover the identity of a whistleblower in 2016. The US regulator noted “shortcomings in the governance, controls and corporate culture relating to Barclays’ whistleblowing function” and that Mr Staley’s behaviour was a ‘step backwards for Barclays’. As part of the settlement, Barclays will produce a plan for improving its internal controls and compliance programme, including more robust protections for whistleblowers. The penalty follows a £642k fine for Mr Staley from the UK’s Financial Conduct Authority in a parallel investigation.

UK regulator fines Santander £32.8m for probate delays.
The UK’s Financial Conduct Authority fined Santander £32.8m for failing to pass on £183m to the beneficiaries of more than 40,000 deceased customers over a 3-year period. The regulator said that in some cases Santander held onto the funds for many years without the beneficiaries being aware of their existence. Santander co-operated fully and received a 30% discount on the fine which would have been nearly £47m.