What You Need to Know In October 2023, the Department of Treasury’s Office of Foreign Asset Control (OFAC) enacted multiple sanctions targeting the supply chain of fentanyl and other illicit drugs. In addition to sanctions compliance obligations, financial institutions that deal in trade finance should modify their existing sanctions and suspicious monitoring programs to identify narcotics traffickers who produce, sell and purchase chemicals of interest. These additional efforts would both combat the fentanyl crisis and limit the financial institution’s risk of being used as a vessel to launde ..read more

As the Russia – Ukraine war rages on, one outcome so far is clear:  the Western nations remain aligned and united to confront Russian aggression. The West’s synchronized, roll-out of economic and trade sanctions against Russia since February 2022 combined with their limited military support, demonstrate that the West’s tight, global coordination helps Ukraine courageously defend its nation and citizens. Importantly, coordinated alignment also protects the homeland and critical infrastructure of each Western nation, including that of the United States. Banks and financial institutions are ..read more

When the tide goes out, as it appears to be doing now with the market down 20% percent from its highs in January, bad actors will be left exposed for everyone to see. Simply put, as the market drops those companies hiding behind lofty share prices and astronomical crypto values will be scrutinized to determine if financial fraud and white-collar crime was behind this activity. The Department of Justice recently brought two significant, complex cases that illustrate this point when markets fall.  On May 17, 2022, the U.S Attorney’s Office for the Southern District of New York filed a case ..read more

Among the risks inherent in a merger or an acquisition, few bring the financial and reputational consequences of the U.S. Foreign Corrupt Practices Act (“FCPA”). Background The FCPA prohibits the offer, promise, authorization, or payment of money or anything of value, either directly or indirectly, to a foreign official, private individual, or entity, to obtain or retain government business. Enacted in 1977 in response to incidents of American companies bribing foreign officials to obtain lucrative government contracts, its enforcement is now among the most prominent white collar enforcement t ..read more

On June 30, 2021, the Financial Crimes Enforcement Network (“FinCEN”) finished an assessment of whether it should create a process for issuing no-action letters in connection with the Bank Secrecy Act (“BSA”) and other anti-money laundering and countering the financing of terrorism (“AML/CFT”) laws and regulations. The short answer is Yes—FinCEN has concluded that a no-action letter process would be valuable, and the agency will be taking steps towards a rulemaking. A no-action letter is a letter from an agency in which the agency states that it will not take any enforcement action against a p ..read more

Bank mergers and acquisitions are becoming a regular part of life in the banking industry, especially for smaller and medium-sized organizations. They provide significant opportunities for institutions to expand their customer base, enhance capital for lending and investments, and grow geographically to capture new customers and new products. But they can also disrupt existing compliance programs and controls. For example, the acquiring institution must set aside sufficient resources to identify and address potential compliance gaps before the merger is completed to avoid costly enforcements f ..read more

In 2021, Square, Inc. (“Square”) announced that it had commenced banking operations under its independently governed subsidiary industrial bank, Square Financial Services (“Square Financial”). The announcement comes after Square successfully completed the charter approval process with the Federal Deposit Insurance Corporation (“FDIC”) and the Utah Department of Financial Institutions for an Industrial Bank/Industrial Loan Corporation (“ILC”) license. Square Financial will offer business loan and deposit products, beginning with underwriting and originating business loans for Square’s existing ..read more

Regulatory trends and high-profile investigations suggest that law firms should conduct enhanced due diligence background checks on all potential clients as part of standard risk management and compliance protocols.   The U.S. House of Representatives recently passed anti-money laundering legislation that would require law firms (in addition to accountancies, payment service providers, and trust companies) to report suspicious transactions by clients, as banks already must do.  Despite industry push back and arguments by some that the affirmative reporting obligations would negatively imp ..read more

The regulatory landscape for fintechs is continually evolving. It is critical that compliance officers stay on top of what is going on in the industry to ensure they make the best decisions and take proactive measures in alignment with current regulations. The recent OFAC settlement with Payoneer, Inc. for apparent violations of multiple sanctions programs is an excellent case study for compliance officers with fintechs and payment processors to heed when enhancing their compliance programs. For those not familiar with the matter, Payoneer paid a more than $1.4 million monetary penalty to sett ..read more

Recently, several financial technology (“Fintech”) organizations have applied for – and been granted – banking charter licenses. For example, in May 2019, Grasshopper was approved for a charter issued by the Office of the Comptroller of the Currency, while in July 2020, Varo Money was approved for a national bank charter. As mentioned in an earlier post, in March, Square, Inc. (“Square”) announced that it had commenced banking operations under its independently governed subsidiary industrial bank, Square Financial Services (“Square Financial”). Square successfully completed the charter process ..read more