National Defense Authorization Act Passed Over President Trump’s Veto Expands SEC’s Disgorgement Authority And Reforms Anti-Money Laundering Laws
On January 1, 2021, the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) was approved by Congress, over the objections of President Trump who vetoed the bill a week before. In addition to authorizing appropriations for defense related activities, the NDAA brings two significant changes relevant to regulatory enforcement. First, the NDAA amends the Securities Exchange Act of 1934 (the “Exchange Act”), providing the U.S. Securities and Exchange Commission (“SEC”) with explicit statutory authority to seek disgorgement for civil actions and expanding the statute of limitation for securing this relief. Second, the NDAA includes the Corporate Transparency Act (“CTA”), which significantly expands the beneficial ownership disclosure requirements for U.S. entities.
Motion To Dismiss Filed In Eastern District Of New York Case Could Provide Opportunity For Clarity On Scope Of FCPA’s “Internal Accounting Controls” Provisions
On November 20, 2020, lawyers for a former investment banker, indicted in the United States District Court for the Eastern District of New York for his alleged role in the 1MDB matter, filed a Motion to Dismiss (“MTD”) the indictment against him, which includes charges of conspiracy to launder money and conspiracy to violate the U.S. Foreign Corrupt Practices Act (“FCPA”). Motion to Dismiss the Indictment and Other Relief, U.S. v. Ng Chong Hwa a.k.a. Roger Ng, 1:18-cr-00538-MKB (Nov. 20, 2020). While the MTD raises a number of issues—including whether EDNY is a proper venue given that the only allegations relate to wires that were transmitted through the EDNY, and whether the banker was an “employee” or “agent” of an “issuer” for purposes of the FCPA—the most interesting argument may be one that squarely challenges the scope of the FCPA’s internal accounting controls provisions. The question of whether the FCPA’s internal accounting controls provisions can be stretched to cover more traditional risk and compliance controls has long been debated, and even spurred a rare dissent from two SEC Commissioners last month, so a decision on the MTD could provide a much-needed opportunity for clarity.
Industrial Bank Settles AML Charges With U.S. And New York State Authorities
On April 20, 2020, Industrial Bank of Korea (the “Bank”) and its New York branch (“NY Branch”) reached settlements with the U.S. Attorney’s Office for the Southern District of New York (“USAO”) and the New York State Department of Financial Services (“NYDFS”), agreeing to pay a combined $86 million to resolve investigations into its anti-money laundering compliance program, which the USAO and NYDFS claimed led to the bank processing over $1 billion worth of transactions in violation of U.S. sanctions against Iran. Specifically, the Bank entered into a deferred prosecution agreement (“DPA”) with the USAO, agreeing to pay $51 million to settle charges that it willfully failed to maintain an adequate anti-money laundering program at its New York Branch in violation of the Bank Secrecy Act (“BSA”). And both the Bank and the New York Branch entered into a consent order (“Consent Order” and, together with the DPA, the “settlement agreements”) with the NYDFS, agreeing to pay a $35 million fine for violating New York state law.