Top Story Security Related

The Financial Action Task Force (FATF) participated in the G7 Finance Ministers and Central Bank Governors' meeting in Bari, Italy, on May 12–13, 2017. G7 participants discussed the importance of tackling illicit financial flows and terrorist financing and committed to fully and effectively implement FATF standards, including on designated non-financial businesses and professions. They strongly supported the work of FATF in improving the implementation of international standards and welcomed and supported the ongoing work to strengthen the FATF's institutional basis, governance and capacity. The G7 created FATF in 1989 to tackle money laundering. From the original 16 members, FATF has since grown to a global network of 198 jurisdictions that have committed at the highest level to fully implement FATF Recommendations on money laundering, terrorist financing and countering proliferation financing.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) has announced that it has designated five individuals and five entities in response to continued acts of violence committed by the Government of Syria, led by Bashar al-Assad, against its own citizens. The designated individuals and entities have provided support or services to the Government of Syria, or are owned or controlled by or are acting for or on behalf of designated individuals or entities. Yesterday’s action was taken pursuant to three Executive Orders (E.O.s): E.O. 13572, which targets persons responsible for human rights abuses in Syria, their supporters, and supporters of senior officials or certain activities related to public corruption; E.O. 13582, which targets the Government of Syria and its supporters; and E.O. 13382, which targets proliferators of weapons of mass destruction and their supporters. As a result of yesterday’s action, any property or interest in property of the identified persons in the possession or control of U.S. persons or within the United States must be blocked. Additionally, transactions by U.S. persons involving these persons are generally prohibited.

OFAC also removed one listing and updated three others. For identity information related to all these actions, see our OFAC Update.

Debit and credit card issuers should be aware that customers who are veterans may contact them about being scammed by crooks using a phony telephone line to pose as representatives of the Department of Veterans Affairs' Veterans Choice Program (VCP). The VCP is a VA initiative the allows certain eligible veterans to use approved health care providers outside the VA system. The legitimate program uses a toll-free number starting with 866. According to a Federal Trade Commission alert, the scammers set up a phone line with the same number, starting with 800. When a veteran dials the bogus line, a message reports the veteran is entitled to a rebate if he or she provides a card number. An unauthorized charge is posted to the veteran's card account, and the veteran has to cancel the card.

President Trump has signed an executive order directing federal agencies to improve the cybersecurity of federal networks. Federal agencies are ordered to follow the framework for cybersecurity of the National Institute of Standards and Technology (NIST), and must submit a risk management report to the Department of Homeland Security (DHS) within 90 days. The order also calls for DHS, collaborating with the Defense Department, FBI and others, to identify ways to support the cybersecurity of key infrastructure entities.

The Office of Foreign Assets Control (OFAC) has taken action to disrupt the leadership of Jama'at ul Dawa al-Qu'ran (JDQ) and financial support networks of JDQ, the Taliban, al-Qa'ida, Lashkar-e-Tayyiba (LT), the Islamic State of Iraq and Syria (ISIS), and ISIS – Khorasan by designating three individuals and one entity based in Pakistan. These actions were taken pursuant to Executive Order (E.O.) 13224, which targets terrorists and those providing support to terrorists or acts of terrorism. All property and interests in property of these persons subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited from engaging in transactions with them. For further information, see our OFAC Update.

The Financial Crimes Enforcement Network (FinCEN) held its third annual Law Enforcement Awards ceremony yesterday at the Treasury Department. FinCEN presented awards to law enforcement agencies that use Bank Secrecy Act reporting provided by financial institutions in their criminal investigations.

The Federal Trade Commission has announced the launch of ftc.gov/SmallBusiness, a new website with articles, videos, and other information aimed at helping small business owners avoid scams and protect their computers and networks from cyber attacks and other threats.

FinCEN has announced provided an update on the imposition of the fifth special measure against FBME Bank, Ltd. In its April 14, 2017, order granting FinCEN's motion for summary judgment, the U.S. District Court for the District of Columbia lifted the stay blocking the implementation of the March 31, 2016 Final Rule imposing a prohibition on opening or maintaining correspondent accounts for, or on behalf of, FBME Bank, Ltd. pursuant to Section 311 of the USA PATRIOT Act. On April 28, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied FBME's motion for a stay pending an appeal of the district court's decision. Accordingly, the Final Rule is in effect.

OFAC has announced it has designated Peruvian national Gino Dusan Padros Degregori as a Specially Designated Narcotics Trafficker (SDNT) pursuant to the Foreign Narcotics Kingpin Designation Act (Kingpin Act) for playing a significant role in international narcotics trafficking. OFAC also designated Peruvian national Guillermo Jean Pierre Zegarra Martinez, a key financial facilitator for Padros Degregori, for providing material assistance, support, or goods or services in support of the international narcotics trafficking activities of, and acting for or on behalf of, Padros Degregori. Three businesses in Lima, Peru, that are owned or controlled by Padros Degregori, were also designated. [See our SDN Update for identification information on the five designees.] As a result of this action, U.S. persons are generally prohibited from engaging in transactions or otherwise dealing with these individuals and entities, and any assets they may have under U.S. jurisdiction are frozen.

Penalties for violations of the Kingpin Act range from civil penalties of up to $1,437,153 per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million. Criminal fines for corporations may reach $10 million. Other individuals could face up to 10 years in prison and fines pursuant to Title 18 of the United States Code for criminal violations of the Kingpin Act.

The Financial Crimes Enforcement Network (FinCEN) and the U.S. Attorney's Office for the Southern District of New York announced on Thursday the settlement of claims under the Bank Secrecy Act against Thomas E. Haider, the former Chief Compliance Officer of MoneyGram International, Inc. Mr. Haider has agreed to a three-year injunction barring him from performing a compliance function for any money transmitter and has agreed to pay a $250,000 penalty. He also has admitted, acknowledged, and accepted responsibility for the following, among other things: (1) failing to terminate specific MoneyGram outlets after being presented with information that strongly indicated that the outlets were complicit in consumer fraud schemes; (2) failing to implement a policy for terminating outlets that posed a high risk of fraud; and (3) structuring MoneyGram’s anti-money laundering (AML) program such that information that MoneyGram’s Fraud Department had aggregated about outlets, including the number of reports of consumer fraud that particular outlets had accumulated over specific time periods, was not generally provided to the MoneyGram analysts who were responsible for filing suspicious activity reports with FinCEN.


In December 2014, FinCEN issued a $1 million civil money penalty against Mr. Haider for failing to ensure that his company abided by the AML provisions of the BSA. [See "FinCEN assesses $1 million CMP against former compliance officer", in our Top Stories, 12/19/2014] The U.S. Attorney’s Office for the Southern District of New York then filed a complaint in U.S. District Court that sought to enforce the penalty and to permanently enjoin Mr. Haider from employment in the industry. This week's settlement concludes those actions and was approved by U.S. District Judge David S. Doty of the U.S. District Court for the District of Minnesota.