What Price Privacy? UK Drive For Foreign Owners’ Transparency

I wanted to take a moment to thank WealthBriefing.com for featuring my recent article “What Price Privacy?  UK Drive for Foreign Owners’ Transparency”.

As the geopolitical landscape evolves and global financial sanctions take hold,  the Economic Crime (Transparency and Enforcement) Bill introduced into UK law this month is worth reviewing.  Will the new legislation prevent money laundering through UK properties by foreign owners and have the intended impact on oligarchs?  Read on:

What Price Privacy?  UK Drive for Foreign Owners’ Transparency

New Law Requires 72-Hour Notice for Cyber Incidents

We recently shared a timely post on Consumer Privacy World that, given the focus of, we wanted to call to your attention.

“President Biden has recently delivered on a long stated priority of his presidency: requiring the disclosure of cyber security incidents for companies that operate critical infrastructure. After announcing an executive order in May 2021 aimed at modernizing the federal government’s cybersecurity practices, the same sweeping changes will now effect private companies that operate critical infrastructure. At the time of the executive order, some noted that the recent string of high profile ransomware attacks was leading to a bipartisan effort to require disclosures of such incidents by those effected in the private sector. Indeed, Congress has acted quickly in codifying disclosure requirements for those that operate critical infrastructure.”

Check out the full blog here.

The Fine Art of Money Laundering: The Treasury Department’s Study on Money Laundering and Terrorist Financing in the Art Trade

The National Defense Authorization Act for Fiscal Year 2021 (“NDAA”) became law early in 2021, after a congressional override of then-President Trump’s veto. Division F of the NDAA consists of the Anti-Money Laundering Act of 2020 (“AMLA”). The AMLA expands numerous Bank Secrecy Act (“BSA”) requirements, and amends the BSA’s definition of “financial institution” to include persons “engaged in the trade of antiquities.”[1] Section 6110(c) of the AMLA also requires the Secretary of the Treasury, in coordination with the Director of the Federal Bureau of Investigation, the Attorney General, and the Secretary of Homeland Security, to perform a study of the facilitation of money laundering and the financing of terrorism (“ML/TF”) through the trade in works of art. The Department of the Treasury released its report in February 2022, containing the findings and determinations made in carrying out the required study.

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President Biden Issues Executive Order Directing Agencies to Develop Policy Recommendations on Digital Assets

President Biden has signed his long-awaited Executive Order on digital assets (“Executive Order”).  The Executive Order, titled Ensuring Responsible Development of Digital Assets, does not announce any new regulations for the digital asset industry.  Instead, the Executive Order mandates federal agencies to take a unified approach to developing specific policy recommendations for a comprehensive regulatory framework for digital assets.  The mandates also include a directive to the Secretary of the Treasury to lead an effort to explore the United States issuing its own Central Bank Digital Currency (“CBDC”), often referred to as the “digital dollar.”  While some commentators have suggested that the EO is “ground that has been trod before”—cross-agency cooperation and the exploration of a CBDC—Senior Administration Officials were quick to point that while it is true that these issues have been explored at length, the EO is “a way to organize [the government] with urgency so that [the government has] a coherent and coordinated view on digital assets and that it’s articulated at the very highest level of our government.”  Industry executives and other commentators have called the EO a “watershed moment” due to its breadth and effort to address the digital asset market as a whole.
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DOJ FCPA Opinion Encourages Corporate Disclosure

On January 21, 2022, the Department of Justice issued an opinion applying the Foreign Corrupt Practices Act to a Hollywood movie-like factual scenario relating to extortion and duress. The opinion is one of two FCPA opinions published within the last two years. Before those two opinions, DOJ had not published one since 2014. Publication of the opinion shows that DOJ’s FCPA Unit is ready to act, and it also signals benefits for proactive disclosure—a broader DOJ theme.

The January 2022 opinion was in response to a request by a U.S. Requestor, whose vessel was seized in international waters and its captain and crew detained by an unnamed country’s naval forces. Initially, the vessel was supposed to anchor at another country’s port, but due to the port reaching maximum capacity, the captain was advised to anchor in another location until the port became available. The captain was given incorrect coordinates by a shipping agent, and those coordinates inadvertently led the vessel into the unnamed country’s territorial waters. The unnamed country intercepted the vessel and directed the captain and crew into its harbor. Thereafter, the vessel’s documents were confiscated; the captain was jailed without questioning or apparent legal reason; and the crewmembers and officers were ordered to remain on the ship. At the time of his detention, the captain was suffering from serious medical conditions that “would be significantly exacerbated by his detention,” which “created a significant risk to his life and well-being.”

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DOJ Ends “China Initiative” Targeting Economic Espionage

Chinese flag on China map.

On February 23, 2022, the U.S. Department of Justice (“DOJ”) announced the end of an initiative to prioritize suspected Chinese economic espionage. The intent of the initiative was to prevent China’s intelligence apparatus from stealing U.S. technology, specifically from research institutions and universities. However, DOJ National Security Division Chief Matthew Olsen stated the initiative “fueled a narrative of intolerance and bias” and had a chilling effect on scientific collaboration and recruitment by U.S. research institutions. Olsen’s comments and the policy change concludes a review that Olsen ordered shortly after his confirmation by the Senate.

Since the initiative’s inception, the DOJ’s enforcement efforts were mixed.  While the DOJ has credited the initiative with some major prosecutorial victories, one study found that cases against academics more often resulted in dismissals rather than convictions. Many prosecutions under the initiative involved alleged grant fraud by researchers working at U.S. universities stemming from alleged failures to disclose ties to the Chinese government. Critics cited the lack of success as proof of racial bias and government overreach. As a result of the policy change, the DOJ’s national security prosecutors are expected to more closely supervise grant fraud cases, and the DOJ may seek civil or administrative sanctions instead of criminal prosecutions.

Although the DOJ will likely remain vigilant in monitoring threats posed by China, Olsen indicated the DOJ will also expand its focus to include threats posed by North Korea, Iran, and Russia.  In light of the new conflict in Ukraine, Russia specifically may find itself under increased scrutiny. Nevertheless, individuals and companies with connections to China and other foreign governments should remain diligent in their disclosures and expect the DOJ to continue to scrutinize their activities for possible economic espionage.

 

Series: Economic Espionage and Theft of Trade Secrets

In 1996, President Clinton signed the Economic Espionage Act (the “Act”). At the time, the principal proponents of the law included business leaders from the then burgeoning Silicon Valley as well as from the aerospace industry. Proponents of the Act claimed foreign entities were actively attempting to steal trade secrets and that the existing laws at the time did not adequately protect their interests. The Act, among other things, criminalized the theft of trade secrets intended to benefit “any foreign government, foreign instrumentality, or foreign agent.” Steep penalties for violations of the Act demonstrated that the United States would take economic espionage extremely seriously. Since its passage, the U.S. Government has aggressively enforced the Act against those who have sought to steal trade secrets from companies for the benefit of foreign adversaries.

Convictions for economic espionage in violation of 18 U.S.C. § 1831 can result in a prison sentence of up to 15 years. Since the Act’s initial passage, Congress has increased the potential monetary penalties for violations to $5 million. For organizations, the maximum possible fine was increased to “the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization.” Between 1996 and 2020, there were no fewer than 190 cases against 276 individual defendants for violation sunder the Act. Of these individual defendants, 31 were convicted of economic espionage under § 1831 of the Act; the remainder were convicted for theft of trade secrets under § 1832.

What is economic espionage?

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Allocating Attorney Fees in a False Claims Act Settlement with Multiple Relators

The United States Court of Appeals for the Sixth Circuit recently issued a published opinion regarding entitlement to attorney fees in a False Claims Act settlement that involved multiple relators, each of whom had filed a case in which the government intervened. Addressing arguments based on 31 U.S.C. s. 3730(d)(1), the first-to-file rule, and the public-disclosure bar, the court held that every relator could seek fees. The Sixth Circuit’s decision in United States ex rel. Bryant v. Community Health Systems, Inc. was the first circuit-level decision on this subject, and it reached a conclusion that differed from that of the handful of district courts to have addressed the question. Therefore, the opinion should be front of mind for any False Claims Act defendant facing similar circumstances. Our colleagues Shams Hirji and Alon Farahan have provided a detailed discussion of the decision at the Sixth Circuit Appellate Blog here.

Proposed FinCEN Pilot Program on Sharing of Suspicious Activity Reports with Foreign Affiliates

On January 25, 2022, the Financial Crimes Enforcement Network (“FinCEN”) issued its anticipated Notice of Proposed Rulemaking seeking public comment on a proposed pilot program that would permit certain financial institutions to share suspicious activity reports (“SARs”) and information related to SARs with the institutions’ foreign branches, subsidiaries, and affiliates (the “NPRM”). The proposed rule is part of a broader reevaluation and recalibration of the federal anti-money laundering regulatory structure directed by the Anti-Money Laundering Act of 2020 (“AMLA”). The NPRM sets out a highly restrictive program, designed to keep FinCEN informed of any sharing of SAR information with entities outside the United States. Participation in the program may be an important first step in creating an enterprise-wide anti-money laundering compliance function that is able to communicate robustly in support of the core function of an effective compliance program—providing highly useful information to law enforcement. However, financial institutions should carefully assess the value to their organization of participating in the program before enrolling.

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Central Bank Guidance to UAE Financial Institutions Banking Cash-Intensive Businesses

The Central Bank of the UAE (“CBUAE”) has issued new guidance (the “Guidance”) to UAE financial institutions providing services to cash-intensive businesses.

The specific characteristics of cash—anonymity, interchangeability, and transportability—make it an attractive medium for illicit actors seeking to obfuscate the proceeds of crime or the funding of terrorism.  Unlike other monetary instruments, such as wire transfers or credit cards, cash holds no record of its source or owner, it can be easily concealed in large quantities, it is widely accepted around the world, and it can be spent instantaneously, after which it is difficult to trace.  For this reason, the Guidance, which aims to help UAE financial institutions understand and effectively mitigate the money laundering and terror financing risks associated with cash-intensive businesses, is yet another important step for the UAE in its commitment to combat money launderers and terror financiers.

We have reported on many of the prior steps that the UAE has taken to enhance the efficiency and robustness of its banking and financial system, including but not limited to passing new laws (see here), disseminating guidance on suspicious activity/transaction reporting (see here), and establishing a specialized court to hear money laundering cases (see here).

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