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Banking Transparency for Sanctioned Persons

On September 7, 2018, Congresswoman Mia Love (R-UT) introduced in the House of Representatives H.R. 6751, the Banking Transparency for Sanctioned Persons Act of 2018 to “increase transparency with respect to financial services benefitting state sponsors of terrorism, human rights abusers, and corrupt officials.” This update discusses the Banking Transparency Act’s provisions and what it conveys about the current U.S. legal climate around corruption and human rights sanctions, Congress’ increasingly activist sanctions posture, and the risk management and compliance inferences that U.S. and foreign financial institutions should draw from the Banking Transparency Bill when viewed in context.

Canary in the Cobalt Mine: Glencore Corruption Probe May Not Be a One Off

The U.S. arm of Glencore, the global commodities trading and mining giant, has been served a subpoena by the U.S. Department of Justice, according to news accounts. The DOJ’s subpoena reportedly seeks documents and information pertaining Glencore’s business in the Democratic Republic of Congo (DRC), Nigeria and Venezuela to assess potential violations of U.S. anti-money laundering laws and the Foreign Corrupt Practices Act (FCPA), the principal U.S. law essentially prohibiting the bribery of foreign officials for business gain by U.S. companies and others subject to United States’ jurisdiction (broadly construed and applied).The Glencore subpoena may not be a one-off and it should be viewed– at least for risk assessment and compliance improvement purposes– as potentially part of a larger U.S. strategy to proactively target corruption and, by extension, money laundering, in Africa and Africa’s extractives industries. (The wider context is that the Trump Administration views U.S. anti-corruption, anti-money laundering and sanctions laws and their enforcement as “tools of economic diplomacy”, including to advance trade and other policy objectives).

Trump Administration Targets Chinese Dominance, Corruption in Africa

Notably, in the two pages of the NSS that are devoted to the National Security Strategy in the Africa context, none of Africa’s 54 nations are mentioned, but China is named twice. The NSS notes with concern China’s “expanding . . . economic military presence in Africa, growing from a small investor in the continent two decades ago into Africa’s largest trading partner today.” China’s methods and influence in Africa are described unflatteringly.  “Some Chinese practices,” the NSS states bluntly, “undermine Africa’s long-term development by corrupting elites, dominating extractive industries, and locking countries into unsustainable and opaque debts and commitments.”

President Trump Promulgates Global Magnitsky Sanctions: EO 13818 Analysis

The Global Magnitsky Sanctions are extraordinary for a number of reasons. First, they are global in reach and require not jurisdictional nexus between the United States and the corrupt acts and human rights abuses they target. As to corruption, both the Global Magnitsky Act and EO 13818 define it broadly, well beyond U.S. and international frameworks that are concerned primarily or exclusively with bribery. The Global Magnitsky Sanctions also depart from U.S. and international anti-corruption frameworks by directly penalizing foreign government officials for corrupt acts.
As discussed above, EO 13818 significantly expands the scope and reach of the Global Magnitsky Act and, in doing so, employs extraordinary theories of liability, such as strict and vicarious liability on the leaders or officials of any foreign entity that engaged in covered corrupt acts. Independently and together, the provisions of EO 13818 empower the United States, and particularly the Executive Branch, to sanction a wide range of persons and conduct without meeting the due process, evidentiary, or other requirements that would apply in U.S. courts.
As indicated in a prior installment of this MassPoint series, 52 individuals and entities have so far been sanctioned under EO 13818. It remains to be seen how the Trump Administration (or subsequent administrations) will implement the Global Magnitsky Sanctions. For now, foreign persons in particular—both government and private—should familiarize themselves with the Global Magnitsky Sanctions and assess their risk for liability, particularly for facilitating corrupt acts such as by transferring the proceeds of corruption.

The President’s “Personal Lawyer,” a “Hush” Payment, and a Bank Suspicious Activity Report

Following reports this week that the FBI executed search warrants at Cohen’s law offices, hotel room and home and seized “business records, emails and documents related to several topics, including a payment to” Stormy Daniels, the Wall Street Journal revisited the Cohen-linked Suspicious Activity Report, writing that First Republic Bank had “conducted its own investigation” of the Stormy Daniels transaction “after receiving the subpoena from the authorities.”

From a legal perspective, these and similar news reports are striking for the legal question that they raise: How did the existence of the Suspicious Activity Report become public? By law, banks and certain other financial institutions are required to have in place systems to detect and deter money laundering, terrorism financing and other financial crime. Banks and certain other financial institutions are required by law to file Suspicious Activity Reports with respect to certain criminal violations or where a transaction appears to have no lawful purpose, is inconsistent with a customer’s ordinary behavior and/or is in other ways suspicious (as indicated in a relevant section of the FFIEC Bank Secrecy Act manual below).