Hdeel Abdelhady Articles

Anti-money laundering

Congressional Hearing: Managing Terrorism Financing Risk in Remittances and Money Transfers

The U.S. House of Representatives Financial Services Committee (the “FSC“) Terrorism and Illicit Finance Subcommittee will on July 18, 2017 hold a hearing entitled “Managing Terrorism Financing Risk in Remittances and Money Transfers.” The FSC memorandum to all of its members states that the “hearing will explore the terrorist and illicit financing risks that are inherent in any form of asset transfer whether through formal banking channels, MSBs, other legitimate remittance networks, or through informal and unregulated value-transfer systems.”

Hdeel Abdelhady Articles

Do State Regulators Like the NYDFS Have Authority to Enforce OFAC Sanctions?

the enforcement of OFAC-administered sanctions by a state agency—even against banks by a banking regulator operating in a dual banking system—raises fundamental constitutional and other legal questions. Chief among them is the overarching question of whether U.S. states have authority to directly or effectively enforce OFAC-administered sanctions, particularly independently and prior to enforcement by competent federal authorities—namely OFAC. This question and some of the legal issues and policy and practical considerations appertaining to it are discussed in detail in a forthcoming publication. This document provides a summary preview of some of the key legal issues discussed in that publication. Additional summary previews may be provided separately.

Anti-money laundering

Correspondent Banking and Derisking Update

Ahead of the upcoming G20 meeting, the Financial Stability Board (FSB) published today, July 4, 2017, a progress report on efforts to address the withdrawal of correspondent banking relationships (derisking) and its action plan to assess and address derisking. Among the areas of concern and action items identified by the FSB are remittances and building the capacity of affected respondent bank jurisdictions to effectively identify and counter money laundering, terrorism finance, and other illicit financial activities. Importantly, the FSB has stated that its efforts will focus not just on legislation and rule-making in respondent jurisdictions, but also on the capacity of those jurisdictions to implement and enforce stronger AML/CFT and other anti-financial crime rules.

Anti-Corruption

Sovereign Commercial Enterprises: Anti-Corruption and Confidentiality Risks

State-owned enterprises (SOEs, including sovereign wealth funds) are prominent players in international business. Given their ownership, SOEs have garnered scrutiny for their lack of transparency and heightened anti-corruption and anti-money laundering risk, as have individual SOE executives and other personnel who qualify as Politically Exposed Persons. In connection with commercial activities, SOEs are not protected in most cases by sovereign immunity. Thus, SOEs can, like their privately-owned counterparts, be subject to foreign legal processes. Given the greater scrutiny around SOEs and some of the high profile enforcement actions involving them directly or indirectly (for example, the 1MDB case), anti-corruption and other compliance, as well as good governance and risk management, are essential to avoid legal, commercial, and reputational risk and loss.

Hdeel Abdelhady Articles

Dana Gas Deems its Own Sukuk Unlawful: Parsing the Dana Gas Statement

Dana Gas PJSC, the Sharjah, UAE-based gas producer, has unilaterally declared “unlawful” sukuk[2] instruments issued by the company in 2013 [3] (through, as issuer, Dana Gas Sukuk Limited, a Jersey public company with limited liability). This post discusses some of the Shari’ah, UAE law, and factual issues triggered by the Dana Gas statement on the unlawfulness of its sukuk.

Anti-money laundering

Basel Committee Clarifies Guidance on Countering Money Laundering and Terrorism Financing in Correspondent Banking

With respect to foreign correspondent banking, the Guidelines’ clarifications are designed to respond to the withdrawal of correspondent banking relationships (derisking) that have adversely affected banks and, in some cases, entire regions. Accordingly, Annex 2 of the Guidelines includes a list of risk factors that “correspondent banks should consider in their risk assessment of money laundering and financing of terrorism associated with correspondent banking.”

Sanctions

China’s One Belt One Road Could Disrupt U.S. Legal Dominance

The OBOR, even if partially successful, would, as many analysts and commentators have noted, alter the global trade landscape, if not “shake up” the global economic order in place since the end of World War II. Less discussed (except, for example, in this 2015 MassPoint Occasional Note) is one likely secondary effect of the OBOR and other trade and finance initiatives that are not centered on the U.S. dollar or the Bretton Woods system: the likely curtailment of the global reach of U.S. law.

Anti-money laundering

Congressional Hearing on Terrorism Financing Probes Bank Secrecy Act Data Effectiveness, Potential BSA Amendments

On April 27, 2017, I attended a Congressional hearing on “Safeguarding the Financial System from Terrorist Financing,” held by the House Committee on Financial Services’ Subcommittee on Terrorism and Illicit Finance (the “Subcommittee”). The sole witness was Mr. Jamal El-Hindi, Acting Director of the Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury charged with protecting the financial system from money laundering, terrorism financing and other illicit activities. The hearing’s purposes were to examine the methods and efficacy of FinCEN data collection, processing and information sharing and whether the Bank Secrecy Act (BSA) and USA PATRIOT Act should be amended to improve FinCEN’s anti-money laundering (AML) and counter-terrorism financing (CFT) capacities and performance. In this brief MassPoint update, I highlight BSA data collection and usage numbers and some of the questions and issues that appeared to be of particular interest and/or concern to Congress members in attendance, taking into account the nature and frequency of the questions asked, the tone of questions, and related requests for additional or clarifying information from FinCEN.

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