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The Morning Risk Report: Surge in Sanctions Lifts Compliance Services
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CNH Industrial, a maker of agricultural and construction equipment and commercial vehicles, has been looking to add to its compliance staff as the volume of work has increased.
MASSIMO PINCA/REUTERS
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Good morning. A surge in economic sanctions and a tangled web of international blacklists are overwhelming in-house compliance staffs and lifting the ledgers of third-party compliance services, Risk & Compliance Journal’s Mengqi Sun reports.
Companies seeking to navigate an increasingly complex area of business—in particular, the avoidance of doing business with blacklisted companies and individuals—are turning to accounting firms, law firms and other consultancies that offer services to handle the screening of customers, suppliers and business partners and other compliance functions.
[Continued below...]
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The increased use of sanctions as a foreign policy tool under the Trump administration alone has driven demand. In 2018, more than 1,450 individuals or entities were added to the designation list, according to data compiled by Dow Jones Risk & Compliance, which is owned by Wall Street Journal publisher Dow Jones & Co. That is more than twice the annual average over the previous 10 years. The Treasury blacklisted about 900 more individuals or entities in 2019.
As in-house compliance teams and compliance consultancies have bulked up, the availability of compliance professionals has dwindled. The average unemployment rate for compliance professionals was 0.2% at the end of 2019, down from 5.1% at the end of 2017, according to the U.S. Bureau of Labor Statistics.
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The Latest on the Coronavirus Epidemic
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DOJ to Appeal Partial Acquittal of Former Alstom Executive
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The U.S. Justice Department on Monday indicated it would appeal the acquittal of former Alstom SA executive Lawrence Hoskins on charges he violated a U.S. antibribery law.
The notice of appeal, filed in a federal court in New Haven, Conn., comes after Mr. Hoskins was sentenced Friday to 15 months in prison for laundering money in connection to a scheme to bribe Indonesian officials for a $118 million power contract.
Although the notice begins the appeal process, prosecutors must still file briefs with the U.S. Court of Appeals for the Second Circuit.
Mr. Hoskins was convicted last year on charges he violated the Foreign Corrupt Practices Act and committed money laundering. A federal judge in Connecticut last month chose to overrule jurors and acquit Mr. Hoskins of the FCPA-related charges, while leaving the money laundering conviction intact.
U.S. District Judge Janet Bond Arterton said prosecutors didn’t provide sufficient evidence at trial that Mr. Hoskins—a British national who worked for Alstom’s parent company in France—acted as an agent of a subsidiary based in Windsor, Conn. Prosecutors didn’t seek to delay Mr. Hoskins’s sentencing but asked he serve between seven and nine years in prison. Lawyers for Mr. Hoskins asked for a term of home confinement.
—Dylan Tokar
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From Risk & Compliance Journal
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Consumer Watchdog Proposes Whistleblower Award Program
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The Consumer Financial Protection Bureau proposed a whistleblower program that would award tipsters who voluntarily provide original information on possible violations of consumer financial laws.
The agency, which was created to protect consumers from abusive financial services practices, said on Friday it has submitted the proposal to the U.S. Congress and that the proposed program would incentivize employees to report wrongdoing, especially those related to fair-lending practices.
“We also want to incentivize whistleblowers to contact us if they believe their employer is not complying with the law,” Kathleen Kraninger, director of CFPB, said in a statement.
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Fifth Third Bancorp said it identified less than $30,000 in improper customer charges that were ultimately waived or reimbursed.
PHOTO: LUKE SHARRETT/BLOOMBERG NEWS
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The Consumer Financial Protection Bureau said Monday that Fifth Third Bancorp employees opened deposit and credit-card accounts without customer approval in a bid to meet ambitious sales goals.
In a lawsuit filed with the U.S. District Court for the Northern District of Illinois, the CFPB said Cincinnati-based Fifth Third knew for years that employees were opening unauthorized accounts but didn’t do enough to monitor or adjust sales goals and incentive-based compensation programs to discourage the behavior. Fifth Third called the allegations “unnecessary and unwarranted.”
Branch employees were given sales goals and sometimes told their jobs depended on their ability to meet them, the CFPB alleged in the lawsuit. Employees earned money for hitting certain sales targets, according to the lawsuit. The agency said Fifth Third employees opened accounts and lines of credits without customer consent to meet those goals and sometimes transferred customer funds into the unauthorized accounts.
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The Trump administration on Monday initiated a change in the way that U.S. manufacturers will be allowed to export some firearms, ammunition and gun components, relaxing federal requirements for such transfers. Export jurisdiction over these weapons will shift from State Department purview to the Department of Commerce. Under the new arrangement, Congress no longer will receive notification of potential sales of these arms.
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Justice Department antitrust enforcers prevailed in forcing changes to a proposed merger in the aluminum industry after making an unprecedented decision to litigate the case in front of an arbitrator instead of before a federal court. The department announced Monday that an arbitrator sided with its challenge to Novelis Inc.’s planned acquisition of Aleris Corp., a 2018 deal valued at $2.6 billion.
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Faulty aircraft design and inadequate pilot-training recommendations from the manufacturer led to the fatal crash of a Boeing 737 MAX jet after takeoff from Addis Ababa in Ethiopia a year ago, according to an accident report issued by Ethiopian investigators.
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Short-form streaming video service Quibi, which is preparing to launch next month, is facing claims that one of its core technology features infringes on another company’s intellectual property, according to documents that describe the dispute.
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Legal proceedings in San Francisco fired the starting gun in a crowded race to reshape college sports this year, in which courts jostle with the National Collegiate Athletic Association, federal lawmakers and states over who gets to redefine the rules governing college athletes and their ability to earn money. An appeals panel will hear arguments Monday on whether college athletes can be compensated beyond their athletic scholarships and additional costs of attendance, in a case brought by former West Virginia University running back Shawne Alston.
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Officials introduced circuit breakers after the Black Monday crash of 1987, which sent the S&P 500 tumbling 20%. Traders on the floor of the New York Stock Exchange, Monday. PHOTO: SPENCER PLATT/GETTY IMAGES
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Investors are bracing for a prolonged period of volatility after two of the most punishing weeks for U.S. stocks in recent memory. A broad swath of U.S. stock-market sectors entered a bear market, defined as a 20% drop from a recent high, following major European indexes. Markets regained some ground Tuesday.
Stock trading was briefly halted Monday for the first time since 1997 after a tumultuous selloff triggered an automatic curb on trading. Minutes after the stock market opened, the S&P 500 fell 7% from its previous close—triggering a circuit breaker that halted trading across the entire stock market for 15 minutes. When trading resumed at 9:49 a.m. ET, major indexes managed to come off their lows and hold above them for the rest of the morning. Stocks then lost ground in the final hours of trading, with the S&P 500 ending down 7.6%.
The modest reprieve in selling immediately after the trading halt suggested the circuit breaker succeeded in doing what regulators and exchange officials had designed it to do decades ago: give hedge funds, institutional investors and day traders in the midst of a sharp selloff some time to pause and reassess the situation before firing off more orders.
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The oil-price collapse wiped out tens of billions of dollars in energy-company stock market value in a moment Monday, calling into question the industry’s ability to pay a huge tab that it rang up with bondholders and banks to fuel its price war with OPEC.
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Consumers might be able to organize information from all the different doctors and hospital systems they visit, as well as their health insurers, in one tool on their smartphones.
PHOTO: JASON CONNOLLY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Sharing your personal health data with apps, doctors and hospitals will get easier under new federal rules, announced Monday, that are likely to sharpen a debate over patient privacy.
By standardizing the way data must be shared and mandating that individuals have digital access to their own health records, the regulations are widely expected to benefit a mushrooming industry around health data. The records hold a wealth of intimate information—the history of patients’ illnesses, prescriptions, laboratory results and sometimes genetics—and are seen as increasingly valuable to companies that can crunch vast databases to develop health-care services.
Apple, Google and Microsoft, which are making inroads in health care, have generally backed the main rule, as have some consumer groups. Consumers often face barriers to getting personal medical information to share between doctors or feed to smartphone apps and web portals that provide health services. Patients often still need to carry printouts or physical discs to a new doctor or input data by hand.
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A federal jury couldn’t reach a verdict on whether a former software engineer for the Central Intelligence Agency was responsible for leaking a trove of classified documents to WikiLeaks, convicting him instead on lesser charges stemming from the leak. Joshua Schulte, 31 years old, was convicted of making false statements and contempt of court—charges that related to Mr. Schulte’s conduct after the March 7, 2017 publication of the CIA materials, dubbed Vault 7 by WikiLeaks. The jury said they were deadlocked on the remaining eight counts, including the illegal gathering and transmission of national defense information.
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Jack Dorsey splits his time between Twitter and Square Inc.
PHOTO: DAVID BECKER/GETTY IMAGES
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Twitter and activist hedge fund Elliott Management have agreed to a truce that will shake up the social-media company’s board but leave Chief Executive Jack Dorsey in place.
The deal halts what was shaping up as one of the highest profile clashes between an activist investor to oust a founder of a high-profile tech company. The agreement calls for Twitter to appoint two new board members to what was an eight-person board, with a promise to search for a new, third independent director, the company said.
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Elizabeth Duke has resigned as chairman of Wells Fargo’s board of directors, days ahead of a congressional hearing during which she was expected to face calls to step down. Charles Noski, who joined the board in June 2019 and played a key role in hiring the bank’s new chief executive, will serve as chairman, the bank said Monday. Mr. Noski is a retired vice chairman and former chief financial officer of Bank of America.
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Democratic presidential candidate Joe Biden spoke to supporters during a campaign stop in Flint, Mich. Monday. PHOTO: MANDEL NGAN/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Twitter has applied new rules against misinformation to a video circulated by one of President Trump’s top aides showing Joe Biden at a campaign rally saying, "We can only re-elect Donald Trump.” Mr. Biden used those words but the video, which was retweeted Saturday by Mr. Trump, omitted what the leading Democratic presidential contender said in full.
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Robinhood Financial suffered its third outage in eight days, angering investors who couldn’t trade during a wild day in markets. The market gyrations sent investors scrambling to hedge positions, cash out or buy stocks at discounted prices while oil prices collapsed and U.S. stocks neared bear market territory. Some Robinhood customers took to social media to vent that they missed out on a historic trading day.
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Aon will own about 63% of the combined company, while existing Willis Towers Watson shareholders will own about 37%.
PHOTO: TIM BOYLE/BLOOMBERG
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Aon agreed Monday to acquire rival Willis Towers Watson for almost $30 billion in stock, the biggest global M&A deal of the year announced on one of the wildest days for markets in recent memory.
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Blackstone Group is buying a majority stake in a health-care software company—the latest example of its strategy to invest in fast-growing firms. The private-equity giant is buying a stake in HealthEdge, which makes administrative software for health insurers, Blackstone said Monday.
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U.K. retailer Tesco, cutting debt and narrowing its focus, agreed to sell its Asia assets to Thailand’s richest family in a deal that values the business at $10.58 billion. Tesco, among the world’s largest grocers by sales, reached an agreement to sell its Thailand and Malaysia assets to CP Group entities.
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