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The Morning Risk Report: U.S. Plans New Iran Sanctions as Europe Tries to Defuse Tensions
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Gen. Amir Ali Hajizadeh, center, head of the Revolutionary Guard Corps’ aerospace division, speaks to media next to debris from a downed U.S. drone in Tehran on June 21. PHOTO: MEGHDAD MADADI/TASNIM NEWS/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Good morning. The U.S. plans to impose major new sanctions on Iran, signaling it won’t ease pressure despite a diplomatic push by European leaders to persuade Washington and Tehran to show restraint.
The administration has ratcheted up economic pressure on Tehran since President Trump pulled the U.S. out of the 2015 nuclear deal in May 2018, hoping to drive Iran to accept a tougher agreement that would end uranium enrichment and curb its regional ambitions.
[Continued below...]
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In recent weeks, Iran has pushed back. Washington has blamed Iran for attacks on tankers, while Tehran downed a U.S. drone and has threatened to violate some terms of the 2015 pact.
In mounting its pressure campaign, the U.S. is seeking ultimately to drive the Islamic Republic’s oil exports to zero. It has more recently imposed sanctions on Iran’s industrial-metals sector and announced major sanctions on one of the country’s biggest petrochemical companies.
“We’ve done very massive sanctions. We’re increasing the sanctions now,” Mr. Trump told NBC over the weekend.
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Labor and Skills Shortages Hinder Antifraud Technology Adoption
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Nearly three-quarters of companies said staffing and in-house skills limitations are major or moderate obstacle to adopting antifraud technology, according to a survey by the Association of Certified Fraud Examiners and SAS Institute Inc.
Meanwhile, 70% cited concerns about poor data quality or integration issues, and 69% pointed to a perceived lack of return on investment, according to the survey, which is based on responses from more than 1,000 ACFE members.
Nearly two-thirds of organizations use exception reporting or anomaly detection techniques, and more than half put in place automated monitoring of red flags or violations of business rules.
Although only 13% of organizations currently use artificial intelligence and machine learning, the use of those technologies is expected to nearly triple over the next two years as more companies plan to deploy these tools to battle fraud, the survey found.
—Maria Armental
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From Risk & Compliance Journal
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The Justice Department has softened its stance on disappearing-message apps, but now it is up to companies to monitor their use. PHOTO: DADO RUVIC/REUTERS
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Companies are facing tough decisions about how to comply with U.S. Justice Department guidelines on employees’ use of disappearing-message apps after officials reversed a ban on the apps in a program for businesses accused of foreign bribery, lawyers say. The Justice Department in March softened its stance on the use of so-called ephemeral messaging apps—such as Signal, Snapchat and WhatsApp—as part of a broader revision of its Foreign Corrupt Practices Act Corporate Enforcement Policy.
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The global standard setter for anti-money-laundering laws called on countries to apply more scrutiny to virtual currency firms that transfer customer funds. The Paris-based Financial Action Task Force said that countries should adopt regulations requiring virtual currency companies—including exchanges and wallet providers—to collect information about their customers and share it with other institutions, including other crypto firms, that receive fund transfers.
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An appeals court dismissed criminal fraud charges against a former chief executive of Barclays PLC, the U.K. Serious Fraud Office said. John Varley, who served as Barclays’ CEO between 2004 and 2010, was charged in 2017 with conspiracy to commit fraud by false representation in capital raising and unlawful financial assistance. The case focused on fundraising arrangements with Qatari investors in 2008, according to the SFO, the U.K.’s white-collar crime prosecuting agency.
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The Federal Reserve’s Randal Quarles said big banks “would be well-positioned to support the economy even after a severe shock.” PHOTO: JONATHAN ERNST/REUTERS
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The biggest banks in the U.S. have enough reserves to continue lending in a severe economic downturn, a sign that firms a decade into an economic expansion are faring better in annual “stress tests” despite increasingly dire hypothetical scenarios. The Federal Reserve on Friday said 18 of the largest banks could weather an extreme market shock—including double-digit unemployment and a 50% U.S. stocks decline—and still have enough capital to continue operating.
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The Trump administration is examining whether to require that next-generation 5G cellular equipment used in the U.S. be designed and manufactured outside China, according to people familiar with the matter. The move could reshape global manufacturing and further fan tensions between the countries.
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President Trump’s promises to reverse the regulatory actions of the Obama administration have been stymied by court challenges, but his administration is achieving the goal another way: by not hiring people to do the work of enforcing rules that are on the books.
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Sealed Air Corp. fired Chief Financial Officer Bill Stiehl in relation to a yearlong investigation of the company by the Securities and Exchange Commission, the company said. Mr. Stiehl was named CFO of the Charlotte, N.C., company roughly a year ago, but had been at the company since 2013. The decision to oust him comes after Sealed Air’s audit committee conducted an internal review that followed a new subpoena last month from the SEC, the company said.
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As U.S. officials prepare an antitrust probe of Alphabet Inc.’s Google and possibly other Silicon Valley giants, a loose-knit crew of its rivals is gearing up to help. In industries from news to travel to online shopping, competitors of Google are readying documents and data in anticipation of meetings with the Justice Department, according to industry representatives.
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European Union leaders threatened sanctions against Turkey as a fight escalated over offshore energy reserves in the eastern Mediterranean. The unprecedented EU move came as Turkish President Recep Tayyip Erdogan already faced the imminent threat of U.S. sanctions over Ankara’s planned purchase of a Russian missile-defense system.
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Shares of Daimler AG fell almost 5% on Monday after the maker of Mercedes-Benz luxury cars issued a profit warning late Sunday related to a government recall of vehicles suspected of manipulating diesel emissions.
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Walmart Chairman Greg Penner climbed Mount Everest in 2018. About 10 days later, he told workers and shareholders at the company’s annual meeting that Walmart is about ‘going big, taking risks, never giving up and succeeding.’ PHOTO: NEAL BEIDLEMAN
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For companies, trying to curb top executives who are prized for walking the line between calculated risk and recklessness is a dilemma. Tell them to stop flying airplanes, racing cars, skydiving, smoking, running with bulls or bungee jumping and they could leave. Let them go along their merry way, and you might lose them another way.
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Airlines rerouted flights to avoid airspace over the Persian Gulf after Iran shot down an American military drone, disrupting air travel around one of the world’s busiest transportation hubs.
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Manufacturing is faltering in the U.S. and a number of key economies around the world, darkening the outlook for the global economy and increasing the likelihood that central banks will ease policy to provide support.
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AICPA Proposes Changes to Private-Company Audit Evidence
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The auditing standards board of the American Institute of Certified Public Accountants proposed an overhaul of the rules governing audit evidence for private companies to better define the role of new technologies in audits. The organization, which sets the standards for audits of private companies in the U.S., proposed expanding the framework auditors use when gathering and assessing evidence used to form their opinions of financial statements.
Current standards focus on the accuracy and completeness of that information. But as new technologies expand auditors’ ability to gather evidence, auditors can and should view that information with a more critical lens. Under the new rules, auditors should assess the risk of bias associated with the information they use to substantiate their audit opinion and consider the authenticity of the information being gathered, the AICPA said.
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The U.S. has accused Iran of the attack on two oil tankers in the Gulf of Oman last week, which the country has denied. PHOTO: HANDOUT/REUTERS
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Iran may attempt to retaliate against the U.S. with disruptive cyberattacks if tensions between the two nations over a series of incidents across the Middle East continue to escalate, according to current and former U.S. officials, as multiple cybersecurity firms said they had already seen signs Tehran is targeting relevant computer networks for intrusion.
Researchers at U.S.-based cybersecurity firms said they had observed suspected Iranian state-sponsored hacking attempts—particularly through spear-phishing attempts—against U.S. government and private-industry targets in the past week that appeared tied to escalating tensions between the U.S. and Iran, though it didn’t appear any attempts had been successful.
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The Trump administration is examining whether to require that next-generation 5G cellular equipment used in the U.S. be designed and manufactured outside China, according to people familiar with the matter. The move could reshape global manufacturing and further fan tensions between the countries.
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Employees work on the production line for the Golf series at a Volkswagen manufacturing plant in Zwickau, Germany. PHOTO: ALEX KRAUS/BLOOMBERG NEWS
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Manufacturing is faltering in the U.S. and a number of key economies around the world, darkening the outlook for the global economy and increasing the likelihood that central banks will ease policy to provide support. The Purchasing Managers Index for U.S. manufacturing activity declined to 50.1 in June, the lowest level in nearly a decade, according to a survey conducted by data firm IHS Markit. A reading above 50 indicates growth, but the figure was down from 50.5 in May and followed other data showing U.S. manufacturing output has declined since the end of last year.
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European car makers are rushing to get new electric cars to market to meet new emission targets; a charging station in Germany in October 2017. PHOTO: DANIEL BOCKWOLDT/ZUMA PRESS
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An approaching target for tougher new carbon emission standards in the European Union is causing panic among unprepared car makers. Auto manufacturers are rushing to bring hundreds of new battery-electric and hybrid models to market by next year to meet the continent’s new targets on greenhouse-gas emissions from vehicles and avert potential fines of up to $37 billion.
Analysts think a number of car companies are at serious risk of failing to achieve the targets, and some are calling it the biggest threat in a generation for an industry already battered by global tariff disputes, disrupted cross-border supply chains and fading demand in Europe and Asia.
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The acceleration of automation across industries has thrown Accenture and its workforce into an identity crisis. The consulting company, which counts 92 of the Fortune 100 companies as clients, touts what it calls a people-first culture. Yet it has become one of the world’s largest providers of outsourced labor and has a growing business helping clients automate their own work.
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New York farmers say they are straining under increased costs as a worker shortage has forced them to use a federal visa program to bring in temporary agricultural workers from other countries.
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The Camp Fire tearing through Paradise, Calif., in November 2018. PHOTO: JOSH EDELSON/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Gov. Gavin Newsom is proposing a multibillion-dollar wildfire fund to help California’s utilities cover mounting fire-related liability costs that have threatened their financial health. The fund is part of a wider regulatory overhaul the Democratic governor is unveiling as he seeks to reach consensus with state lawmakers on fixing the crisis created by the collapse of PG&E Corp. , which sought bankruptcy protection in January after its role in sparking wildfires created more than $30 billion in potential liabilities.
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Property developers need close relationships with banks—but not usually equity stakes in them. A bank investment by the world’s largest property company by assets hints at further trouble in the Chinese financial system. China Evergrande Group, which has an enterprise value of roughly $134 billion—more than Western property giants Simon Property and Unibail-Rodamco-Westfield—said that it is putting 13.2 billion yuan ($1.9 billion) into a small Chinese lender called Shengjing Bank.
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FedEx Corp. is offering big discounts to woo online merchants to its air network as it seeks to refashion a delivery system ill-equipped for the rise of e-commerce. The shipping giant, which is ending an air-shipping contract with Amazon.com Inc. later this month, is cutting prices for some customers of its Express network, according to people familiar with the matter. That includes offering guaranteed two-day air service for the same price as shipping items through its Ground division, the people said.
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Vanguard Group has had discussions with a handful of private-equity firms as the indexing giant weighs whether to push further into alternative investments.
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