Beware the Personal Server

investment bank security breach, Cyber-security, personal servers, “Safeguards Rule”

Accessing Client Accounts from a Home Computer Alerted the SEC

While the question of whether cyber-security breaches from a personal computer cost a candidate the presidency may be the subject of debate for some years to come, the cost of that violation for one of America’s top investment houses is already clear: $1 million. In the financial sector, such lapses are being taken very seriously as demonstrated by what has been referred to as “the most significant SEC cyber-security-related action to date.”

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SEC CAT Unleashed

Securities and Exchange Commission, SEC, Consolidated Audit Trail, CAT, FINRA, NASD, Self-Regulatory Organizations, SROs, market misconduct

The CAT System will Monitor Market Misconduct

On November 15, the Securities and Exchange Commission (SEC) approved a new, cutting-edge plan for a single comprehensive database known as the Consolidated Audit Trail (CAT). Under the new system, regulators will be able to more efficiently track all trading activity in the US equity and options markets. Self-Regulatory Organizations (SROs) such as FINRA and NASD, as well as broker-dealers, will be required to record and report information under CAT—including the identity of the customer—resulting in a range of data elements that together will provide a complete lifecycle record of all orders and transactions in the US equity and options markets. It is important that compliance officers become thoroughly familiar with the new system and its requirements.

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Unexplained Wealth

Criminal Finances Bill, offshore companies, Panama Papers, tax haven, Unexplained Wealth Orders, anti-money laundering, politically exposed persons

New Laws Will Ask Investors Where they Got the Cash

In the wake of last spring’s “Panama Papers” scandal, UK regulators determined that trillions of euros’ worth of taxes were being lost due to the use of offshore entities as holding companies for local properties. Now, it has been determined that up to £100 billion ($123 billion) of tainted cash is getting laundered through the UK annually. The cash is ending up being converted into assets such as real estate, luxury cars, and jewelry. A new law proposed in the UK would force the owner of an asset to explain “just where did you get the money to purchase that?” And the wrong answer would likely lead to confiscation.

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Minor League Baseball Leads to Major League Fraud

SEC, municipal bonds, town of Ramapo, whistleblower, audit fraud

Ballpark Losses were the Tip of the Iceberg

A New York-based audit firm and one of its senior partners have agreed to settle charges brought by the Securities and Exchange Commission (SEC) that they authorized fraudulent audit reports in connection with the municipal bond offering of a Rockland County, New York, town.

According to the SEC, the auditors failed to take appropriate steps to mitigate the risk of material misstatements regarding municipal bond offerings by the town of Ramapo even after senior audit managers became aware that the town’s financial statements were the subject of multiple law-enforcement investigations including losses incurred due to construction of a $58 million minor league baseball stadium.

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Convenience Store Charged with Money Laundering

anti-money laundering, AML, Bank Secrecy Act, BSA, Financial Crimes Enforcement Network, FinCEN, convenience stores, check cashing

Much More than a Supermarket

A Kentucky convenience store owner has been charged by the Financial Crimes Enforcement Network (FinCEN) with various violations of the Bank Secrecy Act (BSA), the formal name of America’s anti-money laundering (AML) statute. According to the complaint, the store cashed over $1 million worth of checks per month during the period under investigation, yet failed to abide by the strict regulations governing that type of “financial institution.” Despite a prior warning pursuant to an earlier investigation, the store continued to operate its check-cashing services in violation of reporting, recordkeeping, and other regulatory compliance requirements.

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No Hard Exit for Brexit

European Union, EU, Brexit, UK, Theresa May, the Lisbon Treaty, Ed Miliband

Pushing for a Hard Exit from the EU Would Harm Both Sides

It has now been over four months since Britons voted to exit the EU in their now famous Brexit vote. In the interim, Britain got a new prime minister—Theresa May—the pound sterling has its ups and downs, and the partisan fervor separating the Leave camp from the Remain camp has cooled, somewhat. But now it is time to deal with that “elephant in the room” question: what happens next? The popular democratic vote was one thing. But as any seasoned contracts negotiator knows—or perhaps the better simile would be “divorce settlement attorney” knows—the “devil is in the details,” and it is those divorce details that will now need to be thrashed out.

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Dogging the EU Tax Dodgers

profit shifting, European Commission, EC, tax avoidance, multinationals, profit shifting

New Regulations Might Put an End to Profit Shifting

In 2011, the European Commission proposed new regulations to close continental tax loopholes under which multinationals were able to save millions of dollars in taxes simply by re-allocating revenues and expenses to the country with the most favorable tax regime circumstances for that quarter or that year.

Put another way, corporate multinationals were engaging in tax avoidance—all a matter of semantics, you might say. But after five years of haggling over the specifics, the EC seems to have finally reached a consensus among member states on a new European-wide tax code. It’s still in the proposal stage, but the likelihood of passage makes it prudent for corporate governance officials to gear up for the changes.

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“No Risk” FINTECH Compliance

FINTECH, Consumer Financial Protection Bureau, CFPB, Project Catalyst, bad actors, no action letters

Now, FINTECH can develop products without fear of non-compliance

As the twenty-first century continues to celebrate its “Sweet Sixteen” year, one of the presents being unwrapped is FINTECH—that catch-all of financial technology that is designed to “rebel” against traditional financial services providers and open up a whole new array of ways to access, invest, and play with money. But while the start-ups that dominate this millennial scene sometimes think they can just take the car keys and roar off, financial regulators have taken a more parental view of the whole thing and have cautioned the young drivers to go slowly. Now, a compromise has been reached whereby FINTECH can engage in adolescent experimentation—without the risk of getting grounded.

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