Financial Crime Cross-Border Enforcement
Cross-Border Financial Crime Enforcement – Overview
Key aspects of cross-border enforcement include:
Mutual Legal Assistance Treaties (MLATs): Agreements between countries to assist in investigation and evidence sharing.
Extradition Treaties: To transfer accused persons to stand trial.
Asset Freezing and Forfeiture: Coordinated efforts to seize criminal proceeds held abroad.
Regulatory Cooperation: Between financial regulators, e.g., SEC (USA), FCA (UK), MAS (Singapore).
International Bodies Involved: INTERPOL, FATF, UNODC, OECD, Egmont Group, etc.
Key Case Law and Examples
1. United States v. HSBC Holdings plc (2012) – Money Laundering / Sanctions Violations
Jurisdictions involved: USA, Mexico, UK, and others
Facts: HSBC was found to have allowed drug traffickers in Mexico to launder hundreds of millions of dollars through the U.S. financial system. It also facilitated transactions for countries under U.S. sanctions (e.g., Iran, Sudan).
Enforcement Action:
The U.S. Department of Justice (DOJ) used the Bank Secrecy Act (BSA) and International Emergency Economic Powers Act (IEEPA) to charge HSBC.
A $1.9 billion fine was imposed, and HSBC entered into a deferred prosecution agreement (DPA).
U.S. and UK regulators coordinated the investigation.
Significance: Highlighted how weak AML controls in one jurisdiction can enable criminal activity globally and the importance of global banks implementing robust compliance systems.
2. SFO v. Standard Bank (UK) (2015) – Bribery / Corruption (UK's first DPA)
Jurisdictions involved: UK, Tanzania
Facts: Standard Bank (now ICBC Standard Bank) was involved in a deal where a Tanzanian partner paid bribes to government officials to secure a bond issuance contract.
Enforcement Action:
The UK’s Serious Fraud Office (SFO) prosecuted under the UK Bribery Act 2010.
The case resulted in the first Deferred Prosecution Agreement in the UK, with a $33 million settlement.
Cross-Border Element:
The funds originated in the UK but were intended to influence officials in Tanzania.
Required cooperation with Tanzanian authorities and international financial intelligence units.
Significance: Set precedent for DPAs in cross-border bribery cases and showed the Bribery Act’s global reach.
3. U.S. v. Odebrecht S.A. and Braskem S.A. (2016) – Global Corruption (Operation Car Wash)
Jurisdictions involved: Brazil, USA, Switzerland, and over 10 countries
Facts: Brazilian construction giant Odebrecht paid around $788 million in bribes across Latin America and Africa to secure public works contracts.
Enforcement Action:
U.S. DOJ, Brazil’s Ministério Público Federal (MPF), and Swiss prosecutors cooperated.
Total fines exceeded $3.5 billion across jurisdictions.
The companies pled guilty to FCPA (U.S.) and Brazilian anti-corruption laws.
Cross-Border Impact:
The case led to resignations, criminal prosecutions, and impeachment proceedings in several countries.
Significance: A benchmark for global anti-corruption cooperation; reinforced the global reach of the U.S. Foreign Corrupt Practices Act (FCPA) and Brazil’s Clean Company Act.
4. U.S. v. Credit Suisse AG (2014) – Tax Evasion Facilitation
Jurisdictions involved: USA, Switzerland
Facts: Credit Suisse helped U.S. taxpayers conceal assets in Swiss accounts to avoid taxes, violating U.S. tax laws.
Enforcement Action:
The DOJ used tax fraud charges and pursued enforcement via FATCA (Foreign Account Tax Compliance Act).
Credit Suisse pleaded guilty and paid $2.6 billion in penalties.
Swiss secrecy laws were challenged, and some data was shared.
Significance:
Marked a shift in banking secrecy from Switzerland.
Reinforced FATCA's global enforcement.
Promoted more transparency and global tax cooperation via the OECD's Common Reporting Standard (CRS).
5. U.S. v. Huawei CFO Meng Wanzhou (2018–2021) – Sanctions Evasion
Jurisdictions involved: USA, Canada, China
Facts: Meng Wanzhou, CFO of Huawei, was accused of fraud and sanctions evasion, involving alleged misrepresentations to banks about Huawei’s dealings in Iran (sanctioned by the U.S.).
Enforcement Action:
U.S. sought extradition from Canada under its treaty.
Triggered a major diplomatic dispute involving Canada, China, and the U.S.
A DPA was eventually reached; Meng was released, though Huawei still faces charges.
Significance:
Demonstrated the geopolitical sensitivity of cross-border financial enforcement.
Highlighted enforcement of U.S. sanctions laws globally, even against foreign nationals.
6. The 1MDB Scandal – Malaysia Development Berhad Fraud (2015–2020)
Jurisdictions involved: Malaysia, USA, Switzerland, Singapore, UAE
Facts: Billions were siphoned from Malaysia’s sovereign wealth fund (1MDB), allegedly involving high-ranking officials, including former Prime Minister Najib Razak.
Enforcement Action:
U.S. DOJ filed civil forfeiture complaints under its Kleptocracy Asset Recovery Initiative, seizing assets (real estate, yachts, art) worth over $1 billion.
Singapore jailed bankers, froze assets; Swiss authorities investigated UBS and Falcon Bank.
Goldman Sachs paid over $2.9 billion globally for its role in facilitating 1MDB bond deals.
Significance:
One of the largest global kleptocracy and asset recovery operations.
Demonstrated how shell companies and financial institutions across borders facilitated fraud.
7. Wirecard AG Fraud (2020)
Jurisdictions involved: Germany, Philippines, Singapore, UAE
Facts: German fintech company Wirecard claimed to hold €1.9 billion in trustee accounts in the Philippines—funds that never existed.
Enforcement Action:
German authorities launched investigations for fraud and market manipulation.
Singaporean regulators investigated local branches.
INTERPOL issued a red notice for COO Jan Marsalek.
Significance:
Major failure of European regulatory oversight.
Showed how cross-border subsidiaries and fake accounting records can be used to mislead investors and auditors.
Key Themes in These Cases
| Theme | Description |
|---|---|
| Global Cooperation | All cases involved coordination between multiple countries' enforcement agencies. |
| Extraterritorial Laws | U.S. FCPA, UK Bribery Act, and other laws applied to foreign actions due to links (e.g., U.S. dollar use, U.S. banking system access). |
| Data Sharing Challenges | Differences in data privacy, banking secrecy, and legal systems complicate evidence sharing. |
| Asset Recovery | Tracing illicit proceeds across jurisdictions requires forensic accounting, freezing orders, and mutual recognition of judgments. |
| Use of DPAs | Increasing reliance on Deferred Prosecution Agreements to impose fines and compliance measures without full trials. |
Conclusion
Cross-border enforcement of financial crime is complex but increasingly coordinated, driven by the global reach of finance and the need to prevent safe havens for illicit funds. High-profile cases like HSBC, Odebrecht, 1MDB, and Huawei underscore the need for strong anti-money laundering regimes, effective corporate compliance, and international legal cooperation.
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