Taiwan's Mega Bank fined by New York regulator for compliance lapses

The New York branch of Mega Financial Holding, one of Taiwan's biggest banks, has agreed to pay $180 million to New York state's financial regulator for anti-money laundering violations that included lax attention to risk exposure in Panama, authorities said on Friday.

It is the first time in a decade that a Taiwan-based financial institution has been penalized by U.S. authorities, according to Taiwan's Financial Supervisory Commission.

Mega International Commercial Bank of Taiwan, the New York branch, was "indifferent" to risks associated with transactions involving Panama, a high-risk area for money laundering, the New York State Department of Financial Services (NYDFS) said in a statement on Friday. read more »

A cocky arms dealer fleeced the Pentagon in ‘War Dogs.’ Now he’s fighting for movie profits.

The movie “War Dogs” debuts Friday with Jonah Hill playing the role of Efraim Diveroli, a brash college dropout in Miami Beach who decides to sell guns and ammunition to the Pentagon. It’s a comedy, but the real-life story is no laughing matter: Diveroli’s company eventually won a $298 million Defense Department contract, but sent substandard equipment from Eastern Bloc countries to Afghanistan and found itself at the center of a sprawling criminal investigation.

Diveroli’s rise and fall was covered at length after the misdeeds of AEY Inc., his company, were discovered. They were outlined in a 28-page report in 2008 by the House Committee on Oversight and Government Reform and in a March 2011 Rolling Stone magazine article that relies heavily on interviews with Diveroli’s former colleague, David Packouz. read more »

To Crack Down on Securities Fraud, States Reward Whistle-Blowers

In the aftermath of the financial crisis, a growing army of confidential informants — better known as whistle-blowers — has helped federal securities regulators identify and prosecute wrongdoers.

Now the same thing is happening at the state level: Securities regulators in two states (so far) are enlisting the aid of these informants to enforce their own fraud statutes and protect residents from financial harm. And the whistle-blowers are reaping rewards.

On Aug. 19, for example, an informant was awarded $95,000 for helping Indiana securities regulators bring an enforcement action against J PMorgan Chase for failing to disclose certain conflicts of interest to clients about the way the bank invested their money. The monetary award was the first given under that state’s whistle-blower program aimed at securities law violators. read more »

Nexsen Says FCA Jury Verdict Bars $117M Malpractice Suit

Law firm Nexsen Pruet LLC urged a South Carolina federal judge on Thursday to toss a hospital system's $117 million malpractice lawsuit alleging the firm’s bad advice caused the company to lose a False Claims Act suit against the federal government, saying the jury’s verdict in that case bars the suit.

Nexsen told U.S. District Judge Margaret B. Seymour that the jury’s ruling definitively showed the firm’s advice did not contribute to South Carolina-based Tuomey Healthcare System Inc.’s contracts with doctors that that led to a $237 million FCA judgment in October 2013. The firm also said the Fourth Circuit backed up the jury’s decision on appeal in July 2015, agreeing that that the hospital violated the Stark Law. read more »

CFTC Charges Forex Capital Markets, LLC

with Undercapitalization, Failing to Timely Report Undercapitalization Violation, and Guaranteeing against Customer Losses

Washington, DC – The U.S. Commodity Futures Trading Commission (CFTC) filed a civil enforcement action in the U.S. District Court for the Southern District of New York against Forex Capital Markets, LLC (FXCM), charging FXCM with undercapitalization, failure to timely report its undercapitalization violation, and guaranteeing against customer losses. FXCM, with headquarters in New York, New York, is registered with the CFTC as a Retail Foreign Exchange Dealer (RFED).

The CFTC Complaint, filed on August 18, 2016, alleges that FXCM, as an RFED in the business of offering or engaging in retail off-exchange foreign currency transactions, was required to maintain adjusted net capital of approximately $25 million on January 15, 2015. However, the Complaint alleges that on that day FXCM admitted it had a shortfall of at least $200 million under its adjusted net capital requirement, meaning FXCM had liabilities exceeding its assets by approximately $175 million. read more »

Deutsche Bank's $10-Billion Scandal

Almost every weekday between the fall of 2011 and early 2015, a Russian broker named Igor Volkov called the equities desk of Deutsche Bank’s Moscow headquarters. Volkov would speak to a sales trader—often, a young woman named Dina Maksutova—and ask her to place two trades simultaneously. In one, he would use Russian rubles to buy a blue-chip Russian stock, such as Lukoil, for a Russian company that he represented. Usually, the order was for about ten million dollars’ worth of the stock. In the second trade, Volkov—acting on behalf of a different company, which typically was registered in an offshore territory, such as the British Virgin Islands—would sell the same Russian stock, in the same quantity, in London, in exchange for dollars, pounds, or euros. Both the Russian company and the offshore company had the same owner. Deutsche Bank was helping the client to buy and sell to himself.

At first glance, the trades appeared banal, even pointless. Deutsche Bank earned a small commission for executing the buy and sell orders, but in financial terms the clients finished roughly where they began. To inspect the trades individually, however, was like standing too close to an Impressionist painting—you saw the brushstrokes and missed the lilies. These transactions had nothing to do with pursuing profit. They were a way to expatriate money. Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia. On the Moscow markets, this sleight of hand had a nickname: konvert, which means “envelope” and echoes the English verb “convert.” In the English-language media, the scheme has become known as “mirror trading.” read more »