Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – October 2021

United States: 

• The SEC charged CanaFarma Hemp Products Corp. and co-founders with defrauding investors of nearly USD $15 million and misappropriating a majority of investor funds for personal use and unrelated purposes.

• The SEC charged former broker and investment adviser Kenneth A. Welsh with misappropriating almost USD $3 million from his clients’ accounts in order to personally purchase gold coins and other precious metals.

• The SEC announced that clearing agency Fixed Income Clearing Corporation (FICC) will pay USD $8 million in penalties to settle charges that it failed to enact adequate risk management policies within its Government Securities Division.

• Credit Suisse Group AG has agreed to pay hundreds of millions in penalties, including nearly USD $100 million to the SEC, for violating the Foreign Corrupt Practices Act (FCPA) and misleading investors in a fraudulent loan scheme in Mozambique. 

United Kingdom:

• The Financial Conduct Authority (FCA) also fined Credit Suisse over £147 million for significant failure to conduct adequate due diligence regarding loans worth over $1.3 billion, which the bank arranged for the Republic of Mozambique.

Hong Kong:

• The Securities and Futures Commission (SFC) fined Ample Capital Limited $5.5 million and suspends its responsible officer for IPO sponsor failures.

Regulatory Updates

FATF: Updated Guidance for a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers

This latest update forms part of the FATF’s ongoing monitoring of the virtual assets and VASP sector and provides relevant examples and potential solutions to implementation obstacles. The 2021 Guidance includes updates focusing on updates and additional information in the following six key areas: 

• Clarification of the definitions of virtual assets and VASPs
• How the FATF Standards apply to stablecoins
• Related risks and tools available to countries to address money laundering and terrorist financing risks for peer-to-peer transactions
• Licensing and registration of VASPs
• Public and private sector guidance on the implementation of the “travel rule”
• Principles of information-sharing and co-operation amongst VASP Supervisors

FinCEN: Updated Suspicious Activity Reports Statistics

The Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN) recently released updated statistics on the SARs submitted up to the end of September 2021, showcasing an anticipated record high of over 3,000,000 SARs filed by the end of the year. 

The challenge now facing enforcement agencies is to sift through the high volumes of reports to determine quality vs quantity. The AML Act of 2020 has been the biggest proponent of improvement in the quality of meaningful feedback and trends, with the purpose of encouraging higher-quality reporting, not simply higher quantity.

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Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – May 2021

United States: 

• The Securities and Exchange Commission (SEC) charged BitConnect and five individuals for allegedly promoting a global unregistered digital asset securities offering that raised over $2 billion from retail investors.

• SEC charged Under Armour Inc. with failing to adequately disclose known uncertainties concerning its future revenue prospects and misleading investors. Under Armour agreed to a $9 million settlement.

• SEC charged Colorado-based GWFS Equities Inc. for failures related to filing suspicious activity reports (SARs). GWFS agreed to a settlement that imposes a $1.5 million penalty, a censure, and an order to cease and desist from future violations.

• SEC charged New Jersey-based healthcare company Premier Healthcare Solution LLC and its founder, Josiah David (formerly known as Dennis Lee) with fraudulently raising almost $4 million from over 130 investors nationwide.

• The SEC charged LJM Funds Management Ltd., LJM Partners Ltd., and their portfolio managers with fraudulently misleading investors regarding investment risks, resulting in a $1 billion trading loss.

• The SEC charged and fined S&P Dow Jones Indices LLC $9 million for failures relating to a previously undisclosed quality control feature of one of its volatility-related indices, which led S&P DJI to publish and disseminate stale index values during a period of unprecedented volatility. 

United Kingdom:

• The Financial Conduct Authority (FCA) fined Sapien Capital Ltd £178,000 for serious financial crime control failings in relation to cum/ex trading, which led to the risk of facilitating fraudulent trading and money laundering.

• The FCA charged Ian Hudson with fraudulent trading and carrying on regulated activities without authorization.

Hong Kong:

• The Securities and Futures Commission (SFC) reprimanded and fined Ewarton Securities Limited $1.5 million for breaches and failures of internal controls.

• The Market Misconduct Tribunal (MMT) fined China Medical & HealthCare Group Limited (formerly COL Capital Limited) and six former and current directors $4.2 million for failing to disclose inside information following SFC proceedings.

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Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – April 2021

United States: 

• The SEC awarded over USD $3 million to two whistleblowers who brought to light key issues and violations to help improve SEC’s ongoing compliance efforts.

• SEC filed charges against 8 companies for failing to disclose complete reporting information on required Form 12b-25 filings.

• The SEC charged fund manager and former race car team owner Andrew T. Franzone with multimillion-dollar investment fraud and misappropriation scheme.

• The SEC filed charges against Spot Tech House Ltd., a binary options trading platform, and two of its top executives with defrauding investors out of more than USD $100 million through unregistered online sales.

• The SEC charged seven individuals with defrauding investors out of more than USD $16 million through an oil-and-gas market manipulation scheme.

United Kingdom:

• The Financial Conduct Authority (FCA) commenced criminal proceedings against 2 individuals for conducting unauthorized regulated business activities in the UK.

• The FCA banned and fined UK financial adviser Simon Varley £68,300 for providing unqualified, dishonest financial advice to retail customers.

Hong Kong:

• The Securities and Futures Commission (SFC) fined Optimas Capital Limited $1.05 million over multiple failures with their short position reporting processes.

• The Market Misconduct Tribunal (MMT) sanctioned two former executives of Asia Telemedia Limited (ATML), now known as Yunfeng Financial Group Limited, for insider dealing.

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Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – March 2021

United States: 

• The SEC charged the founder of San Francisco-based biotech company uBiome for defrauding investors out of USD $60 million with false claims of the company’s successful business model and track record.  

• The SEC charged 7 individuals and tech company Airborne Wireless Network with running a fraudulent fundraising scheme that generated nearly USD $45 million.

• The SEC charged private investor George Heckler for running a decade-long scheme defrauding investors of over USD $90 million through two private hedge funds.

• The SEC charged Seth P. Levine, owner of real estate firm Norse Holdings, LLC, that defrauding at least 60 people out of millions based on false and misleading claims about real estate investments.

• The SEC took action against California-based stock trader Andrew L. Fassari (known as @OCMillionaire on Twitter) for a $900K fraudulent Twitter scheme for a now-defunct cannabis company.

United Kingdom:

• The Financial Conduct Authority (FCA) fined over £530,000 24 Hour Trading Academy for giving unauthorized trading advice via Whatsapp to consumers.

• The FCA fined experienced trader Mr. Adrian Geoffrey Horn £52,500 for executing trades with himself (“wash trading”) and prohibited him from participating in regulated activities.

Hong Kong:

• The Securities and Futures Commission of Hong Kong fined Yardley Securities Limited $5 million for failing to comply with AML/CFT regulatory requirements while handling third-party fund transfers.

• SFC reprimanded and fined Sino-Rich Securities & Futures Limited $7.2 million for failures in complying with AML/CFT regulatory requirements when handling cash deposits and third-party fund transfers.

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Regulatory Actions and Updates from Around the Globe

Enforcement Highlights – February 2021

United States: 

• The U.S. Securities and Exchanges Commission (SEC) suspended trading in the securities of 15 companies due to questionable trading and social media activity targeted at artificially inflating their stock price.

• The SEC charged an Oklahoma-based gas exploration and production company, Gulfport Energy Corporation, and its former CEO Moore, for failing to properly disclose executive perks and related person transactions.

• The SEC charged three individuals with running a Ponzi-like scheme that raised over $1.7 billion from 17,000 retail investors through securities issued by a New York-based registered investment adviser GPB Capital.

• FINRA fined Atlanta-based investment firm Triad Advisors $200,000 over findings that it neglected to follow proper compliance procedures when switching customers’ investments between funds.

• The SEC’s initial fine of $5 million on two Ukrainian traders and their firm for defrauding investors was increased to $7.5 million in February 2021 by a U.S. Supreme Court judge.

• OFAC fined BitPay, Inc., a digital currency company based in Georgia, more than $500,000 for over 2,100 international sanctions violations from multiple digital currency transactions.

United Kingdom:

• FCA began criminal proceedings against two brothers, former Goldman Sachs and Clifford Chance employees, for fraud by false representation and insider trading.

Hong Kong:

• The Securities and Futures Commission (SFC) reprimanded Brilliance Asset Management Limited and fined it $3.15M over failures to ensure short position reports (SPRs) for four collective investment schemes.

• SFC prohibited 13 brokers from dealing with assets held in 54 trading accounts related to a suspected social media ramp-and-dump scam involving the manipulation of the market

Regulatory Updates

Singapore:

The Monetary Authority of Singapore (MAS) recently published its Technology Risk Management Guidelines with a focus on establishing robust governance to ensure cyber resilience and sound technology risk practices for those companies operating both inside and outside of Singapore.

Upcoming Events:

The New Consumer: How to Ensure Integrity
in the Virtual Economy

Join our upcoming fireside event as we discuss the rise of virtual marketplaces as the new eCommerce, and how every player in these marketplaces – from consumers to payment processors – can establish a vibrant digital ecosystem built on integrity and accountability.

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Is your AML compliance too expensive, time-consuming, or ineffective?

iComply enables financial services providers to reduce costs, risk, and complexity and improve staff capacity, effectiveness, and customer experience.

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