Top 10 International Anti-Corruption Developments for October 2022
Top 10 International Anti-Corruption Developments for October 2022
Designed for busy in-house counsel, compliance professionals, and anti-corruption lawyers, this newsletter summarizes some of the most important international anti-corruption law and case developments from the past month, with links to primary sources. This month we ask: What did a U.S. appellate court have to say about a foreign bribery related money laundering conviction? What foreign bribery enforcement action did Australian authorities bring? What impact will a new data sharing agreement between the United States and the United Kingdom have on foreign bribery enforcement? The answers to these questions and more are here in our October 2022 Top 10.
On October 5, 2022, the U.S. Court of Appeals for the Second Circuit issued a summary order affirming the January 2020 money laundering conviction of Donville Inniss, the former Minister of Industry, International Business, Commerce, and Small Business Development of Barbados. Inniss allegedly accepted approximately $36,000 in bribes, through a U.S. bank account in his friend’s name, from “high-level executives” at a private Barbadian insurance company in exchange for leveraging his status as the Minister of Industry to enable the insurance company “to obtain two insurance contracts from the Barbados government to insure over $100 million worth of government property.” On appeal, Inniss argued that (1) the international transfer of funds at issue was integral to the unlawful activity of bribery and thus could not independently constitute proceeds for a money laundering conviction and (2) the international transfer of funds did not “promote the carrying on of” bribery because the transfer did not ensure the continuing operation of the bribery scheme. The Second Circuit rejected both arguments. Relying on previous precedent, the court held that (1) the relevant money laundering statute, 18 U.S.C. § 1956(a)(2)(A), does not require that proceeds “first be generated by unlawful activity, followed by a financial transaction with those proceeds, for criminal liability to attach,” and (2) because the international transfers were integral to move the bribe payments, they were essential to the completion of the scheme, satisfying the § 1956(a)(2)(A) requirements. The court also rejected Inniss’s challenges to several jury instructions. The affirmation of Inniss’s conviction is important for DOJ’s increasing use of the money laundering statutes to target “demand side” or “passive” bribery. (See our August 2019 and September 2021 Top 10s for more on U.S. efforts to target the demand side of foreign bribery.)
On October 20, 2022, DOJ announced that Arturo Carlos Murillo Prijic, the former minister of the government of Bolivia, had pleaded guilty in the Southern District of Florida to one count of conspiracy to commit money laundering. DOJ first announced charges against Murillo and several others in May 2021 for their roles in an alleged bribery and money laundering scheme involving a Bolivian government contract. DOJ accused Murillo of receiving “at least $532,000 in bribe payments from a Florida-based company in exchange for helping that company secure an approximately $5.6 million contract to provide tear gas and other non-lethal equipment to the Bolivian Ministry of Defense.” According to DOJ, Murillo laundered approximately $130,000 in cash bribes through bank accounts in Miami, Florida. Murillo faces up to 10 years’ imprisonment. Four of Murillo’s co-defendants—Sergio Rodrigo Mendez Mendizabal, Bryan and Luis Berkman, and Philip Lichtenfeld—pleaded guilty to related charges in September 2021 and, in June 2022, were sentenced to terms of imprisonment ranging from 26 to 42 months.
On October 24, 2022, DOJ announced charges in the Eastern District of New York and the District of New Jersey against 13 individuals, including individuals identified as Chinese intelligence officers, for their alleged participation in malign schemes in the United States, including engaging in a campaign to harass and coerce a U.S. resident to return to the PRC as part of an international extralegal repatriation effort known as “Operation Fox Hunt” (discussed in our November 2020 Top 10) and attempting to obstruct a U.S. trial of a Chinese telecommunications company for allegedly misappropriating trade secrets. According to a complaint filed in the Eastern District of New York, one of the alleged Chinese intelligence officers, Guochun He, paid a $41,000 Bitcoin bribe to an undercover law enforcement agent to obtain non-public, confidential information concerning the criminal prosecution and ongoing investigation of the Chinese company. DOJ charged He with two counts of money laundering and one count of obstruction of justice. He remains at large, but if convicted, he faces up to 40 years in prison.
On October 11, 2022, the Australian Federal Police (AFP) announced charges against two former Snowy Mountain Engineering Corporation (SMEC) executives for their alleged participation in bribing Sri Lankan officials. According to the AFP, the former executives arranged for the payment of more than $195,000 in bribes to Sri Lankan officials in exchange for their assistance in securing infrastructure projects in Sri Lanka worth more than $8.8 million. If convicted, the former executives face up to 10 years’ imprisonment. According to the announcement, the AFP and Sri Lankan law enforcement worked in close collaboration throughout the investigation.
On October 11, 2022, the Panamanian Public Ministry announced that the High Court for Settlement of Criminal Cases amended a lower court’s order dismissing a criminal case against 32 individuals, allowing the case to proceed to trial. The individuals are charged with, among other things, money laundering in connection with the Public Ministry’s 2016 investigation linking Panamanian law firm Mossack Fonseca to Operation Car Wash (Lava Jato), an investigation into alleged corruption involving Brazil’s national oil company, Petróleo Brasileiro S.A. (“Petrobras”). Arrests in the case were first made public in February 2017. According to the lower court, however, prosecutors had failed to demonstrate which accounts were created in Panama, which were opened with the purpose of hiding money of illicit origin, and the amount of money received from offshore companies. The Public Ministry stated that it was ready to commence hearings, as it had all the evidence it needed to prove its charges. (For more on Mossack Fonseca, see our April 2016 and February 2017 Top 10s.)
On October 3, 2022, DOJ announced that the U.S. and UK Access to Electronic Data for the Purpose of Countering Serious Crime (the “Data Access Agreement” or “Agreement”) entered into force. The Agreement, which is authorized under the Clarifying Lawful Overseas Use of Data (CLOUD) Act, allows each country’s law enforcement agencies—the U.S. DOJ’s Office of International Affairs and the UK Home Office’s Investigatory Powers Unit—to access data held by electronic communications or remote computing service providers to combat serious crime. In other words, service providers in one country “may respond to qualifying, lawful orders for electronic data issued by the other country” for use in government investigations of serious crime. DOJ stated that the Agreement will “greatly enhance the ability of the United States and the United Kingdom to prevent, detect, investigate, and prosecute serious crime. . . .” Serious crimes in the United States are crimes that are punishable with a maximum term of imprisonment of at least three years, which include, among others, fraud, bribery, money laundering, and FCPA violations. The Data Access Agreement should further enhance cross-Atlantic cooperation in foreign bribery investigations. For a more in-depth discussion of the Data Access Agreement, its impact on service providers, and its scope, see our client alert.
On October 18, 2022, the UK Home Office announced legislation that would create new measures designed to protect national security and combat corruption. The Foreign Influence Registration Scheme, if passed, would require “the registration of political influence activities within the UK at the direction of a foreign power or entity.” The bill would also enact measures to “protect UK interests from corrupt financial influence,” including by allowing UK investigators to monitor a suspect’s bank account in real time, identify bank accounts held by suspects in UK financial institutions, and compel the production of information and documents from relevant individuals and organizations. This bill would also make it an offense to obtain a material benefit from a foreign intelligence service.
On October 26, 2022, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced that it was adding Vladimir Plahotniuc, a former Moldovan member of Parliament, who served as both a de facto leader and elected chair of the Democratic Party of Moldova, to the Specially Designated Nationals List. OFAC alleges that Plahotniuc bribed law enforcement officials to buy their loyalty and maintain control over Moldova, including by obtaining a “key” business position for a high-ranking Moldovan government official’s relative. OFAC alleges that, in advance of the 2018 elections, Plahotniuc directed Moldovan law enforcement officials to focus on investigations concerning his political rivals. Plahotniuc is also alleged to have misappropriated state assets and to have been responsible or complicit in engaging in corruption related to private assets, government contracts, and national resources. As a result of Plahotniuc’s designation, all of his property and interests in property that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC, and U.S. persons (including U.S. financial institutions) are generally prohibited from engaging with him.
On October 18, 2020, the OECD Working Group on Bribery announced the results of its Phase 4 evaluation of Italy’s implementation of the OECD Anti-Bribery Convention. All parties to the Convention are subject to a rigorous peer review process, Phase 4 of which focuses on the evaluated country’s enforcement of the Convention and considers the country’s particular challenges and positive achievements. According to the Working Group, “Italy has strengthened its legislation and shows a significant level of foreign bribery enforcement with the pace of enforcement increasing since 2011.” The Working Group attributed this success in part to Italy’s creation of a specialized foreign bribery department in the Milan prosecutor’s office and efforts to modernize the court system. Nevertheless, the Working Group expressed concern that a high rate of foreign bribery cases were dismissed by Italian courts due to an “onerous” burden of proof. The Working Group also recommended that Italy increase the statute of limitations and monetary penalties for corporations that commit foreign bribery.
On October 11, 2022, Transparency International (TI) published “Exporting Corruption 2022,” which assesses foreign bribery enforcement in 43 of the 44 signatory countries of the OECD Anti-Bribery Convention, as well as China, Hong Kong, India, and Singapore. TI found that, since it began measuring in 2009, “[c]ountries’ enforcement against foreign bribery has dropped to its lowest level.” The report found a “continued decline in enforcement” and “inadequacies” in the legal frameworks and enforcement systems in almost every country. Notably, Brazil, Sweden, and Portugal declined in enforcement performance, moving from a “moderate” to “limited” enforcement classification. TI scored enforcement by reviewing, among other things, each country’s number of investigations commenced, charges filed, and cases concluded with sanctions. TI issued a similarly grim report in October 2020, but, as reflected in the OECD’s Phase 4 evaluation of Italy’s foreign enforcement record (which received a “limited enforcement” rating in the 2022 TI report), not everyone shares TI’s pessimistic view.