Is the US Government Trying to Destroy Bitcoin?

Earlier this month, the US government seized the account of Bitcoin exchange Mt. Gox, prompting Kim Dotcom to wonder if the feds were trying to destroy the virtual currency. 

That remains to be seen, write attorneys at Fuerst Ittleman. But the government’s actions should be a surprise to no one: 

“Let’s start with the regulatory background. Between the time of its birth and this past March, Bitcoin existed in an area of the law where there was no law. That is not to say that Bitcoin issuers and users were not subject to the money laundering provisions of federal law if they used Bitcoin for unlawful purposes, but up until March of this year the federal government had not decided how to regulate Bitcoin as a thing. Then, on March 18, the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury issued its Guidance entitled, ‘Application of FinCEN’s Regulations to Persons Administering, Exchanging, or Using Virtual Currencies.’ This was a watershed moment for the regulation of Bitcoin, but sadly it seems that Mt. Gox either never knew about it or chose to disregard it… 

So, before March, whether FinCEN would ever regulate Bitcoin – and if so, how – was a mystery. However, after March 18, things became much more clear: if an entity is in the business of exchanging Bitcoin for ‘real currency’ or vice versa, or accepts Bitcoin from one person and transmits the real currency equivalent to another person, that entity is a money transmitter and will be regulated as such in the United States, and will be subject to the criminal provisions of 18 USC 1960 for failing to register with the federal government as a money transmitter or being licensed in any state that would require a money transmitting license.”

Read the full update, Bitcoin Regulatory Update: Understanding the Federal Government’s Attack on Mt. Gox - Fuerst Ittleman David & Joseph, PL»

FINRA Cracks Down on Lax Anti-Money Laundering Programs

Recent enforcement from the Financial Institution Regulatory Authority sends an important reminder to securities firms – and their employees – of the need to establish and follow anti-money laundering procedures. From attorneys Kiersten Fletcher and Daniel Nathan at Morrison & Foerster:

“Last week, the Financial Industry Regulatory Authority (FINRA) publicized penalties against three companies – as well as four associated individuals – that it found had failed to establish and implement adequate procedures for detecting money laundering and other suspicious transactions in violation of the Bank Secrecy Act… The enforcement actions and accompanying announcement demonstrate FINRA’s continued focus on anti-money laundering (AML) compliance programs, and why implementing effective procedures will help firms avoid regulatory actions or scrutiny.

FINRA’s announced settlements of three formal disciplinary proceedings that imposed a total of $900,000 in sanctions and suspensions on multiple securities-industry professionals. FINRA ordered Atlas One Financial Group, a Miami, Florida-based brokerage firm, to pay a $350,000 fine for failing to implement sufficient procedures to detect and monitor suspicious transactions, and fined and suspended the firm’s former chief compliance officer and AML compliance officer. FINRA also levied a $300,000 penalty against Firstrade Securities, Inc., a Flushing, New York-based company that operates an online platform for securities trading. Finally, FINRA imposed a $250,000 fine against World Trade Financial Corporation, a San Diego, California-based broker-dealer, and fined and suspended its president, chief compliance officer, and trade desk supervisor.” 

Read the full update, FINRA Focuses on Anti-Money Laundering Procedures and Red Flags - Morrison & Foerster LLP»

Businesses that Handle Virtual Currencies May Be Subject to Bank Secrecy Act

Businesses that deal in virtual currencies take note: The Financial Crimes Enforcement Network (FinCEN) might consider you to be a “money service business” and as such subject to the Bank Secrecy Act. From attorneys at Pillsbury:

“On March 18, 2013, the Financial Crimes Enforcement Network, under its authority to administer the Bank Secrecy Act (‘BSA”), issued interpretive guidance to clarify whether the BSA and its implementing regulations apply to persons using, administering, or exchanging virtual currencies (the ‘Guidance’). The Guidance follows FinCEN’s issuance of a Final Rule amending definitions and other regulations relating to money services businesses (‘MSBs’) […] and a Final Rule amending definitions and other regulations relating to prepaid access… The Guidance explains the regulatory treatment of ‘persons’ engaged in ‘convertible’ virtual currency transactions under the BSA and its implementing regulations…

Under the BSA and its implementing regulations, MSBs, and authorized delegates of MSBs, are required, among other things, to develop, implement, and maintain policies, procedures, and internal controls that are reasonably designed to prevent the risk of money laundering and the financing of terrorist activities. These requirements include, among other things, establishing and maintaining a written anti-money laundering program and a customer identification program, filing government reports, creating and retaining records, and responding to law enforcement requests.”

Read the complete update, Financial Crimes Enforcement Network Issues Guidance on Virtual Currency - Pillsbury Winthrop Shaw Pittman LLP»

Feds Take FCPA Fight to Wall Street

From Corporate Law Report:

U.S. regulators just took the fight against bribery and corruption to a new arena: Wall Street. Attorneys John Goselin and Mauro Wolfe of Duane Morris explain:

“On May 7, 2013, the U.S. Attorney’s Office for the Southern District of New York unsealed extraordinary criminal charges against two registered representatives of a U.S. broker-dealer and a high-level Venezuelan government official for engaging in a ‘Massive International Bribery Scheme.’ What makes this fraud scheme remarkable is that it involves the activities of a U.S. broker-dealer, its client, a foreign-owned and controlled bank, the Foreign Corrupt Practices Act and several suspicious transactions that potentially should have raised concerns—a perfect storm.”

Read the post in full»

Ranbaxy to Pay $500 Million for Adulterated Drugs

Generic drug maker Ranbaxy USA will pay $500 million to settle to seven felony charges in the “largest drug safety-related settlement with a generic manufacturer to date,” write attorneys at Skadden Arps: 

“… Ranbaxy admitted to manufacturing and distributing adulterated drugs made at two of Ranbaxy’s facilities in Ponta Sahib and Dewas, India, failing to file required reports with the U.S. Food and Drug Administration (FDA), and making material false statements to FDA. Ranbaxy Laboratories Limited’s press release following the settlement noted that the conduct at issue occurred several years ago and that Ranbaxy’s current management cooperated fully in the Department of Justice’s (DOJ) investigation. The settlement follows upon Ranbaxy’s 2012 Consent Decree of Permanent Injunction and represents the largest drug safety settlement to date with a generic drug manufacturer. The settlement also makes good on government threats to use criminal and civil enforcement tools, including the FCA, to address serious manufacturing violations…

The Ranbaxy settlement is significant in a number of respects. First, the $500 million total financial settlement represents the largest drug safety-related settlement with a generic manufacturer to date, and the seven felony guilty pleas are indicative of the severity of the allegations resolved. Second, the settlement has broader implications for DOJ and FDA enforcement trends: It makes good on repeated threats that the government intends to focus on manufacturing issues in addition to the advertising and promotion claims that have historically dominated drug and device manufacturer government investigations and settlements. Third, while there are strong legal arguments to the contrary, the settlement reflects DOJ’s belief that manufacturing and safety violations may be actionable under the civil False Claims Act.”

Read the full update, Ranbaxy Resolves Criminal and Civil Charges Through Record Settlement - Skadden, Arps, Slate, Meagher & Flom LLP»

What Will The Future Bring for SEC Enforcement?

From securities lawyer Jim Meyers (Orrick), a perspective on the future of enforcement actions at the Securities and Exchange Commission:

“Q: Is the Ralph Lauren Non-Prosecution Agreement a one-off or the start of a trend?

Meyers: It is hard to say whether the Ralph Lauren NPA is the beginning of a trend. Perhaps reflecting Rob Khuzami’s background as a prosecutor, NPAs and DPAs were introduced to SEC enforcement in 2010, during Mr. Khuzami’s tenure as Enforcement Director. Given that Mary Jo White, Andrew Ceresney and George Canellos have a similar background, I expect the SEC to continue to offer NPAs, DPAs and other forms of credit for cooperation. To date, however, NPAs and DPAs have been few and far between – only a handful of such resolutions with companies, and only one publicized instance of which I am aware of a decision not to prosecute an individual due to the individual’s substantial cooperation during an investigation. Moreover, unlike decisions not to bring any enforcement action in the first instance, NPAs and DPAs offer cooperators only partial, not complete, credit for cooperation.”

Read the full update, A Look Ahead at SEC Enforcement Actions with Orrick’s Jim Meyers – JD Supra Law News»

Hospice Providers Take Note: The Justice Department Has Your (False Claims) Number…

The federal government recently launched a False Claims Act lawsuit against the largest for-profit hospice chain in the United States. It’s the latest blow in a crack-down on Medicare billing fraud at the nation’s hospice providers, writes attorney Latour Lafferty at Fowler White Boggs:

“The Justice Department announced filing a False Claim Act (FCA) lawsuit against Chemed Corporation, and various owned hospice subsidiaries … alleging false Medicare billings for hospice services. The announcement signals the continuing surge by federal prosecutors of FCA lawsuits, many of which originated as whistleblower complaints, against providers in the burgeoning hospice industry, utilizing the FCA which is the government’s chief civil fraud tool…

Over the last four years, federal prosecutors have asserted FCA claims against numerous hospice providers in addition to Chemed and obtained [a number of] settlements… These settlements are part of the government’s continuing emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009.”

Read the full update, Justice Department Increases Fraud Prosecution of Hospice Providers - Fowler White Boggs P.A.»

Are You Ready for the New Export Control Regulations?

Companies subject to US export control rules take note: recent revisions that are likely to prove complicated in their implementation will go into effect soon. From attorney Joseph Gustavus at Miller Canfield:

“The first significant reforms to the U.S. export control regulations in International Traffic in Arms Regulations (ITAR) and U.S. Export Administration Regulations (EAR) are about to take effect.

With the 30-day Congressional notification period concluding on April 7, 2013, the initial changes to the USML, comprised of (1) revisions to USML Category VIII (Aircraft and Related Articles), and (2) the establishment of a new USML Category XIX (Gas Turbine Engines), were published by the U.S. State Department on April 16, 2013 in the form of a final rule (ITAR Initial Reform Rule). The ITAR Initial Reform Rule is effective 180 days after publication or October 15, 2013.”

Read the full update, U.S. Export Control Reforms to Become Effective - Miller Canfield»

The Long Arm of the IRS Is Getting Longer…

The Internal Revenue Service plans to share tax information with the Australian and UK governments, writes David Gair of law firm Looper Reed:

“The [IRS] says that the target is trusts and companies holding assets on behalf of residents throughout the world… 

But there is nothing wrong or illegal about holding assets in offshore entities – as long as it is properly reported. The IRS has a multitude of reporting requirements for offshore activity (FBARs, Form 8938, etc.).”

Read the full update, IRS Announces Information Sharing Agreement With Australia And The UK To Combat Tax Evasion - Looper Reed & McGraw, P.C.»

New Russian Anti-Corruption Law Establishes Internal Compliance Program Requirement

Russia’s recently enacted anti-corruption law sets a new standard for all companies that do business in the country: the obligation to create and maintain an internal compliance program. It’s a big step in the right direction for the country, write attorneys at Dechert:

“Russia’s recent efforts to combat bribery have met with mixed results in recent years, as publicized initiatives have not yet resulted in significant change on the ground. But change is palpable. For example, Russia’s Transparency International ranking (reflecting public perception of corruption) has gradually improved over the past five years (from 147 in 2008 to 133 in 2012), although it remains on par with countries such as Iran and Nigeria. Russia’s ability to attract capital is very much tied to whether or not the Russian Government can make significant progress in combating this economic and social problem in the coming years. The new Anti-Corruption Law could be a step in that direction…

Among other requirements, the new Anti-Corruption Law imposes an express obligation on ‘organizations’ to develop and implement internal controls designed to combat corruption. By comparison, the U.S. Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act (UKBA) do not impose internal controls as broadly. While the UKBA allows for an ‘adequate procedures’ defense for companies that maintain such controls, and while U.S. enforcement officials often mitigate penalties against companies with compliance programs, Russia’s new Anti-Corruption Law essentially imposes a strict liability standard for companies to maintain these programs.”

Read the full update, CIS Legal Update - May 2013: Measures Taken to Strengthen Russian Anti-Corruption Laws - Dechert LLP»