Hello and welcome to the Fides Weekly Update. Take a look at this week’s key trends, moves and developments in legal and compliance.
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1. Sanctions violations lead to over $1 billion fine for Standard Chartered
Standard Chartered has agreed to pay $1.1bn (£843m) in settlement fees for both violating US sanctions against Iran and inadequate financial crime controls.
The total amount exceeds the $900m initially set aside for the expected sum, and it combines penalties issued from authorities residing in both the UK and US, including the DoJ, New York Department of Financial Services, Manhattan district attorney, Department of Treasury, Federal Reserve and the FCA.
This fine marks an end to a five year-long investigation into sanctions breaches by StanChart and culminated in various extensions to a seven year-long deferred prosecution agreement (DPA). The DoJ claims the DPA will end once bank has “admitted and accepted responsibility for its criminal conduct”, likely in 2021.
According to the FT, the emerging markets bank violated US sanctions placed on not only Iran, but also Myanmar, Cuba, Sudan and Syria, highlighting one example where dollar payments were processed for a correspondent bank supposedly related to the Isis terrorist group, as understood from an investigation by the FCA.
Examining the banks financial crime controls, the FCA found highly lax procedures, particularly in the UAE, where on one occasion an account was opened for a consulate with over £500,000 in cash from a suitcase.
Most of the bank’s wrongdoing occurred in its Dubai branch and London HQ. In the UAE, a former StanChart employee has pleaded in New York state court to sanctions-related violations, and an Iranian customer of the Dubai branch has been criminally charged in Washington D.C.
Meanwhile in London, the bank has been found of multiple AML failings by its UK Correspondent Banking business during the period from November 2010 to July 2013. Mark Steward, Director of Enforcement and Market Oversight at the FCA, said:
‘Standard Chartered’s oversight of its financial crime controls was narrow, slow and reactive. These breaches are especially serious because they occurred against a backdrop of heightened awareness within the broader, global community, as well as within the bank, and after receiving specific attention from the FCA, US agencies and other global bodies about these risks.
There have been numerous sanctions fines reported over the last decade. Here are some of the most high-profile in recent years:
- Société Générale fined $1.3bn for US sanctions violations in Nov 2018
- BNP Paribas received $8.9 billion penalty over sanctions violations in Sudan, Cuba and Iran in May 2014.
- Credit Agricole paid $787 million in Oct 2015
- ING Bank charged $619 million, largest OFAC settlement at the time in June 2012
2. Paul Hastings launches new cross-disciplinary AI practice
Paul Hastings has launched a new Artificial Intelligence group with analysts and data scientists from Booz Allen Hamilton.
Lawyers and technologists from the group will join forces to help clients face the legal issues surrounding the use of artificial intelligence, and address its impact across different industries.
The practice is co-chaired by London-based European data privacy and cyber security head Sarah Pearce, and US litigation partner Robert Silvers based in Washington DC. Mr Silvers formerly served as the Assistant Secretary for Cyber Policy at the Department of Homeland Security under the Obama administration.
The 40-lawyer team gathers specialists advising on data privacy and cyber-security, employment, technology transactions, fintech, IP, trade controls, class action and litigation. The technologists in the team were previously absorbed from consultancy Booz Allen Hamiltion in 2017/18, and operate out of Washington DC and Atlanta.
After realising a set of common concerns were arising from the deployment of artificial intelligence across a range of industries, the firm set to establish a cross-practice team to help its clients navigate the issues. This includes the application of emerging technology to new business lines, as well as the governance and ethical considerations of using AI.
The practice will both take on existing matters from the plethora of partners involved and generate its own work out of tech developments in client companies.
The creation of the practice reflects broader efforts in law firms to help clients navigate the issues associated with disruptive technologies. Earlier this month, Norton Rose Fulbright launched its technology consulting practice led by computer scientist and Professor Peter McBurney.
EY in its recent acquisition of Pangea3 from Thompson Reuters, and onboarding of Riverview Law and its disruptive software Kim Technologies last year, also marks a turning point in the use of technology to deliver legal managed services.
Movers & Shakers of the week
Sky has promoted former Olswang partner Claire Canning to the role of general counsel for its U.K. and Ireland operations
Davis Polk & Wardwell Hong Kong partner Paul Chow will leave the firm and join Cathay Pacific Airways Ltd., Hong Kong’s flagship carrier, as its group general counsel.
Linklaters has made its third senior appointment in the firm’s finance and projects division this year, with London partner Daniel Tyrer set to become the firm’s new global head of projects this May.
Pinsent Masons’ head of financial products and payments Tony Anderson has led a three-lawyer defection to Eversheds Sutherland, joined by consultant Henry Burkitt and associate Charlie Clarence-Smith.
Mehdi Khodadad, along with colleague Joshua DuClos, have joined Sidley Austin’s Century City office.
Macfarlanes makes its third lateral hire of 2019 with former Ropes & Gray special situations partner Peter Baldwin joining the team
Former PwC directors Shaun Whittaker and Tony Rutherford join Mills Oakley as partners in Melbourne, in the latest in the battle for talent between the Big Four accounting firms and law firms in Australia.
Tax litigation partner James Le Gallais joins Stewarts law with Tax directors Lisa Vanderheide and Sarah Stenton from BDO.
Reed Smith’s innovation manager Alex Smith has joined artificial intelligence services provider RAVN as Global Product Lead
Office Openings & Closings
Inclusion and Diversity