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Pablo Quiñones joins PCCE as Executive Director

Program on Compliance and Enforcement, New York University School of Law -

The NYU Program on Corporate Compliance and Enforcement is pleased to announce that Pablo Quiñones will be PCCE’s new Executive Director.  Mr. Quiñones will assume his new position on February 1, 2018 and will serve for the rest of the academic year.  Next academic year, Mr. Quiñones return to private practice but will continue to work with PCCE as a Senior Fellow.

Mr. Quiñones joins the Law School after serving as Chief of Strategy, Policy and Training for the U.S. Department of Justice’s Criminal Fraud Section in Washington, D.C.  In that role, Mr. Quiñones supervised a unit that worked with senior leaders, supervisors and trial attorneys within the DOJ to develop and implement enforcement strategies, policies, and educational programs related to prosecuting financial crimes.  He helped foster cooperation among foreign and domestic government agencies, promote the evaluation of corporate compliance programs and monitors, and implement investigation, prosecution and trial training programs.  Among other things, Mr. Quiñones oversaw the Section’s first detail of a prosecutor to a foreign regulator and first expert compliance counsel, assisted in the development of FCPA enforcement policies, and advised on important litigation and appellate matters.

“Pablo Quiñones is a valuable addition to NYU School of Law.  He brings a wealth of enforcement experience and a deep understanding of the practical and policy goals guiding corporate and individual enforcement strategies in the U.S. and abroad,” said Professor Jennifer Arlen, Founder and Faculty Director of PCCE.

Mr. Quiñones began his DOJ career at the US Attorney’s Office for the Southern District of New York, where he served for eight years as a criminal prosecutor, including  on the SDNY’s Securities and Commodities Fraud Task Force prosecuting insider trading, market manipulation, accounting fraud, and investment fraud cases.  At the SDNY, Mr. Quiñones handled several high-profile prosecutions of Wall Street executives, narco-terrorist and violent gang leaders, and corrupt public officials.

Mr. Quiñones has extensive experience from the private sector as well. Prior to his government service, Mr. Quiñones was a partner at international law firm Reed Smith LLP and at a national law firm now known as Anderson Kill P.C. He also brings corporate counsel experience as general counsel of an investment company and associate general counsel of a healthcare company.

Mr. Quiñones is a graduate of Cornell University and Michigan Law School.

“I am excited to share my more than 20 years of experience and expertise representing the government, companies, and individuals with the great minds at NYU School of Law and the impressive PCCE team.  I also look forward to working with the government and private sector on ensuring our justice systems are fairly and consistently applied to corporations and individuals alike,” said Pablo Quiñones.

New Behavioral Science One Sheet: Goals Gone Wild

Ethical Systems Blog -

Ethical Systems has released our newest Behavioral Science One Sheet, created in partnership with the Notre Dame Center for Ethical Leadership.

Our Winter 2017 one sheet on Goals Gone Wild encompasses the concept of goal setting and how doing so can inadvertently lead to unethical behavior in organizations. We credit Professor Lisa Ordóñez of the Eller School of Management for her work helping both introduce the topic to the academic field and her work crafting the text on this informative one sheet. 

The goal of our behavioral science one-sheets has always been to connect behavioral science concepts to daily workflow and organizational cultures. We use simple language and concrete examples about how to apply behavioral science concepts in practice. We have added a creative commons license to allow you and your organization to use these one-sheets in a variety of ways.


Browse and download our Goals Gone Wild one sheet and the five previous one sheets in our growing collection >>


Tags: Goals Gone WildLisa OrdonezNDDCELNotre Dame Center for Ethical Leadership

This Week in FCPA-Episode 85, the Is Case Keenum the Man or Is it Tom Brady’s Hand? edition

FCPA Compliance & Ethics -

In this episode, Jay Rosen and myself take a look at some of the top compliance stories over the past week. Are CCOs at risk? Indeed is should the entire compliance industry be running for cover. Adam Dobrik explores explore in GIR. Court Golumbic explores in “The Big Chill”: Personal Liability and the Targeting of [...]

The post This Week in FCPA-Episode 85, the Is Case Keenum the Man or Is it Tom Brady’s Hand? edition appeared first on Compliance Report.

Third-Party Risk Management Decisions Need Context to Maximize ROI

The Network Inc. GRC Blog -

When viewed in isolation, no single component of a third-party risk management program provides enough clarity to direct confident next steps. Viewed together, however, the essential components of an effective third-party risk management program gives us the context needed to accurately score third parties and position each in our organization’s risk hierarchy. Learn how to create context for your third-party risk management program.

Breaking News in the Industry: January 19, 2018

Loss Prevention Media -

Two sought in $2M jewelry theft from Texas store [Viral Video]

Police are looking for two men who stole jewelry valued at $2 million from a Sugar Land, Texas, store after smashing display cases with a hammer. The men are seen on surveillance video Sugar Land police released on Thursday from the Jan. 10 heist at Hutton’s Jewelry & Gifts. The men entered the store at 2735 Town Center Blvd., just after 12:20 p.m. on Jan. 10. One man approached an employee and asked about an engagement ring. The second man soon joined them, then removed a hammer from inside his jacket and smashed two display cases, one in the rear of the store and another at the exit. The first man also removed jewelry from the cases and both ran out of the store. [Source: Chron]

New Jersey mother accused of using 11-year-old in shoplifting scheme

The state Division of Child Protection and Permanency has been contacted to visit a Perth Amboy woman’s home after she allegedly used her 11-year-old daughter to shoplift merchandise from a Woodbridge Center store. Around 3:15 p.m. Tuesday, Woodbridge police were dispatched to the JC Penney store for a report of a mother and young daughter shoplifting. Police were informed by a store loss prevention associate that Cruz Maria Garcia De Rodriguez, 45, and her 11-year-old daughter had been caught shoplifting $1,234.15 worth of merchandise, including sneakers, shirts and blankets. According to police, the mother and daughter used a system to shoplift items from the men’s, bedding and children’s departments. In each department, Garcia De Rodriguez would have her daughter hide under a table or bench while she handed the child merchandise from the store racks. The mother would then have the child place the items into JC Penney’s plastic shopping bags before the daughter emerged from under the displays and handed the bags to her mother.

The mother and daughter were spotted on surveillance video cameras repeating these actions in several store sections, police said. The mother and daughter headed for the store exit after their arms were filled with JC Penney shopping bags of unpaid merchandise, police said. They were stopped by store loss prevention personnel just before they exited the store and brought to the loss prevention office, where police were contacted. In the loss prevention office, police found the girl crying and upset from the incident. Police asked Garcia De Rodriguez to contact another relative to take custody of the girl, who went back home in a cab with the relative. Garcia De Rodriguez was arrested and received summonses for shoplifting, endangering the welfare of a child and using a juvenile to commit a criminal offense before being released, police said.  [Source: MyCentralJersey]

Shoplifting turns into foot pursuit

Police charged a local man with receiving stolen property and resisting arrest Monday afternoon after he allegedly stole a nail gun from Home Depot and led police on a short foot chase. Sean P. McInnis, 40, allegedly bypassed Home Depot’s registers and walked out of the store with a Dewalt nail gun he didn’t pay for, according to Rochester Police Capt. Jason Thomas. Police logs indicate the reporting party watched McInnis run out of Home Depot after the nail gun triggered the North Main Street store’s theft alarms. Thomas said an officer subsequently saw McInnis walking with the nail gun along North Main Street. After he saw the officer, McInnis allegedly dropped the nail gun and started running. “He was apprehended just moments later,” said Thomas. The charge of receiving stolen property is a Class B felony because McInnis has a prior conviction on his record. The resisting arrest charge is a Class A misdemeanor, police said. In addition to those charges, Thomas said McInnis was taken into custody on an outstanding Strafford County warrant as well as a Rochester theft-by-unauthorized-taking warrant related to a Nov. 27 theft at the Hannaford supermarket on North Main Street. McInnis refused bail and was arraigned on the charges in Strafford County Superior Court on Tuesday.  [Source: Fosters]

Florida woman sentenced for credit card fraud

A woman from Florida who police believe was part of a ring that defrauded Walmart stores around the country by using stolen credit cards has been sentenced to a year in jail for guilty pleas in two local counties. Yenisleidi Pino-Quintana, 25, of Miami, pleaded guilty in Warren County Court in November to second-degree forgery for her use of stolen cards to buy gift cards at the store on Route 9 in Queensbury last January. She also pleaded guilty to criminal possession of a forged instrument in Saratoga County Court for use of a stolen credit card at the Walmart store in Wilton and was sentenced to time served in jail. Police said she was also tagged with charges for a similar crime in Schenectady County. Pino-Quintana was arrested by State Police in Queensbury in April. Warren County Judge John Hall warned her during her guilty plea that she likely faced deportation to her native Cuba for the conviction after her release from jail. [Source: The Post Star]

Massachusetts man sent to prison for armed robbery of robot vac

A Massachusetts man is heading to state prison for at least two years, after weaponizing a robotic vacuum cleaner he was trying to steal last January.  David Nardella, 43, pleaded guilty to armed robbery and multiple counts of felony larceny during a hearing Wednesday in Salem Superior Court.  Judge Thomas Drechsler sentenced Nardella, who has a nearly-continuous criminal record stretching back 25 years, to two to 2 1/2 years in state prison. That’s half the time sought by a prosecutor, who had asked for four to five years in prison for Nardella.  “It’s time to protect the community,” prosecutor Karen Hopwood told Drechsler.  But Nardella’s attorney, Cristina Ayo, argued for less time, saying her client was suffering from a serious heroin problem and had relapsed in the days before he went on a theft spree in three counties. Hopwood said Nardella’s spree began at a TJ Maxx in Salem, where he walked out with two North Face jackets and four other coats on Jan. 10, 2017.  A week later, on Jan. 17, he was at the Target in Salem, where he walked out with two Samsung robotic vacuums. A store loss prevention associate noticed the thefts on surveillance video and remembered the suspect.  Two days later, Nardella was back at the same store, said Hopwood.  This time, he cut the security cords attaching two Neato robotic vacuums to a shelf, and walked out. The loss prevention associate saw what was happening and caught up with Nardella in the parking lot.

Nardella might have faced only a shoplifting or larceny charge but for what happened next: he swung one of the vacuum cleaners by the security cord at the associate. That turned the incident into an armed robbery. While the officer managed to grab that vacuum, Nardella got away with the other one.  He left in a black SUV with a veterans license plate that, it turns out, had been stolen off an actual veteran’s car in Lynn, said the prosecutor.  Over the next several days, the spree continued with similar crimes at stores in Woburn and Revere, where he was arrested.  Nardella has already pleaded guilty and served his jail terms in the Middlesex and Suffolk county cases.  Ayo asked the judge to give Nardella credit for the time spent serving those jail terms, arguing that his conduct was part of a single, ongoing scheme. But for the fact that the crimes occurred in three different counties, she suggested, he would likely have been sentenced to concurrent terms on all of the incidents.  Hopwood opposed the request, accusing Nardella of “triple dipping” by seeking the additional credit toward the sentence.  Drechsler opted to allow Nardella to receive credit toward his sentence for the time he’s been in custody since his arraignment in June in the Salem case.  Some, but not all, of that time overlaps with the sentences he served in the Middlesex and Suffolk cases. After his release, Drechsler ordered that Nardella must spend three years on supervised probation, and must immediately enter a residential drug treatment program.  He’s also been ordered not to use any drugs, including marijuana and alcohol, while on probation.  [Source: The Salem News]

Aetna agrees to pay $17M to settle HIV data breach incident

Aetna reached a $17 million settlement Wednesday to resolve a federal class-action lawsuit filed in August after the insurer revealed thousands of customers’ HIV statuses in mailings, according to court documents.The Hartford, Conn.-based Aetna exposed members’ HIV statuses through a window on envelopes containing information about filling prescriptions for HIV medications and pre-exposure prophylaxis, a pill that helps prevent a person from contracting HIV. The letters were mailed July 28 to about 12,000 customers in multiple states. As part of the settlement agreement, which is now subject to court approval, Aetna agreed to pay $17,161,200 to rectify the privacy breach claims. The payer will use the money to send a base payment of at least $500 to those whose information was breached. Another automatic base payment of $75 will be issued to about 1,600 additional Aetna members whose health information was allegedly disclosed to the company’s legal counsel and mail vendor.  [Source: Becker’s Hospital Review]

The post Breaking News in the Industry: January 19, 2018 appeared first on LPM.

Ted Banks on Moving from a Legal Role into Compliance [Podcast]

The Compliance & Ethics Blog -

By Adam Turteltaub Compliance starts with the law, but simply thinking like a lawyer isn’t enough.  Ted Banks, partner at Scharf Banks Marmor learned that lesson firsthand. Today he is an experienced compliance professional who has worked in compliance at Kraft and served as a monitor for both the FTC and the Canadian Competition […]

Day 19 of 31 Days to a more Effective Compliance Program-The Investigation Protocol

FCPA Compliance & Ethics -

Focusing on investigations under Prong 7 in the Evaluation it stated, Properly Scoped Investigation by Qualified Personnel – How has the company ensured that the investigations have been properly scoped, and were independent, objective, appropriately conducted, and properly documented? Moreover, with the advent of the SEC Whistleblower Program, courtesy of Dodd-Frank, it is imperative that a [...]

The post Day 19 of 31 Days to a more Effective Compliance Program-The Investigation Protocol appeared first on Compliance Report.

Calif. Debris Removal Presents Health, Environmental Risks

Risk Management Monitor -

Last week, Santa Barbara, California suffered 20 casualties, countless injuries and millions of dollars in property damage due to the unprecedented mudslides that tore through the city of Montecito. Search and rescue efforts continue in the aftermath of the phenomenon, which was caused by the heavy rains washing away ground laid bare by the Thomas Fire in December 2017. The resulting millions of pounds of debris left behind present biological and environmental risks to the area. Returning residents have been warned to protect against potentially hazardous chemicals and untreated sewage that were swept along with the mudslide debris. Meanwhile, where all this mud and debris will be moved to presents another dilemma.

Public Health Advisory
On Jan. 17, Santa Barbara County’s Public Health Department issued a public health advisory to warn about potential health conditions residents and workers may face as they return to their homes and businesses. The advisory states that “unknown amounts of potentially hazardous chemicals and untreated sewage were swept into the mudslide debris that flowed through impacted areas,” and provided tips for those affected to protect their health amid cleanup and recovery.

The advisory warned that residents also are at risk of wound infections, rashes, illnesses borne from raw sewage mixing into the debris and immersion foot syndrome (also known as “trench foot”), among other injuries.

Although it was encouraged to leave cleanups to professionals, the Health Department recommended Tetanus shots for those engaged in cleanup activities who have not been vaccinated during the past 10 years. It also acknowledged that while the hepatitis A virus could theoretically be spread via exposure to feces or raw sewage, it had not received any reports of that scenario and maintained the probability is low.

Removal Efforts
Temporary solutions for moving and storing the debris are reportedly in place. According to the Los Angeles Times, dump trucks “discarded at least 3,500 tons—or about 7 million pounds—of muck at the Ventura County Fairgrounds, where it will be stored temporarily until crews can sort through it.”

The Times continued:

Up to 1,000 tons more—per day—could eventually make it down to the Calabasas Landfill. To help with cleanup efforts, the Los Angeles County Board of Supervisors on Tuesday passed a temporary waiver to allow the intake through mid-April.

Santa Paula Materials, which sells rocks and recycled construction debris, will collect the rocks that are hauled out, while Standard Industries, a building material manufacturer, will take the metal and tires, said Lance Klug, spokesman for the California Department of Resources Recycling and Recovery’s Office of Emergency Services.

Wildfire Cleanup Ongoing
The mudslide debris removal compounds the already daunting task of clearing Thomas wildfire debris in other areas. On Jan. 12, the California Governor’s Office of Emergency Services (Cal OES) announced that its cleanup program had moved nearly 1 million tons from the burn scarred areas and had completed work in Yuba, Butte, Nevada and Lake Counties, but “still had much work to be done.” The Environmental Chemical Corporation will continue the massive undertaking of debris clean-up in Sonoma, Napa and Mendocino Counties that were hard-hit during the October 2017 wildfire siege.

The Better Business Bureau issued guidelines for removing both wildfire and mud debris, classifying it into four main categories and recommending disposal in the following ways:

  • Branches, trees and vegetative wastes​ can be separated from the other debris and later can be sent to the community burn pile. These wastes can also be sent to a permitted disposal site.
  • Construction debris​. The structural materials from houses and buildings—such as concrete, boards, shingles, windows, siding and pipes—can be taken to the closest construction and demolition landfill or a permitted municipal solid waste landfill.
  • Other household wastes, ​such as trash and furniture, should be sent to a permitted municipal landfill.
  • Hazardous wastes​. If you believe the waste contains regulated hazardous materials, more care and caution is needed. These wastes should be containerized, labeled, and ultimately sent to a facility that is permitted to store, treat or dispose of hazardous wastes. In these instances, it is important to contact the department to discuss proper disposal procedures.

The guidelines also provide a full list of items that require special disposal, including pool chemicals, tires and commercial and medical waste.

Citi to Address Gender Pay Gap

Corporate Governance -

Citi reached an historic agreement to disclose wage data and adjust employee salaries in a company-wide effort to achieve gender pay equity. Arjuna Capital agreed to withdraw its gender pay shareholder resolution after the agreement. Citigroup (Citi) and Arjuna Capital disclosed that Citi is taking steps to provide gender and ethnicity wage data and commit to […]

The post Citi to Address Gender Pay Gap appeared first on Corporate Governance.

Compliance Bricks and Mortar for January 19

Compliance Building -

These are some of the compliance-related stories that recently caught my attention.

Financial Institutions Are Playing Catch-Up in AML and Sanctions Compliance by Michael Volkov

A recent survey of financial institutions conducted by Alix Partners on AML and Sanctions compliance (here) contains informative results that support some of my general concerns about ethics and compliance programs – board members do not receive adequate training and compliance officers are continuing to struggle with lack of adequate resources. [More…]

A Sense of Purpose by Larry Fink

Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth. It will remain exposed to activist campaigns that articulate a clearer goal, even if that goal serves only the shortest and narrowest of objectives. And ultimately, that company will provide subpar returns to the investors who depend on it to finance their retirement, home purchases, or higher education.  [More…]

The New Digital Wild West: Regulating the Explosion of Initial Coin Offerings by Randolph A. Robinson, II

In order to provide the necessary context to understand this new decentralized world, this paper provides a non-technical legal audience with a foundational understanding of how public blockchains work. The paper begins with an introduction to the coming decentralized world, including an overview of both public blockchain technology as well the Ethereum platform, the primary public blockchain upon which ICOs are being deployed. [More…]


What to Watch: Draft Export Control Law of China

Global Compliance News -

The Ministry of Commerce (“MOFCOM“) of the People’s Republic of China (“China“) published the draft Export Control Law (“ECL“) for public comments via a circular on 16 June 2017. If enacted, the ECL will be the first set of comprehensive and unified export control legislation in China, which is aimed at upgrading the country’s existing regime consisting of various administrative regulations and rules. The ECL is still in the draft form and no further update has been announced since its publication last year, but it is widely expected to be introduced in the National People’s Congress within 2018.

1. Controlled Items, Blacklists and Embargoes

The draft ECL sets forth four categories of controlled items (“Control Lists“), including dual-use items which may be used for civilian and military purposes, military items, nuclear items, as well as other goods, technologies, services and items that are related to national security. Items outside the Control Lists could also be temporarily controlled for up to two years, subject to the approval of the State Council, the Central Military Commission and their designated authorities (“Competent Authorities“). In addition, activities subject to ECL control need not involve items on the Control Lists as long as the exporter knows or should know that the export may give rise to national security and terrorism concerns.

The Competent Authorities may also maintain blacklists of foreign importers and end-users that breach the ECL, and may prohibit the export of controlled items to such persons

Furthermore, the draft ECL provides that if China is subject to any discriminatory export control measures by any country, the State may adopt retaliatory measures against such country. The State may also put in place any necessary controls over the export of any goods, technologies and services in order to safeguard security and interests during wartime or urgent situations concerning international relations.

If the draft ECL is passed in its current form, companies must be prepared to regularly monitor dynamic updates to the scope of controlled items, countries and persons in order to ensure full compliance with the law.

2. Controlled Activities and Licensing

The draft ECL introduces the concepts of deemed export and re-export in China, which will bring China’s system many steps closer to the export control regimes in western countries. Deemed exports include the provision of controlled items by a citizen, legal person or other organization in China to any foreign person; the item need not be physically exported from China. Re-export controls cover the export of controlled items (i.e. items comprising a prescribed amount of content controlled by China) from one overseas jurisdiction to another.

It remains unclear whether or precisely how China will implement provisions controlling deemed export and re-export transactions. Given their potentially extra-territorial reach, there may be practical challenges in enforcing such requirements. Furthermore, if ultimately adopted, the deemed export provisions may significantly impact multinational corporations with a presence in China or with access to Chinese controlled items and technology outside of China. In view of the breadth of the draft legislation, even the sharing of information related to controlled items between colleagues (one of whom is employed by a Chinese subsidiary) may be included within the scope of the ECL’s control regardless of whether there is actual cross-border transfer.

The ECL requires licences (categorized into General Licences and Individual Licences) to be obtained from the Competent Authorities for carrying out controlled activities. Additionally, exporters may also be subject to recordkeeping and monopoly qualification requirements.

3. End-Use Requirements

The Competent Authorities may request the exporters to submit end-use certificates or documents issued by the importers or the relevant agencies in the countries of import. The exporters are also under a positive obligation to review the end-users and uses of the exported items, and to immediately report to the Competent Authorities of any change in end-users or uses. Further , the importers shall undertake not to alter the ultimate uses of the imported items, or transfer the imported items to any third parties other than the end-users, without the approval of the Competent Authorities. In this regard, the Competent Authorities are empowered under the ECL to conduct on-site verifications on the end-users and end uses.

4. Enforcement and Penalties

The draft ECL grants Competent Authorities broad investigative powers. They may, for example, enter the business premises of parties under investigation, conduct interviews with relevant parties, access and copy relevant documents, examine the conveyance used for export, seize items and even freeze bank account of the export operators.

The draft ECL prescribes the following key penalties:

  • Export without a Permit – The operator may receive a warning from the Competent Authorities, as well as administrative penalty of not more than 10 times the illegal business revenues and confiscation of any illegal gains derived from such activity. Persons directly in charge and other persons directly held liable (not expressly defined, but may include employees or agents of the exporter) may also be given a warning and fined up to CNY 300,000.
  • Fraudulent Acquisition or Trading of a Permit – In addition to the above penalties, the Competent Authorities may withdraw the licence of any party that obtains it by fraud, bribery or other illegal means, or falsifies, alters, leases, lends, or trades a licence for the export of controlled items.
5. Implications

The ECL is still in the draft form and it remains to be seen how the legislative provisions will be enforced, whether any exemptions will be introduced, and if there will be any meaningful updates to the draft before it is introduced to the National People’s Congress. Given the potentially wide-sweeping impact, multinationals that may be affected are well advised to start early to understand the implications of the new law on their compliance obligations, supply chains, and business operations.

The post What to Watch: Draft Export Control Law of China appeared first on Global Compliance News.

What Level of Due Diligence Should You Perform

FCPA Compliance & Ethics -

Today, I want to take a deep dive and exploration of the levels of due diligence. Due diligence is generally recognized in three levels: Level I, Level II and Level III. Each level is appropriate for a different level of corruption risk. The key is for you to develop a mechanism to determine the appropriate [...]

The post What Level of Due Diligence Should You Perform appeared first on Compliance Report.

The Payoff and Peril of Smart Infrastructure

BRINK News -

Smart infrastructure, defined as the “result of combining physical infrastructure with digital infrastructure, providing improved information to enable better decision making, faster and cheaper,” is changing society. Indeed, the Cambridge Centre for Smart Infrastructure and Construction estimates that such infrastructure is a global opportunity worth $2.8 – $6.6 trillion.

Smart grids, for example, which are used to monitor and manage energy consumption in cities, are starting to come online globally. To a large extent, the growth of these new innovations depends on the public sector’s investment appetite. The European Union “aims to replace at least 80% of electricity meters with smart meters by 2020 wherever it is cost-effective to do so.” This ambition was set in 2014, and progress has been substantial. By 2020, according to the European Commission’s 2014 report on smart metering, “it is expected that almost 72% of European consumers will have a smart meter for electricity. About 40% will have one for gas.”

Smart infrastructure will directly reduce costs, increase reliability, and save energy. Other positive externalities, such as enhanced environmental sustainability, will also contribute to the overall benefit to society. In the U.S., smart grid deployment is expected to deliver $1.3 trillion to $2 trillion in benefits over a 20-year period.  

Although the benefits are substantial, potential risks are severe, and the evidence shows proper planning to meet them is not keeping up with smart infrastructure implementation. Insurance companies are acutely aware that the growing interconnectivity within cities may lead to large loss accumulation. In the case of a large infrastructure failure, for example, insurers could be required to meet claims across many different classes of coverage, including direct damage, business interruption, and third-party liability policies. Or take a cyberattack on the U.S. Northeast electrical grid, which could result in economic losses as high as $243 billion. In addition, insurers are pointing to other potential risk scenarios of emerging risks that have vastly varying estimated costs:

The majority of these and other innovation-related risks are uninsured: The insurance gap is as high as 83% in a cloud service disruption scenario and 93% for a mass vulnerability setting. Other risks are yet unknown. Society faces two stark realities that need to be resolved, says Matthew Leonard, partner at Oliver Wyman: “First, people do not fully understand the risks they are running; and second, those who seek to mitigate their risk with insurance are faced with a decided lack of choice and/or affordability.”

Although the benefits of smart infrastructure are substantial, potential risks are severe, and the evidence shows proper planning to meet them is not keeping up with smart infrastructure implementation.

The World Economic Forum convened a working group comprised of government officials, business leaders from the insurance industry, and technology players in its Mitigating Risks in the Innovation Economy initiative to examine how emerging technologies—such as smart infrastructure—are causing a radical shift in the nature of risks faced by individuals, businesses and society. “The world is changing as new technologies proliferate and the nature of risks facing individuals, and the economy is morphing at an increasingly rapid pace,” says Prashanth Gangu, partner at Oliver Wyman and a member of this initiative. “Society needs to be ready for events bigger than the more than $100 billion loss estimates from Hurricanes Harvey, Irma, Maria which could be caused by risks in the global cyber-physical system, either errors in code, malicious hackers or AI gone wild.”

The initiative provided comprehensive recommendations, and prioritized three high-level areas where key stakeholders could start to collaborate:

  1. Insurers, governments and technology players need to come together to accelerate the development of a solution to this large and pressing issue. Existing liability rules were not designed with complex and autonomous systems in mind, which has left stakeholders guessing as to how current liability rules will be applied in practice.
  2. The exchange of data can and will be an effective tool to support the management of vulnerabilities and threats. In the future, governments should continue to foster collaboration and the sharing of information between the public and private sectors. Insurers and technology players should take an active role in these initiatives.
  3. A patchwork of standards and regulations is likely to ensue if there is no collaboration across borders. The resulting risk is an environment in which new technologies must operate under an inconsistent set of safety and operational protocols globally. It is important to identify areas with significant gaps and promote the development of collaborative efforts to establish these global protocols.

The recommendations, along with the risks and challenges posed by various emerging technologies, are laid out in a report prepared by the World Economic Forum and Oliver Wyman titled How Emerging Technologies Are Changing the Risk Landscape.

The Steering Committee and Working Group are now working on developing specific resiliency solutions against the failure of emerging technologies, starting with smart grids. As adoption rates for smart infrastructure and emerging technologies more broadly increase, the public and private sector must work together to develop resiliency and support the implementation of recommendations. The recommendations are to be further developed and piloted in 2018, starting at the World Economic Forum Annual Meeting in late January.

The Need for Anti-Money Laundering Regulatory Reform

Corruption, Crime & Compliance Blog -

It is rare these days for Republicans and Democrats to agree on political priorities – another profound grasp of the obvious.  Recently, on Capitol Hill there appears to be some common ground on the issue of reforming AML laws and regulations.

The motivation is to make financial AML regulations “smarter” and increase focus on beneficial ownership, terrorist financing and proactive detection of money laundering.  Some of the AML requirements and reporting rules have lost focus on these important priorities.

Two significant issues have been identified: (1) reporting requirements for transactions over $10,000 and (2) the filing of Suspicious Activity Reports.  Banks and law enforcement agree that many of the filings above the $10,000 threshold and in SARs are not helpful to law enforcement.  In response to money laundering and terrorist financing threats, the number of filings required by banks has steadily increased with no firm finding that such filings have directly resulted in increased enforcement.  In fact, banks have suggested that the system is so complex and poorly coordinated that law enforcement’s ability to identify and target investigations has been hindered.

For example, the $10,000 threshold for reporting cash transactions was adopted in the 1970s.  There is a need to increase that figure, and some have suggested setting a new threshold at $30,000.

Also, with respect to filing of SARs, most banks, out of concern that they may fail to file a required SAR, file SARs in situations when the filing is not required.  The banks know that regulators will review their SARs filings and often second-guess these determinations.

In the case of the new beneficial ownership regulations that are effective in May 2018, some have floated the idea of having FinCEN create a national database of beneficial ownership information, mandating that company’s register themselves with federal regulators and not just state incorporation authorities.  While banks are complaining about the burden of beneficial ownership regulations, I do not expect Congress to modify this requirement.  Rather, the politicians floating this idea appear to be giving banks another shot to argue against the beneficial ownership regulations.  The United States is far behind other countries on requiring beneficial ownership disclosures, and consequently the amount of money laundering through hidden accounts in the US is much higher than it should be.

Banks have also sought additional guidance from law enforcement and regulators on AML compliance requirements.  The specific breakdown in communication and information sharing has been between law enforcement and regulators.  In many cases, banks have explained that the regulatory framework and specific requirements does not match law enforcement’s priorities and need for information, resulting in AML regulatory requirements that do not advance law enforcement’s ability to focus on the more serious financial crimes or terrorist financing schemes.

Law enforcement is sure to oppose any major revisions to the AML system and its voice is an important factor to consider in any regulatory modification.  However, there is nothing wrong with banks, regulators and law enforcement working to come up with practical improvements to the regulatory and reporting system.

Community banks have raised complaints about regulatory burdens and the amount of time and expense devoted to AML compliance.  Again, the community banks have suggested that they are not able to design a truly risk-based AML compliance program because of the fear that regulators will second guess such determinations when conducting supervisory reviews of their operations.

The post The Need for Anti-Money Laundering Regulatory Reform appeared first on Corruption, Crime & Compliance.


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RT @mikevolkov20: Episode 14 - What Every Compliance Officer Needs to Know About Data Privacy and the EU's GDPR - Corruption, Crime &… 2 weeks 5 days ago
RT @ComplianceXprts: What You Need To Know About Auditing And Risk Management In The Transport Industry 4 weeks 1 day ago
RT @EthicalSystems: Our 2017 End of Year Letter from @JonHaidt and @azishf "This is the time for the business… 1 month 1 day ago
RT @ComplianceXprts: Inspection of Facilities and Sporting Venues - Due Diligence 1 month 1 day ago
RT @ComplianceXprts: 14 Essentials For Your Compliance Management System 1 month 2 weeks ago
RT @ComplianceXprts: Our focus is on what people don't want to do. #ce 1 month 2 weeks ago
RT @mikevolkov20: ISO 37001: Board, Top Management and Anti-Bribery Compliance Responsibilities (Part III of V) - 3 months 4 days ago
RT @RSAFraud: 1 in 4 retailers state loyalty #fraud is one of the most detrimental threats to their e-commerce business… 3 months 4 weeks ago
RT @ComplianceXprts: FTAs, Risk Management and The Transport Industry #riskmanagement 3 months 4 weeks ago
RT @ComplianceXprts: How To Navigate Audit Road Blocks : Part II Avoid Challenges To The Audit Scope 4 months 4 days ago