Compliance News | Jul 2021

Posted by

David Mangion

on 27 Jul 2021

Key compliance news including Saudi Aramco data breach, NGP harassment settlement, KPMG's $84m fraud payout, £4m AML recovery and more...

Compliance News | Jul 2021

Our pick of key compliance stories this month

Oil giant Saudi Aramco victim of 1TB data breach

The oil giant Saudi Aramco has been struck by a data breach where hackers managed to steal 1TB of proprietary company data which is now up for sale on the Dark Web. The hackers obtained this data not by directly infiltrating Saudi Aramco's systems, but via those of third-party contractors working for the company instead.

The hackers are now attempting to sell the proprietary data on an online forum with a negotiable price tag of $5m. The hacking group claims that the data was lifted from the firm sometime in 2020, although some of the files date all the way back to 1993.

According to the hackers, the data contains full information on over 14,000 Saudi Aramco employees including their full names, photos, passports, emails, phone numbers, residence permit numbers, job titles, ID numbers, family information and more. What's more, the stolen data also includes project specifications, internal analysis reports, network layouts, location maps with precise coordinates and a list of Saudi Aramco's clients.

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LBGI fined £91m for misleading renewal promotions

The FCA fined LBGI (Lloyds Bank General Insurance Limited, St Andrew’s Insurance Plc, Lloyds Bank Insurance Services Limited and Halifax General Insurance Services Limited) for failing to ensure that language was clear, fair and not misleading within millions of home insurance renewals communications.

LBGI sent 9m renewal communications to home insurance customers from January 2009 and November 2017 with language to the effect that they were receiving a ‘competitive price’ at renewal.

This caused a risk of harm as it was likely that the premium quoted to them at renewal would have increased versus their prior premium. Renewal premiums would also likely have been higher than the premium quoted to new customers or those switching. Particularly for customers who renewed repeatedly.

Separately, LBGI informed half a million customers they would receive a discount based on their ‘loyalty’, they were a ‘valued customer’, or another promotional or discretionary basis. The discount wasn't applied and was never intended to. It affected around 1.2m renewals, with approximately 1.5m communications sent by LGBI. It was only identified and rectified by LBGI during the course of the FCA’s investigation.

Under new FCA rules, from 1 January 2022, insurers will be required to offer customers a renewal price no higher than they would pay as a new customer. The FCA estimates it will save consumers £4.2 billion over 10 years.

FS Social Media Compliance Tips

Pharma companies £260m+ fine for 10k% price hike

The UK's long-running investigation of the 10,000% price hike for generic hydrocortisone tablets is now coming to a close. As a result, the UK's Competition and Markets Authority (CMA) has handed down fines of more than £260m to over ten pharmaceutical companies.

Specifically, authorities say Auden Mckenzie and Actavis UK - now called Accord-UK - charged the government health system "excessively high prices" for hydrocortisone tablets for close to ten years. Both companies received fines of around £221m between them.

Officials say Auden Mckenzie, the sole provider of the medicine for a number of years, "paid off would-be competitors" to keep out of the market after acquiring generic rights to the drug. After Actavis UK took over marketing in 2015, the firm carried on with its payments to one of those companies, AMCo.

With their exclusive market position, the firms involved raised the price on the 10-mg and 20-mg versions of the generic medicine excessively over the years. From 2008 to 2016, the drug's price inflated by 10,000%, costing taxpayers hundreds of millions of pounds. Before April 2008, England's NHS was spending about £500,000 per year on hydrocortisone. By 2016, that cost had grown to over £80 million.

Key takeaways

  • Never abuse your company's dominant position by charging excessively high prices.
  • Don't discuss or enter agreements with competitors regarding prices, production volumes or intended bids, or agree to share markets or customers.
  • Be careful not to act in a way that restricts competition in any market where your company has a dominant position.
  • Never discuss commercially sensitive information, such as future pricing plans and promotions, with competitors or suppliers, or RRPs with retailers.
  • Report any suspicion of violations of competition law immediately - this is vital because, under leniency rules, the first to report to the authorities can often escape prosecution.

Free Competition Law Training Presentation

Azeri PEP to surrender £4m in laundered funds

A Politically Exposed Person (PEP) has agreed to hand over £4m which was sent via the infamous Azerbaijan Laundromat money laundering scheme. London-based Suleyman Javadov has close ties to the ruling powers in Azerbaijan where his father was formerly the deputy energy minister.

The NCA was permitted to apply Account Freezing Orders in 2018 and 2019 on ten bank accounts held by Javadov and his wife which held around £6.4m. The forfeiture of just over £4m from four of Javadov’s accounts settles the NCA's claim, and the freezing orders on the other accounts will now be revoked.

Andy Lewis, NCA Head of Asset Denial, said "This result is a significant success for the UK – £4m for the public purse – following the first case seeking forfeiture of funds relating to the so-called Azerbaijan Laundromat. It follows a challenging and complex NCA investigation lasting more than two years, which resulted in Javadov agreeing to settle rather than face a court battle. Anyone who used the Azerbaijan Laundromat should not rest easy, as your assets in the UK are potentially recoverable.")

Free MLRO Responsibilities Checklist

Northern Gas & Power £36k harassment settlement

An employment tribunal has ordered Northern Gas and Power to pay more than £36k to a former employee over allegations which include post-employment victimisation, harassment related to sexual orientation, and constructive dismissal.

The tribunal heard the claimant, during his employment, heard comments such as "two men having sex is unnatural and not right" while a manager suggested starting a "Straight Pride" movement because he felt that gay people were rubbing Gay Pride in his face.

The employment tribunal said that, after the claimant left the firm, one of his fellow employees received a message saying, "gays and blacks and ethnics" leaving the office was a "good cleanse".

When making the ruling, Employment Judge Rogerson said, "the culture in the Leeds office was accurately described as toxic involving daily use of racist, homophobic and anti-Semitic language, which some managers and senior employees actively engaged in, treating it as acceptable banter between friends and colleagues."

Key takeaways

  • Recognise harassment as a real and serious issue.
  • Be self-aware and sensitive to the feelings of others - watch how they respond to what you do and say, and take corrective steps to avoid offending or intimidating them.
  • If you're specifically asked to refrain from acting or speaking in a particular way, then do so.
  • Report any incident of harassment that you witness even if it is not reported by the victim.
  • Be supportive of others who report harassment and do not victimise them.

Free Workplace Harassment Training Presentation

JWT loses 'gender pay gap' obliteration case

Two men who were fired after voicing concerns at an advertising agency's decision to "obliterate" its "Knightsbridge boys club" reputation in light of an "embarrassing" gender pay gap have won their sex discrimination case. David Jenner and Chas Bayfield won their claim at an employment tribunal for direct sex discrimination and victimisation against J Walter Thompson (JWT), after the advertising agency fired the middle-aged, white creative directors in 2018.

Their dismissals came only days after they had voiced concerns about a conference presentation called "Crisis: The Mother of All Change" by Jo Wallace, a creative director appointed to fix the agency's reputation, and executive creative director, Lucas Peon. JWT's 2017-18 gender pay gap report revealed that women at the firm earned a mere 55p for every £1 that men earned when comparing median hourly pay.

In the talk, Wallace said, "One thing we all agree on is that the reputation JWT once earned - as being full of white, British, privileged [men] - has to be obliterated." This statement was made alongside a slide saying, "White, British, privileged, straight men creating traditional above the line advertising", which then appeared crossed out at the mention of the word "obliterated".

A couple of days later, Bayfield wrote an email, which read: "I found out recently JWT did a talk off-site where it vowed to obliterate white, middle-class straight people from its creative department. There are a lot of very worried people down here." Senior management said there had been a misunderstanding and the idea was to obliterate the agency's poor reputation, and not white males. Yet, the following week, the two creative directors and three other senior creatives were dismissed.

According to Employment Judge Emery, the redundancy was a "sham designed to ensure the predetermined decision to dismiss the claimants was seen to be justified". Ultimately, the tribunal concluded that "the decision to dismiss was related to the fact the claimants are men, that this was a conscious motivation in the decision to dismiss, for reasons including the desire to improve the gender balance in its senior creative team [and] the improvement to the gender pay gap figures which would result in their dismissal".

Free Equality Training for Managers

Leeds company fined £200k for illegal nuisance calls

The Information Commissioner's Office (ICO) has fined Leeds-based Brazier Consulting Services Ltd (BCS) £200k for making over 11 million illegal phone calls. An ICO investigation, prompted by complaints from members of the public, found that BCS had been making repeated and relentless nuisance calls to people about PPI.

When defending against the claim, BCS was unable to provide evidence of enough consent to call any of the complainants. Investigators were also unable to find any evidence to prove that the firm provided training to employees in relation to the Privacy and Electronic Communications Regulations (PECR). As a result, calls made by BCS led to a total of 316 complaints to the ICO and Telephone Preference Service (TPS).

The law prohibiting unsolicited marketing calls in relation to claims management services came into force in September 2018. The ICO's website transparently sets out the rules concerning telephone marketing.

The ICO also issued BCS with an Enforcement Notice forcing them to cease their illegal marketing activity and informing them that carrying on with it is a criminal offence.

Free GDPR Self-assessment Questionnaire

KPMG settles fraud lawsuit with $84m payout

KPMG is to pay around $84m to settle legal claims after failing to identify fraud at China Forestry, a Chinese timber company. China Forestry's liquidators claimed that KPMG was negligent in failing to detect serious false accounting by some of the firm's senior managers ahead of its IPO listing.

Although China Forestry raised $216m when it was listed in Hong Kong, the firm ended up suspended from trading just a year later.

The lawsuit was finally settled on the eve of a 10-week trial in Hong Kong. The liquidators claimed that during a pre-IPO audit, KPMG did not notice that executives had falsified the firm's revenue and assets by forging bank statements and customer records. The liquidators also accused KPMG of having employees falsify papers themselves during the audit.

Key takeaways

  • Reduce fraud pressures - such as by removing operational obstacles blocking effective performance and avoiding setting unachievable financial goals.
  • Remove the opportunity to commit fraud - such as by establishing clear and uniform accounting procedures, with no exception clauses.
  • Avoid rationalisation of fraud - by providing regular training and having policies that clearly explain and define prohibited behaviour.

Free Fraud Prevention Good Practice Guide

NCA recovers £2m from London-based landlord & property developer

London-based property developer, Richard Leahy, is to hand over assets worth almost £2m in order to settle a civil recovery claim based on alleged involvement in fraud, money laundering, and marijuana cultivation. The order relates to three London properties and over £1.1m in cash in a bank account.

The NCA's case was that the property was the proceeds of criminal conduct. Investigators alleged that Leahy had been involved in criminal activity for over 15 years, including marijuana cultivation, benefit fraud, mortgage fraud, money laundering and tax evasion.

Andy Lewis, Head of civil recovery at the NCA, said "This is a great result, recovering nearly £2m that will go back into the public purse and be used to help fight criminal activity. Settlements in civil cases offer good value to the taxpayer, avoiding often lengthy and costly legal battles while freeing up our investigators and legal team to pursue other casework."

Free 6AMLD Training Presentation

35% of UK workers feel unsafe on public transport

A new study revealed that 35% of workers were "very anxious" at the idea of commuting via bus, train or tram. Consequently, many are choosing to keep on working from home.

Dash Tabor, the founder of TUBR, who carried out the study, said the UK government's hectic handling of announcements around face-masks was one reason behind the sense of unease.

"The Government created chaos and confusion with its policy on face masks and it has left passengers unsure and concerned at a time they need clarity and confidence. It would be far better for the Government to retain mandatory face masks on public transports at least until the end of this year. We are also seeing rising numbers of people travelling outside rush hour times which makes the idea of advising people only to wear masks during peak times nonsense. Covid has turned the usual 9-5 on its head and people are moving around in a much different way."

Almost 75% of the 1,000 questioned by TUBR also said making masks mandatory would encourage them to get back on public transport. A mere 10% said they would feel confident asking a fellow commuter to put a mask on - which is the "common-sense" approach preferred by the government.

Just 13% of respondents said they currently feel "relaxed" about returning to public transport, while almost one in five (18%) have stopped using public transport entirely.

Return to Work Compliance Checklist

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