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Compliance News | May 2021

Posted by

David Mangion

on 26 May 2021

Compliance News | May 2021

Key compliance news from EU to shame weak AML, right-to-work fines, lettings AML deadline and Ericsson's €80m damages to Google's €102m fine.

Our pick of key compliance stories this month

Ericsson to pay Nokia €80m damages settlement

Telecommunications gear firm Ericsson has reached an agreement with Nokia to pay a damages claim of €80m (£69m). This settlement follows investigations carried out by the US Department of Justice (DoJ) into corruption, including the bribing of government officials. It settled with the DoJ back in 2019 and was required to pay over $1bn (£709m) in penalties.

The DoJ said that Ericsson conspired with third parties to violate the US Foreign Corrupt Practices Act (FCPA) from at least 2000 to 2016 by taking part in a scheme to hand out bribes and to falsify books and records, in addition to failing to implement adequate internal accounting controls.

According to Ericsson, the settlement would impact operating profit by €80m (£69m) and cashflow by €26m (£22.5m) in the second quarter of 2021, stating that "the amount reflects uncertainty, risk, expense, and potential distraction from business focus associated with a potentially lengthy and complex litigation."

Key action points:

  • Never give or offer any inducement, nor request or accept one from others - keep in mind that bribery is a criminal offence and a predicate offence to money laundering
  • Make sure that any gift or hospitality you give or accept is proportionate, and in line with industry-standard policies and thresholds
  • Conduct due diligence on all third parties and make your company's stance on bribery clear
  • Never attempt to disguise a bribe as something legitimate, for instance as a 'scholarship' or 'loan repayment'

Free Anti-Bribery Good Practice Guide

HMRC AML deadline looms for UK letting agents

Letting agents in the UK have until 10th June 2021 to register with HMRC if they are to remain anti-money laundering compliant. This applies to any letting agent - commercial or residential - who lets out properties at €10,000 or more per month (approximately £8,660), or the equivalent in another currency.

By the June deadline, letting agents will need to have implemented a comprehensive and well-documented AML policy that outlines the AML processes their business adheres to. This includes the undertaking of customer due diligence (CDD) and the roles and responsibilities of employees and the legislation that the business operates under.

Additionally, such letting agents need to have undertaken an Anti-Money Laundering Risk Assessment and made sure that all frontline staff have received adequate training applicable to their role within the business.

Free MLRO Responsibilities Checklist

Fresh warnings over the return of right-to-work fines

UK firms are once again facing fines and other penalties if they fail to appropriately check their staff members' eligibility to legally work in the UK. For much of 2020, during the worst of the Covid pandemic, the Home Office did not issue a single right-to-work fine. However, it resumed doing so in the final quarter, issuing a total of 77 fines.

The number of investigations is expected to increase significantly as lockdown restrictions ease. Enforcement is likely to then become even more severe from 30th June 2021, which is when EU employees will also be required to show proof of eligibility to work in the UK.

Right-to-work fines are issued to firms if they employ someone they knew, or even had reasonable cause to believe, did not have the right to work in the UK. Bosses are required to see an original birth certificate or passport and keep copies of necessary documents with dates and signatures.

In the most serious cases, certain individuals could even be jailed for as many as five years or face an unlimited fine if they knew or had reasonable cause to believe that they were hiring an illegal worker. According to immigration law experts, this could extend to a director, manager or secretary of the business, so it is far-reaching in scope.

Key takeaways:

  • Know your tiers - if you are recruiting, be sure that you know who has the right to work in the UK
  • Ensure that your company has seen and verified original versions of all necessary documents before making a job offer
  • Keep document records so that you have a statutory excuse in case there are any issues
  • Take your time to review ID documents thoroughly, and check that the photo and personal data match across them all
  • Keep yourself up to date on any new government rules and regulations
  • For any employee with a visa extension, make a verification request to the Home Office ECS in good time

Roland fine rises to £5m after settlement breach

The Competition Appeal Tribunal (CAT) unanimously upheld the CMA's decision to fine musical instrument firm Roland for restricting online discounting of its electronic drum kits between 2011 and 2018.

The tribunal completely dismissed Roland's arguments that its conduct was not serious enough to justify such a large fine and that the CMA should have given it a higher leniency discount.

By appealing against the CMA's decision, the tribunal ruled that Roland had breached its settlement deal with the CMA to accept a lower fine in return for agreeing not to appeal. It judged that Roland should lose the benefit of its 20% settlement discount as a result, increasing Roland's fine by over £1m, bringing the total to just over £5m.

Michael Grenfell, the CMA's Executive Director of Enforcement, said that "this is an important judgment from the Tribunal and sends a strong message that when a company agrees to end an investigation through a settlement, it cannot reopen the question by appealing without losing its discount. This reinforces the CMA’s view that settlements should be final."

Google fined €102m for abuse of dominant position

Italy's antitrust authority has issued Google with a €102.8m (£88.7m) fine for breaching competition law by abusing its dominant position. The Competition and Market Authority (AGCM) said the fine was due to Google's refusal to allow Enel X Italia to create a version of its JuicePass app compatible with Android Auto.

The app in question permits users to find and book a place at numerous recharging stations for electric vehicles. AGCM has also issued Google with a cease and desist order to coerce it to make Android Auto development tools available to Enel X Italia and other similar developers.

"By refusing Enel X Italia interoperability with Android Auto, Google has unfairly limited the possibilities for end-users to avail themselves of the Enel X Italia app when driving and recharging an electric vehicle," AGCM said in a statement.

"Google has consequently favoured its own Google Maps app, which runs on Android Auto and enables functional services for electric vehicle charging, currently limited to finding and getting directions to reach charging points, but which in the future could include other functionalities such as reservation and payment.

Key takeaways:

  • Don't act in a way that restricts competition in markets where you enjoy a dominant position by for instance refusing to supply, prohibiting discounting, imposing exclusive obligations or entering "pay-for-delay" deals
  • Never discuss or enter into agreements with competitors regarding prices, margins, market shares or production volumes
  • Never discuss future pricing plans and promotions with suppliers or discuss RRPs with retailers
  • Don't impose price, territorial or online sales restrictions on suppliers or distributors unless you are absolutely certain that it is legally permissible to do so in that instance
    Free Competition Law Training Presentation

Long working hours kill 745,000 people each year

New research by the World Health Organization (WHO) reveals that excessive working hours are killing almost 750,000 people each year, primarily through heart disease or strokes. The study reveals that persons living in South East Asia and the Western Pacific region were the most affected.

Researchers found that working 55 hours or more per week was connected with a 35% higher risk of stroke and a 17% higher risk of dying from heart disease, in comparison with a regular working week of around 35 to 40 hours. The WHO has warned that this trend may worsen due to the pandemic.

The research, conducted in collaboration with the International Labour Organization (ILO), also showed that close to 75% of the victims were middle-aged or older men. Typically, the deaths occurred a lot later in life, sometimes even decades after the long hours were worked.

Free Workplace Stress Training Presentation

EU to name & shame banks with weak AML controls

The European Banking Authority (EBA) is in the process of setting up a centralised database to name and shame EU banks and other financial institutions that have poor anti-money laundering controls.

The EBA, which is responsible for creating a single rulebook for EU bank regulation, has claimed that the database is set to become a "key tool" in the fight against money laundering and terrorist financing.

Its proposal includes the collection and storage of information on banks that show "weaknesses" in their AML procedures. It is also set to contain information on the measures that national regulators are taking to crack down on such institutions.

Now the EBA is looking for stakeholder input about how to define these shortcomings and how the information in the database will be shared, both among official entities and to the public. The primary objective is to help regulators coordinate and allocate suitable resources across borders for on-site inspections as well as off-site monitoring.

Key takeaways:

  • Recognise how money laundering and terrorist financing work and have robust policies and procedures in place to tackle them at all levels
  • Conduct initial and ongoing due diligence on all clients and third parties using a risk-based approach
  • Look out for anything about any customer or transaction that is unusual or suspicious - pay particular attention to high-risk customers and jurisdictions
  • Exercise extreme care to avoid tipping off anyone who has been reported for money laundering or terrorist financing
  • Report any knowledge or suspicion of money laundering or terrorist financing to the relevant authorities immediately

Free 6AMLD Training Presentation

Former Goldman Sachs analyst insider trading bar

The Financial Industry Regulatory Authority (FINRA) has barred a former Goldman Sachs research analyst, Brian Maguire, as a result of insider trading. FINRA discovered that Maguire bought securities twice after learning that a colleague was due to upgrade his recommendation in upcoming research reports. What's more, he then went on to lie about this to FINRA employees.

FINRA also found that Maguire had chosen to avoid disclosing that a member of his household had a financial interest when he wrote his research reports in violation of FINRA rules. Additionally, he failed to disclose the accounts in which he traded to Goldman Sachs or seek prior approval for the trades, as required by procedures at the firm.

According to Jessica Hopper, Executive Vice President and Head of FINRA's Department of Enforcement, "insider trading by securities industry professionals erodes the public trust in our capital markets. FINRA utilizes sophisticated surveillance tools to detect and remediate this type of misconduct. Ensuring market integrity is one of FINRA's core missions and weeding out misconduct from within the industry will always be a priority for FINRA."

Free Fraud Prevention Good Practice Guide

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