Deutsche Bank warned around 1,000 investment banking clients that they need to hand over company-ownership information and other documentation to close gaps in compliance.
- Clients have a month or less to hand over documentation.
- This is part of a multiyear process that has reviewed around 20,000 clients.
- The bank has severed relationships with an undisclosed amount of clients and countries involved in money laundering and terrorism financing.
The PATRIOT Act has called for banks to do considerable due diligence on clients, but not for clients buying real estate. Clients could set up a shell company to buy properties in cash without revealing their identity. For example, Iran used a $500 billion Manhattan skyscraper as a slush fund—a fund or account that is not properly accounted, such as money used for corrupt or illegal purposes—for 22 years. Even though it had been set up to avoid taxes, the structure then came in handy for keeping ownership concealed from the U.S. government once sanctions were put in place.
- To close the loophole, the Treasury set up a pilot program to find the people behind the LLCs buying luxury real estate and had considerable success.
- The pilot program has caused a 70% drop in companies buying real estate with cash, most likely because they want to keep their identity a secret for money laundering purposes.
- Currently, the pilot only applies to 12 U.S. cities. The Treasury started with Manhattan and Miami and has expanded to places like Honolulu and Seattle. The expansion could either mean that shady real estate activity is widespread or criminals are going to great lengths to escape authorities.
Former Goldman Sachs VP Woojae “Steve” Jung was accused of trading on insider information to net $130,000 in illegal gains.
- Prosecutors recommended 18-to-24 months behind bars.
- Jung was a South Korean citizen living in San Francisco and claimed that he conducted the illegal trades because he wanted to help his brother in South Korea who had a gambling problem.
Many car dealerships outsource compliance efforts, but still need an employee to look over third-party efforts. The employee assigned the title of “Compliance Officer” usually lacks the knowledge of properly handling the responsibilities of that role.
- There were only 14 compliance officers accounted for in 2018 and 0 so far in 2019, according to the EDI Trends in the National Automobile Dealer Association’s 2018 Workforce Study.
- The head of F&I (Finance & Insurance) department tends to be assigned the role.
- Having people in charge of management that are also compliance officers can create a conflict of interest in regards to reporting issues without fear of recourse.