Danske Bank Faces the Music for Money-Laundering Corruption

Denmark’s largest bank, Danske Bank, has been caught in a money-laundering scandal that has sent its CEO packing and halved its share price. The country’s regulatory agency, the Financial Supervisory Authority (FSA), stands accused of knowing but not acting with alacrity on money laundering shenanigans, even with a 2012 FSA report that describes some of the bank’s customers as being “insufficiently legitimized.”

The Estonian branch of Danske Bank specifically is under the spotlight for its handling of $227bn of suspicious transactions originating from various ex-Soviet countries. Eight other banks have also been implicated, including three banks that link the Estonian branch to America’s financial system.

Danish prosecutors filed criminal charges against Danske Bank on November 28; other investigations have also been triggered, including by America’s DoJ and Estonian authorities. So far, the bank is accused of failing to report suspicious transactions, lacking a senior compliance manager, and failing to train staff on anti-money-laundering protocols.

Although no evidence has reportedly been found yet, American investigators are looking into whether money was handled for people or companies subject to U.S. sanctions.

Danske Bank has a $2.7bn reserve fund set aside for potential fines, and they continue to add to it. In the years preceding, several people had alerted authorities about the shady transactions but were sidelined with NDA’s or by regulators who were not eager to police the bank.

Resource articles:
Bloomberg "Danske May Face Smaller Fine After ‘Draconian’ Management Purge"
The Economist "The first charges for money-laundering are laid against Danske Bank"
MarketWatch "Danske Bank charged in money-laundering scandal"

Danske Bank reveals it’s built up $2.7 billion in reserves to absorb potential fines for its role in one of Europe’s worst ever money laundering scandals https://t.co/OlRf99eDQM

— Bloomberg (@business) December 6, 2018

Apple Inc. v. Pepper

The Supreme Court will hear a case on Apple’s App Store pricing and practices. The suit, Apple Inc. v. Pepper, centers on antitrust laws as they relate to third party resellers. A decision is expected by late spring.

The consumer complaint is that Apple has a monopoly on App Store apps and that its pricing model raises prices unfairly for consumers. Apple requires that app developers pay a 30% commission to Apple on whatever they sell; they are also prohibited from selling their apps in other marketplaces. There is a question whether the inflated prices come from the developers, or Apple’s commission structure.

The Trump administration along with the U.S. Chamber of Commerce and several computer and software industry groups support Apple. On the other side are 31 states and other groups fighting antitrust practices. If Apple were to lose the case, consumers would be able to sue Apple directly.

Summarized in part from the November 26, 2018 PBS News Hour article "Supreme Court hears Apple monopoly case on App Store pricing"

Additional resources:
USA Today "Supreme Court skeptical of Apple's monopoly on app purchases through its App Store"
SCOTUSblog "Apple Inc. v. Pepper"

Supreme Court hears Apple monopoly case on App Store pricing. https://t.co/gY4PU1ywq8

— PBS NewsHour (@NewsHour) November 26, 2018

Foreign Political Influence, Manafort, and FARA Enforcement

FARA, or the Foreign Agents Registration Act, is a law that was originally passed in 1938. It essentially requires that people who represent foreign interests in a political capacity register with the Department of Justice and publicly disclose certain transactions. From the NY Times:

Lobbyists that register under FARA must report specific meetings, phone calls and other details of contacts with members of Congress or federal officials to the Justice Department, which then posts the material online.

FARA is administered and enforced by the FARA Registration Unit under the Department of Justice's National Security Division's (NSD) Counterintelligence and Export Control Section (CES).

Over the course of its enactment, the law has only been lightly enforced, with the emphasis being on voluntary compliance.

Paul Manafort, Trump’s former campaign chairman, has been the most prominent FARA case to be prosecuted in five decades. During the previous five decades, only 7 people have been criminally charged under the law.

Manafort has represented the interests of many foreign government and political group clients over his career. In more recent years, he reportedly received $60m from Ukraine oligarchs to help promote their political interests, one of those was helping to bring Ukraine's now former pro-Russian president to office. Though Manafort had been investigated many years before and told to correct his filings under FARA he never did.

In addition to light enforcement, FARA has some further shortcomings. Again from the NY Times:

Congress is also considering whether to strengthen the statute. A bill sponsored by Senator Charles E. Grassley, the Iowa Republican who leads the Senate Judiciary Committee, would close a major loophole by requiring lobbyists hired by foreign commercial interests to file FARA reports. 

Currently, lobbyists representing foreign commercial interests register only with Congress, which requests minimal information, while those who represent foreign “principals” working for the benefit of foreign governments or political parties register with the Justice Department. The dual disclosure regimes create a huge gray area because in many countries, including Russia and Ukraine, the line between commercial and government interests is heavily blurred.

Some privacy, non-profit, and pro-business groups are opposing the bill saying the original bill is still too vague and needs to be cleaned up before new legislation makes sweeping and possibly politicized investigations easier.

Due in part to the recent activity with Manafort and Mueller’s Special Counsel investigation, there have been 50% more new FARA registrations this year from last.

CLOUD Act

The CLOUD Act (H.R. 4943) was passed into law on March 23, 2018 as section 105 of the Consolidated Appropriations Act, 2018 (H.R. 1625, passed as PL 115-141), an omnibus spending bill. The CLOUD Act is an acronym for Clarifying Lawful Overseas Use of Data Act.

The CLOUD Act amends the Stored Communications Act (SCA) of 1986 and allows federal law enforcement to compel US companies to provide data requested by a warrant or subpoena whether the data is stored in the US or on foreign soil.

The law was introduced after Microsoft refused to comply with a FBI SCA warrant for email data stored on one of its servers in Ireland for a drug trafficking investigation. The refusal led to the Supreme Court case Microsoft Corp. v. United States. The challenge identified that if a mutual legal assistance treaty (MLAT) is not in place, cross-border data discovery can be slowed and impede law enforcement efforts. The Supreme Court case was vacated when the DoJ was able to secure a new warrant under the CLOUD Act, rendering the original case moot.

The CLOUD Act asserts that U.S. companies must provide data on U.S. citizens on any of their servers when requested by a warrant. It also provides an expedited route to MLATs through "executive agreements."

"Why the CLOUD Act is Good for Privacy and Human Rights," by Jennifer Daskal and Peter Swire https://t.co/tEDGNnZ1pA

— Lawfare (@lawfareblog) March 14, 2018

Three “tectonic themes” before #SCOTUS in US v. Microsoft case – court-made internet policy, privacy on the internet and state sovereignty -- @andrewkwoods of @universityofky breaks down these issues in our latest post https://t.co/ViDZbPMeTO

— SCOTUSblog (@SCOTUSblog) February 8, 2018