 | The Morning Risk Report: Lessons From a Mega Bank Penalty By Samuel Rubenfeld | | The $180 million fine imposed on Mega Bank by New York State's Department of Financial Services is the largest enforcement action since Maria Vullo took over the agency, and it's consistent with the approach of her predecessors, an attorney said. Matthew Schwartz, a partner at Boies Schiller & Flexner LLP, said the focus on anti-money laundering controls, foreign-correspondent accounts and transaction monitoring is something seen since the agency's inception. Moreover, the bank didn't respond to the agency's requests for action in response to potentially high-risk transactions, he said. "Those are the types of cases that have been the best candidates for enforcement," said Mr. Schwartz. Pointing specifically to the agency's comments in the case on failures in transaction monitoring, he said banks won't be able to say they didn't know because new rules coming into effect next year--proposed by the agency's first leader, carried forward by the next one and finalized by Ms. Vullo--would prevent it. "It shows continuity and commitment to core values at DFS," said Mr. Schwartz. The Mega Bank case is also notable because it's the first bank penalty directly citing the leak of the Panama Papers documents. The DFS statement on Friday said its probe of Mega Bank determined "a substantial number" of entity customers were formed with the assistance of the law firm Mossack Fonseca, the firm whose data was leaked in the Panama Papers scandal. Mr. Schwartz said Panama has long been known as a high-risk jurisdiction for money laundering despite getting off the blacklist run by the Financial Action Task Force, a standard-setting body, earlier this year. "It wasn't appropriately handling its Panamanian transactions, which were in the billions of dollars," said Mr. Schwartz. | |  Seven Hidden Costs of a Cyberattack There are many ways a cyberattack can affect—and cost—an organization, and the impacts vary depending on the nature and severity of the event. Rarely brought into full view, however, are cases of intellectual property theft, espionage, data destruction, attacks on core operations or attempts to disable critical infrastructure. Beneath the surface, these attacks can have a more significant impact on organizations and lead to additional costs that are challenging to quantify and often hidden from public view. Continue » Read more Deloitte Insights » | | Crisis of the Week: Delta. Delta Air Lines found itself in the crisis spotlight following a power failure that led to a crash of its computer network that prompted the cancellation of more than 1,000 flights on the first day alone, with around 1,000 more flights canceled on the second and third days of the event. |  | | VW faces uphill battle outside U.S. on emissions. Governments, investors and car owners around the world are gaining ground in efforts to pressure Volkswagen AG for settlements over its emissions-cheating scandal, aiming for terms similar to a $15 billion U.S. agreement, WSJ reports. From Australia to South Korea to Ireland, governments and consumers are ratcheting up legal and regulatory demands in part because similar moves in the U.S. yielded a speedy shift to contrition from combativeness. In many of the countries where Volkswagen still faces legal action, it is arguing the defeat device on its diesel engines wasn't illegal or the car emissions didn't violate local rules, according to court records and documents reviewed by The Wall Street Journal. |  | Ahn Young-joon/Associated Press |
| Report on Renault emissions omitted key details. A French government report omitted significant details about how Renault's diesel cars were able to emit fewer deadly gases when subject to official emissions testing, members of the state inquiry have told the Financial Times. Volkswagen settles parts dispute. Volkswagen AG said it reached an agreement with suppliers that had cut off parts delivery, settling a conflict that disrupted production and reduced working hours for nearly 28,000 of the car maker's employees, WSJ reports. U.S. farmers see benefits in deal cleared by national-security watchdog. The $43 billion deal spotlights U.S. farmers' complex relationship with China, whose economic growth in recent decades has spurred demand for agricultural commodities ranging from pork to soybeans, WSJ reports. China is the world's top consumer of both, and Syngenta's sale to ChemChina, a Chinese state-owned enterprise, has provoked both fears and hopes across the U.S. Farm Belt. FEMA proposes rules for construction in flood zones. The Federal Emergency Management Agency proposed regulations that would require companies and homeowners using federal funds on construction projects in flood-prone areas to build on higher ground—2 feet higher, in many cases, WSJ reports. Comcast beats appeal over Allen Stanford fraud. A federal appeals court said Comcast Corp's Golf Channel need not repay $5.9 million it had received from convicted swindler Allen Stanford in exchange for services aimed at furthering his multibillion-dollar Ponzi scheme, Reuters reports. A battle over fund documents ensnares paper company. Few thought the SEC's electronic delivery push, part of a broader proposal to modernize fund regulations, would be controversial, Bloomberg reports. The battle has been both bizarre and bruising, with the two sides trading accusations of hidden agendas and creative use of statistics while squabbling over issues such as whether elderly people can input a lengthy web address. Singapore exchange considers dual-class trading. SGX is poised to allow dual-class voting rights for listed companies, FT reports, following legal changes in Singapore aimed at boosting the city-state's ability to compete for initial public offerings. |
| | | | | CEO pay pits ISS against Hillary Clinton. Institutional Shareholder Services has unintentionally taken on Hillary Clinton and Larry Fink. At the moment, ISS is winning, Bloomberg reports. The proxy adviser, whose customers control a combined $25 trillion in assets, has helped drive the trend toward rewarding executives for share-price gains. Top U.K. asset managers drop bonuses. Two prominent U.K. asset managers have decided to stop paying executive bonuses, FT reports, as pressure mounts on the investment industry to rethink the way it rewards top employees. Swedish CEOs find themselves on firing line. Corporate Sweden is replacing chief executive officers at the fastest pace in at least a decade, Bloomberg reports, underscoring the fate that top directors face if they fail to satisfy increasingly hard-to-meet shareholder demands. Marathon Oil CFO departs. Marathon Oil Corp. said J. R. Sult had left his role as chief financial officer, WSJ reports, citing personal reasons, as it also announced several other managerial changes. | | | | | | Citigroup sends errant email to Costco customers. Citigroup Inc. mistakenly sent e-mails to some active Costco Wholesale Corp. members telling them their wholesale club membership had lapsed and that their cards would be canceled, bringing a fresh headache to the new partnership, Bloomberg reports. |  | Daniel Acker/Bloomberg News |
| Political risks loom over European markets. With lackluster corporate profits, tepid economic growth and a fragile banking system, the market is vulnerable to a range of political risks in the coming months that could derail the region's feeble recovery, investors said to WSJ. | | Workers are getting raises. U.S. companies are giving raises to more of the nation's lowest-paid workers, and they are eager to trumpet the news, WSJ reports. For Americans in the bottom quarter of the income scale, who were left behind for much of the expansion, pay is rising at the fastest rate since the recession. Wal-Mart probes textile company. Wal-Mart Stores Inc. said it is reviewing supplies from Welspun India Ltd., days after Target Corp. severed ties with the Indian textile maker alleging that the company billed sheets it sold as made with Egyptian cotton when they weren't, WSJ reports. | | LoanDepot CFO sketches strategy after forgoing IPO. Bryan Sullivan, LoanDepot Inc.'s finance chief, helped steer the company away from a poorly-timed initial public offering. But the CFO still needs to find an avenue for delivering returns to early investors, CFO Journal reports. | | Lawyer strikes out on his own, takes on auditors. Steven Thomas had enough cash to pay about three months of bills in 2007, when he quit Sullivan & Cromwell to set up on his own, FT reports. Deserting the elite Wall Street law firm was virtually unheard of; partners sometimes left to join a client such as Goldman Sachs, but almost never to start from scratch. But Mr Thomas had become known as the go-to guy in the emerging world of auditor liability, wringing settlements out of some of the world's biggest professional services firms. | |
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