The Morning Risk Report: Panama Papers to Ignite Enforcement Activity

The Morning Risk Report: Panama Papers to Ignite Enforcement Activity

By Samuel Rubenfeld

A survey of executives found 51.3% said they believe global enforcement of anti-corruption laws will rise in the wake of the Panama Papers scandal, and companies are responding to the concern. The survey by Deloitte Advisory received more than 2,000 responses from professionals primarily working at financial services firms, consumer and industrial products companies, or in the technology, media and telecoms sectors. (Deloitte is the sponsor of Risk & Compliance Journal.)

While most respondents expressed some level of confidence in their organizations' ability to identify and mitigate financial crime, 8.9% said they don't have any such confidence, the survey found. Chris Georgiou, a partner in the forensic and investigations practice of Deloitte Financial Advisory Services, said the leak affected more than just financial institutions. "All multinational organizations should understand what potential exposures third parties and customers pose to them," he said.

Some of the challenges they face, the survey found, include a lack of visibility on beneficial ownership of organizations, inadequate customer due-diligence policies and a limited use of advance analytics to monitor payments in certain high-risk markets. "Now is not the time to place your company or yourself in a position to claim ignorance with government authorities and regulators," said Mr. Georgiou.

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COMPLIANCE

Companies made deals that may violate whistleblower-restriction rules. Wells Fargo, Advanced Micro Devices and Fifth Third Bank have in recent years agreed to settlement deals that seek to muzzle former employees in ways that some lawyers said could violate U.S. whistleblower protection laws, Reuters reports. Five lawyers, including three who represent whistleblowers, said that the settlements appear aimed at blocking workers from airing their concerns and contain similarities to those used by other companies that ran afoul of government rules.

Eric Thayer/Bloomberg News

China takes steps to fend off risk. China took aggressive steps to head off signs of growing risks in its financial and banking system, unveiling detailed rules to curb an unruly peer-to-peer lending sector and intervening in its money markets. The peer-to-peer firms shrugged it off, Reuters reports.

China probes Dutch flash-trading firm. China's securities regulator is probing IMC BV, a Dutch high-frequency trader, over its activity in the futures market during China's stock market rout last summer, FT reports, marking the second western group to face regulatory fallout from the turmoil.

Brussels rebuffs U.S. on tax investigations. The European Commission rebuffed an attack by the U.S. Treasury on its investigations into alleged sweetheart tax deals between companies such as Apple and McDonald's and European governments, saying there was no anti-U.S. bias, Reuters reports. U.S. companies are bracing for a shakeup, FT reports.

WL Russ settles with SEC over fee-allocation disclosures. Private-equity firm WL Ross & Co. has reached a settlement with the Securities and Exchange Commission over its disclosures of fee allocation practices, WSJ reports. The SEC said WL Ross voluntarily reimbursed about $11.8 million to certain WL Ross funds and agreed to pay a $2.3 million civil penalty. The firm didn't admit or deny the SEC's findings, according to the agency. Is there someone defending fee secrecy?

SEC charges municipal bond issuers. The SEC charged 71 municipal bond issuers, including the states of Hawaii and Minnesota, as well as related entities, for using offering documents that misled investors, Reuters reported, citing the agency.

Hyundai strikes union deal. Hyundai Motor Co. reached a tentative wage deal with its unions, which puts an end to damaging strikes and paves the way for a similar deal at its Kia Motors Corp. affiliate, WSJ reports.

France denies omitting findings in Renault report. France's Environment Ministry denied it had omitted key elements concerning some Renault SA cars in a report on vehicle pollution it commissioned following the Volkswagen AG emissions scandal last year, Reuters reports.

Chinese firm pressured Americans for nuclear secrets. A state-owned Chinese power company under indictment in the U.S. pressed American nuclear consultants for years to hand over secret technologies and documents they weren't supposed to disclose -- and in some cases it got them, several of the consultants have told the FBI, Bloomberg reported.

DATA SECURITY

Cybersecurity firms integrate industry cooperative. Some information security companies that were shut out of the leading system for sharing data on malicious software are revealing more about how their own systems work in hopes of rejoining the cooperative effort, a shift that should improve protections for customers throughout the industry, Reuters reports.

Hackers are targeting your phone. Cyberthieves have a new way to hack into consumer bank accounts: mobile phones, WSJ reports.

Bloomberg News

Social media networks must join fight against Islamic State, U.K. lawmakers say. Facebook Inc., Alphabet Inc.'s Google and Twitter Inc. are deliberately shirking responsibility in the fight against Islamic State and other terrorist groups, WSJ reports, citing an influential committee of British lawmakers in a report to be published Thursday, reigniting a war of words over the role social media plays in radicalization.

GOVERNANCE

Chelsea Clinton to remain on Clinton Foundation board if Hillary wins presidency. The Clinton Foundation is considering exceptions to its plan to stop accepting corporate and foreign donations and reduce family involvement as a way to insulate Hillary Clinton from potential conflicts of interest if elected president, WSJ reports.

Agence France-Presse/Getty Images

Viacom may tighten reins on Paramount. Now Paramount Pictures parent Viacom Inc. is getting ready to crack the whip on Chief Executive Brad Grey, WSJ reports. In a Securities and Exchange Commission filing this week outlining its corporate restructuring, Viacom said new interim CEO Tom Dooley and the board will call on the Paramount team to defend their film record and present a turnaround plan.

Do we pay CEOs wrong? Behavioral economists say boards could pay CEOs less by giving them more near-term incentives, Bloomberg BusinessWeek reports.

J.P. Morgan creates executive role for cloud services. The largest U.S. bank by assets named an executive who is tasked with running the bank's cloud services, creating a position to oversee the technology, according to an internal bank memo reviewed by The Wall Street Journal.

Putnam adds board member. Putnam Investments, the $151 billion money manager, added veteran investment-bank executive Gregory Fleming to its board of directors, people familiar with the matter said to WSJ.

Investors add pressure on Sports Direct board. Sports Direct has come under renewed pressure after some of the word's biggest investors called for an independent review of the scandal-hit retailer's corporate governance framework at its annual meeting next month, FT reports.

RISK

China's Zika rules are worrying U.S. exporters. China's recent move to add the U.S. to a list of Zika-infected countries is worrying U.S. exporters, who fear they will be required to fumigate all containers destined for Chinese ports, WSJ reports. The cost to fumigate a container ranges from between $100 and $200. Exporters who ship everything from agricultural products and chemicals to engine parts say they fear that conflicting information from Chinese custom officials about the new requirements could result in delays, added cost and lost business.

OPERATIONS

More retailers probe supplier of "Egyptian cotton." Wal-Mart Stores Inc., Target Corp. and other big U.S. retailers have become entangled in a controversy over whether one of India's biggest textile companies has been supplying their stores with phony "Egyptian cotton" sheets, WSJ reports. Egyptian cotton, which since colonial times has been prized for its softness and durability, is often touted by stores that charge a premium for bed sheets or bath towels made with the material. It is found in everything from Ritz-Carlton hotel sheets to Brooks Brothers dress shirts. The scandal follows years of plummeting output, Reuters reports.