Swiss Penalty, India Margins, Dutch Insurers: Compliance

Swiss banks that seek to avoid prosecution for fostering tax evasion through secret accounts held by U.S. clients face penalties of as much as 50 percent of the value of those assets, the U.S. government said.

Hundreds of Swiss banks could be covered by a U.S.- Switzerland accord over how to punish financial institutions that used secret accounts to help American clients hide assets from U.S. tax authorities. The U.S. said Aug. 29 it will continue criminal probes of 14 banks while allowing others to avoid prosecution by paying penalties and disclosing accounts.

The accord lets Switzerland, the world’s largest offshore financial center with about $2.2 trillion of assets, resolve talks spanning two years after U.S. criminal prosecutions eroded Swiss bank secrecy. Those under investigation include Credit Suisse Group AG, the second-largest Swiss bank; HSBC Holdings Plc, the largest European bank; and Julius Baer Group Ltd.

Since 2009, the U.S. has prosecuted 68 account holders and more than 30 banking professionals for offshore tax crimes.

Under the accord, banks that seek to avoid prosecution must pay penalties, disclose their cross-border activities, give detailed account information for U.S. clients, describe other banks that received secret accounts, and cooperate in requests for information under a U.S.-Swiss tax treaty.

Banks wanting to participate in the program will need to apply for individual authorization, the Swiss government said in a statement Aug. 30. Banks that believe they have violated U.S. tax law must request non-prosecution agreements by Dec. 31.

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Compliance Policy

India Doubles Gold Futures Margins as Prices Rally to Record

India’s commodity markets regulator ordered exchanges to double margins on gold futures after a record plunge in the nation’s currency fueled a rally in bullion priced in rupees to an all-time high.

Initial margins on all contracts will rise to 5 percent of the value from Sept. 2, from 4 percent, the Forward Markets Commission said on its website. An additional margin of 5 percent will be levied on gold, silver, Brent crude, crude oil, and natural gas contracts due to high volatility in prices and it will be effective until further orders, it said.

Futures on the Multi Commodity Exchange of India Ltd. in Mumbai advanced to a record last week, rebounding 32 percent from a two-year low in June, threatening jewelry demand during the main festival season. Consumption in the country, which imports almost all the bullion it needs, accounted for about 20 percent of global demand in 2012, according to data from the World Gold Council.

Futures have gained 6.3 percent this year, compared with a 17 percent drop in the metal priced in dollars.

India’s rupee fell to a record low of 68.8450 on Aug. 28 and has lost 17 percent this year.

China Starts Bond Futures Trading Sept. 6, Security Times Says

The China Securities Regulatory Commission approved the China Financial Futures Exchange to start government bond futures trading on Sept. 6, the Securities Times reported, citing an unidentified spokesman from the commission.

The nation began treasury futures trading in 1992 and stopped it three years later after an investigation into alleged market manipulation.

Separately, the commission will introduce new rules on high-frequency trading, the Securities Times reported, citing an unidentified spokesman from the commission.

Separately, China will regulate its state-owned companies and control its shareholders’ actions, according to a statement posted to the commission’s website.

The nation’s state-owned companies should coordinate business development with listed companies they control to eliminate internal competition, the commission said in the statement.

India Said to Plan Tax Cut on Some Ore Exports to Help Rupee

India is considering reducing taxes on some exports of iron ore to boost shipments and help reverse a decline in the local currency, said two government officials with direct knowledge of the matter.

Taxes on overseas shipments of low-grade fines, or small particles, may be cut to 20 percent from 30 percent, the people said, declining to be identified before a public announcement. The lower tax will apply only to a part of the exported quantity, they said without elaborating. The proposal is with the finance ministry and will be placed before the cabinet for approval soon, they said.

Boosting exports will help Prime Minister Manmohan Singh narrow the current account deficit, avert a balance of payments crisis and stem the plunge in the rupee, which has declined 16 percent this year, the worst performance after the South African Rand among 24 emerging-market currencies tracked by Bloomberg. Lower taxes will also help Indian miners regain market share in China from Rio Tinto Group and BHP Billion Ltd.

D.S. Malik, a spokesman at the finance ministry, declined to comment, while Ruby Sharma, spokeswoman for the mines ministry, didn’t answer two calls to her office numbers after business hours.

Compliance Action

Aberdeen Asset Management Fined $11.2 Million by U.K. Watchdog

The U.K. markets regulator fined Aberdeen Asset Management Plc 7.2 million pounds ($11.2 million) for failing to properly handle client money from 2008 through 2011.

The firm didn’t have the correct documentation for around 685 million pounds in client funds placed in money market deposits, the London-based Financial Conduct Authority said in a statement on its website today.

The regulator stepped up enforcement of client-money rules after the bankruptcy of Lehman Brothers Holdings Inc. in 2008. The New York-based bank’s former U.K. unit failed to segregate billions of dollars of client funds from its own accounts, leaving creditors with competing claims that resulted in years of litigation. The issue resurfaced in the administration of MF Global’s U.K. unit.

Aberdeen Asset Management, Scotland’s largest money manager, received the FCA’s standard 30 percent discount on the fine for cooperating with the probe.

“We regret that the situation arose, have cooperated fully with the FCA in the course of its investigation and have amended our U.K. procedures regarding bank deposits following the FCA’s guidance,” Aberdeen Asset Management said in an e-mailed statement.

Everbright Securities Plunges After Record Penalty, Resignations

Everbright Securities Co. plunged to the lowest since its shares started trading in 2009 after errant trades drew a record penalty from China’s securities regulator and two executives resigned.

The country’s seventh-largest brokerage by market value fell by the 10 percent daily limit to 9.06 yuan at the opening yesterday in Shanghai, after its shares were suspended on Aug.


The China Securities Regulatory Commission said Aug. 30 the broker engaged in insider trading Aug. 16 when it roiled the nation’s equity markets with erroneous stock-purchase orders worth as much as 23.4 billion yuan ($3.8 billion). Fines and the confiscation of illicit gains will total 523 million yuan, the CSRC said. Assistant President Yang Chizhong and Board Secretary Mei Jian tendered their resignations, Everbright said Sept. 1 in statements to the Shanghai stock exchange.

Four people including ex-President Xu Haoming will be banned from markets for life and the brokerage was barred from most proprietary trading, the CSRC said. Xu resigned and the brokerage suspended Yang Jianbo, the head of its proprietary trading business. The firm estimated it lost 194 million yuan on the trades, based on Aug. 16 closing prices, and said the figure may change.

The brokerage’s proprietary trading business, excluding fixed income, has been halted and the CSRC will also suspend reviews of any new businesses for Everbright, the regulator said.

Everbright was sued by investors in Guangzhou and Shanghai seeking damages for losses. Courts in the two cities have received the claims and haven’t yet decided whether to accept them, Ye Xiaolei and Yan Yiming, lawyers for the investors, said today.

The CSRC didn’t reply to a faxed query seeking comments and three phone calls to Everbright’s offices in Shanghai went unanswered today. The company hasn’t commented on the CSRC ruling.

The Guangzhou investor is seeking 70,000 yuan in compensation from Everbright and the Shanghai Stock Exchange, Ye said by telephone from Shenzhen today. The Shanghai investor is seeking about 99,000 yuan, Yan said by phone from Shanghai.

Beijing-based lawyer Zhang Yuanzhong said his firm had been contacted by investors who claim damages of more than 1 million yuan for their losses due to the market turmoil. Everbright’s orders helped push the benchmark Shanghai Composite index from a loss of as much as 1 percent to a gain of 5.6 percent in two minutes.

Chinese securities law allows investors to file civil suits for losses arising from insider trading, the CSRC said in the statement that detailed the penalties on Everbright. The brokerage has the right to request a hearing with the CSRC before the penalties become final, the regulator said.

Spanish Police Catch ‘Sewer Gang’ That Robbed Banks in Madrid

Spanish police said they captured a gang of robbers that specialized in using Madrid’s sewers for planning raids on bank branches.

Officers arrested 10 people involved in seven violent bank raids in the capital, police said in an e-mailed statement yesterday. Four of the gang were caught as they emerged from underground after a raid in which they stole 60,000 euros ($79,300), the police said. They were armed with three guns, a club, flashlights and tape to immobilize their victims, according to the statement.

El Mundo newspaper reported in June that police had been for the past seven years chasing a gang that used its knowledge of Madrid’s 1,240-mile sewer system to plan bank raids.

Dutch Regulator Keeps Insurer Rate Curve After France Cut

Aegon NV and Delta Lloyd NV are among Dutch insurers facing a drop in solvency because regulators decided to preserve the interest-rate curve used to calculate liabilities following France’s downgrade.

“Discussions took place at the request of the Dutch Association of Insurers to explore the possibility to allow for a different alternative interest-rate curve,” the Dutch Central Bank, or DNB, said Aug. 29 in a statement. “However, DNB currently sees insufficient reason to approve a different alternative interest-rate curve.”

Insurers asked the regulator to reconsider after Fitch Ratings stripped France, Europe’s second-largest economy, of its AAA rating in July. The Dutch Association of Insurers, a trade group representing about 95 percent of the market, said the industry still has a strong solvency position.

The Netherlands, together with Germany, Finland and Luxembourg, are the only remaining countries in the euro region that have top ratings at the three major rating companies.

Bitcoin Exchange Tradehill Pauses for Regulatory Reasons

Tradehill Inc., an exchange for virtual currencies such as Bitcoin, is temporarily suspending trading, citing unspecified banking and regulatory reasons.

“This decision has not been made lightly and we regret having to take such action,” the company said Aug. 30 on its website. The company said it plans to “to upgrade, improve, and polish our trading platform.”

Tradehill has been seeking more business from investors and financial institutions as it works to legitimize virtual-currency trading in the U.S. The San Francisco-based company is among several upstart exchanges such as Mt. Gox and BTC-e that have emerged to support Bitcoin trading. Jered Kenna, chief executive officer of Tradehill, didn’t immediately return requests for comment.

Tradehill registered last month with the Financial Crimes Enforcement Network, a U.S. Treasury agency that targets money laundering, the company said in its statement. Steve Hudak, an agency spokesman, said he couldn’t comment on any regulatory issues for a specific firm.

FinCEN, as the Treasury agency is known, released guidance in March saying digital-currency administrators and exchangers are considered money-services businesses subject to regulations and anti-money-laundering controls. Regulators in Tradehill’s home state, California, have also been watching virtual currencies.

Mark Leyes, a spokesman for California Department of Business Oversight, didn’t respond to requests for comment on Tradehill.

Payment Group Says U.S. Banks Can Work With Legal Online Lenders

Banks can do business with Internet-based lenders that don’t violate the law, the nation’s primary payment system said in a letter that followed warnings from regulators about the online firms’ practices.

Nacha, the group that oversees the automated clearing house network, told the Online Lenders Alliance, an industry association, that banks have to examine the circumstances of lenders’ work and “take action where appropriate.”

Banks need not stop processing payments “for online lenders engaged in legal lending activity,” Jane Larimer, the executive vice president and general counsel of Nacha said in an Aug. 26 letter.

Nacha’s members include Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., PNC Financial Services Group and U.S. Bancorp.

Benjamin Lawsky, New York’s state superintendent of financial services, on Aug. 6 ordered a group of 35 online lenders, including at least four owned by Native American tribes, to cease offering loans in New York. He charged the loans violated New York’s interest rate caps.

Lawsky also sent a letter to 117 banks and Nacha itself requesting their assistance to “choke off” the lenders from the automated clearing house system, the bank-supported network that handles electronic bank account debits. Nacha responded on Aug. 8 by asking banks to advise the payment network whether they are still doing business with the online lenders named by Lawsky.

The online lending group has argued, on various grounds, that its members do not violate the law.

The Department of Justice and the Federal Deposit Insurance Corp. have also been pressuring banks to reconsider their relationships with online lenders.

Norway’s FSA Says Banks Had Core Capital of 11% End of June

Norway’s Financial Supervisory Authority said banks are meeting minimum capital requirements put in place from July 1 this year, according to an e-mailed statement Aug. 30.

The nation’s banks had core capital of 11 percent at the end of June, the Authority said in the statement.

The Authority also said banks had core capital of 9.9 percent a year earlier.

Rhoen Assumes It’s Not Focus of German Prosecutors Investigation

Rhoen-Klinikum, the German health-care facility operator, has no information about reported investigations, spokesman Sascha Schiffler said in e-mail statement Aug. 30.

Rhoen said the company would fully cooperate if public prosecutors contact it. The Data Protection Authority, or DPA, reported alleged market manipulation by Rhoen staff, citing Steinkraus-Koch of the Munich public prosecutors office.

The case concerns alleged violation of security trading law and attempted coercion, according to the DPA.


Banks Boosted Capital by $500 Billion Since 2009, Carney Says

Large international banks raised about half a trillion dollars in fresh capital since 2009 and are moving closer to complying with global capital rules, said Mark Carney, chairman of the Financial Stability Board.

Carney, who is the governor of the Bank of England, said that the capital raising has been “encouraging” though “uneven,” in a press conference in London yesterday.

Global banks had core capital reserves averaging about 9 percent of their risk-weighted assets at the end of 2012, above the 7 percent required under the updated Basel standards, the Basel Committee on Banking Supervision said in a report last week.

All jurisdictions needed to comply with tougher capital rules by 2019, Carney told journalists.