Convictions to “Promote” Crime and “Conceal” Illegal Proceeds Vacated Due to Insufficient Evidence of Intent

A recent decision out of the United States District Court for the Eastern District of Virginia adjudicating a seemingly straight-forward alleged fraud and money laundering scheme reminds us that money laundering charges still require the government to establish elements which can be difficult to prove, including, importantly, specific intent.

United States v. Millender involved an investment fraud scheme charged against a husband and wife and their associate. Terry and Brenda Millender were, respectively, the founder and pastor, and the “First Lady” of the Victorious Life Church (“VLC”) in Alexandria, Virginia. The evidence at trial established that Mr. Millender conceived of and founded Micro-Enterprise Management Group (“MEMG”), purportedly for the purpose of helping the poor in developing countries by making small, short-term loans to entrepreneurs who wished to start or expand existing businesses. Mrs. Millender was the co-founder, registered agent, and signatory of MEMG. To fund the enterprise, MEMG solicited “loans” from VLC congregants and other private lenders. MEMG promised its investors high rates of return through profits on the entrepreneur loans and assured them that the loans were securely backed by MEMG assets. Moreover, written materials soliciting investment represented that MEMG had a successful history of making micro-loans in Africa and had established relationships with on-going projects. Later, Mr. Milliner founded a second entity, Kingdom Commodities Unlimited (“KCU”), purportedly for the purpose of brokering Nigerian oil deals, and promising investors substantial returns on what they claimed were short term loans. The defendants solicited over $600,000 from investors from 2008 until 2015.

The Millender opinion reflects the complexity of the different prongs of the money laundering statutes, and their somewhat overlapping and competing requirements. The opinion is particularly noteworthy because of its procedural posture: despite jury verdicts finding guilt, the district court nonetheless found at least as to some counts that there was insufficient evidence as a matter of law of knowledge and specific intent. Continue Reading Money Laundering and Specific Intent Can Be Difficult to Prove

New York State Encourages Banking for State-Licensed Medical Marijuana Businesses – Whereas a Maine Company Runs Into Trouble, Despite State Law Legalizing Medical Marijuana

To state the obvious, growing and dispensing marijuana is still illegal under federal law.  As a result, being involved in even a state-licensed marijuana business can be risky. Moreover, obtaining financial services for such a business is sometimes impossible, primarily due to the federal anti-money laundering (“AML”) obligations imposed upon financial institutions by the Bank Secrecy Act (as we have blogged).

This post discusses two recent developments related to state-licensed medical marijuana operations, which serve as contrasting bookends to the spectrum of potential risks and opportunities presented by such businesses.  On the risk-end of the spectrum, we discuss the recent difficulties encountered by a Maine business, and how dubious the seeming safe harbor of state legalization of marijuana can be in some cases. On the opportunity-end of the spectrum, we discuss recent guidance issued by the New York Department of Financial Services, which has declared its support and encouragement of state-chartered banks and credit unions to offer banking services to medical marijuana related businesses licensed by New York State. Continue Reading The Medical Marijuana Industry and AML: Opportunities and Risks

The Financial Action Task Force (“FATF”) recently released a special report on professional money launderers (“PMLs”) who provide money laundering expertise and services to their crime-committing clients. The Report describes the functions and characteristics of a PML and the services they provide. Although the FATF has issued many reports on potential vulnerabilities in anti-money laundering efforts, this Report focuses on the affirmative threats posed by money laundering regimes.

The Report is primarily descriptive, and contains examples of enforcement actions involving PMLs across the globe. A non-public version of the Report, available to Members of the FATF and the FATF Global Network, sets forth practical recommendations for the detection, investigation, prosecution, and prevention of PML-related laundering, including “appropriate regulation,” law enforcement coordination, and international co-operation and information exchange. Presumably, the Report will provide additional fuel to efforts across the world to close perceived regulatory gaps involving the collection of beneficial ownership information, and the potential role of professionals, including lawyers, in assisting others to launder illicit funds. Continue Reading FATF Report: Professional Money Laundering and Related Threats

Earlier this month, the District Court for the Central District of California imposed a prison sentence of one year and a day, with three years of supervised release, on defendant Theresa Lynn Tetley, who had pleaded guilty to: (i) the unlicensed operation of a digital currency exchange due to failure register with the Financial Crimes Enforcement Network (“FinCEN”), in violation of 18 U.S.C. § 1960(a) and (b)(1)(B), and (ii) a money laundering charge, in violation of 18 U.S.C. § 1956(a)(3)(B), arising out of an undercover “sting” operation run by the Drug Enforcement Agency and Internal Revenue Service-Criminal Investigation involving the attempt to conceal proceeds supposedly obtained by selling drugs.  Tetley also was ordered to pay a $20,000 fine and forfeit 40 Bitcoin, $292,264 in cash, and 25 gold bars that were the alleged proceeds of her illegal activity.

The Court imposed a sentence significantly lower than the sentence of 30 months requested by the government, a recommendation which already was lower than the advisory sentencing range recommended by the Federal Sentencing Guidelines (“Guidelines”) of 46 to 57 months in prison, as calculated by the U.S. Probation Office.

Tetley, a 50 year old woman living in Southern California, is a former stockbroker and real estate investor. She operated her digital currency exchange under the alias “Bitcoin Maven” for over three years, running an unregistered Bitcoin for cash exchange service.  According to the government, her service “fueled a black-market financial system” that “purposely and deliberately existed outside the regulated bank industry” and which catered to an alleged major darknet vendor of illegal narcotics.  According to the defense, however, the defendant “departed from a lifetime of integrity and good deeds and showed terrible judgment by failing to comply with federal registration requirements and buying bitcoins from individuals who represented themselves as engaged in criminal activity.”

In this post, we will drill into this sentencing and the parties’ respective positions, which provide a window into the prosecution and sentencing of alleged crimes involving both digital currency and undercover money laundering operations — and into the process for the sentencing of federal crimes in general, and how other factors which are entirely unrelated to the facts of the specific offense can be important.  Further, the Tetley case is interesting in part because it represents a sort of “hybrid” case — seen from time to time in money laundering cases involving professionals — which straddles both the typically very different realms of “pure” financial crime cases and illegal narcotics cases.  The government sentencing memorandum is here; the defense sentencing memorandum is here. Continue Reading Unlicensed Bit Coin Exchange Operator Sentenced to One Year and a Day for Attempted Money Laundering in Undercover Sting Operation and Failure to Register with FinCEN

The U.S. Department of Justice (“DOJ”) announced last week that it was disbanding the Financial Fraud Enforcement Task Force, established under the Obama Administration. In its place, pursuant to an Executive Order, the DOJ plans to establish the Task Force on Market Integrity and Consumer Fraud (“Task Force”). The purpose—according to a DOJ press release—is to deter fraud on consumers and the government. Additionally, the Task Force will focus on money laundering, “including the recovery of proceeds;” fraud related to digital currency; tax fraud; health care fraud; securities and commodities fraud; and other financial crimes.

The Task Force is a multiagency effort. Although the DOJ will lead the group under Deputy Attorney General Rod Rosenstein, the Executive Order directs him to include a host of other federal agencies, including the Secretary of the Treasury, the Comptroller of the Currency, and the Chairperson of the Board of Governors of the Federal Reserve System.

This is a potentially important development regarding government enforcement, including as to money laundering. We and our colleague Alan Kaplinsky therefore discuss the new DOJ task force in detail here.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.

Exterior of the Robert F. Kennedy U.S. Department of Justice Building in Washington, D.C.

In a highly anticipated speech to the New York City Bar White Collar Crime Institute this morning, Deputy Attorney General Rod Rosenstein announced two new Department of Justice (“DOJ”) policies: first, a directive encouraging “coordination among Department components and other enforcement agencies when imposing multiple penalties for the same conduct,” and second, the establishment of a new Working Group on Corporate Enforcement and Accountability designed to foster consistency in DOJ outcomes surrounding white collar crime and corporate compliance.

Although Deputy A.G. Rosenstein did not discuss specifically enforcement actions involving money laundering or violations of the Bank Secrecy Act (“BSA”), his remarks and guidance clearly will apply to such actions, because they will apply  to all corporate investigations and prosecutions. Indeed, the high-profile actions against financial institutions involving alleged AML/BSA and/or OFAC violations which we have seen over the years invariably involve numerous enforcement agencies, including but not necessarily limited to DOJ, FBI, IRS, FinCEN, the OCC, and/or state agencies — with each agency looking to assert its own particular role and agenda, sometimes to the bewilderment and detriment of the company.

This is an important development for institutions undergoing government scrutiny. I and my colleagues Hank Hockeimer, Jr. and Thomas Burke therefore discuss Deputy A.G. Rosenstein’s speech in detail here.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. To learn more about Ballard Spahr’s Anti-Money Laundering Team, please click here.

As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.

The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far.  Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA.  In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.

Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment.  The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.”  Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.

As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology.  There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.  However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it.  Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA. Continue Reading DOJ Employs Money Laundering Statute to Prosecute Venezuelan Oilmen for Foreign Bribery