The Western Union Company (“Western Union”) entered into a deferred prosecution agreement (“DPA”) on January 19th with the Department of Justice, based on alleged willful failures to maintain an effective AML program and the aiding and abetting of wire fraud. The DPA involved a combined $586 million monetary penalty and also involved related civil enforcement actions by the Federal Trade Commission and FinCEN. The agreement has been well-publicized and its details will not be repeated here; very generally, the DPA rests on allegations involving conduct stretching from 2004 through 2012 and an overall failure by Western Union to detect and prevent a kaleidoscope of illicit behavior by customers, from structured transactions to an international consumer fraud scheme to potential drug distribution. To be sure, this is a significant agreement – but it echoes the same general sort of facts and allegations which have become almost standard in large AML enforcement actions. However, the Western Union action contains at least one interesting wrinkle. Continue Reading The Western Union DPA and the Need to Investigate One’s Own
In part two of our review of the 2016 developments in Anti-Money Laundering (AML), the Bank Secrecy Act, (BSA), the criminal money laundering statutes, forfeiture, and related issues, we discuss four additional key topics:
- Federal banking regulators’ efforts to ease industry concerns about overly aggressive Anti-Money Laundering (AML)/Bank Secrecy Act (BSA) enforcement and limit the practice of “de-risking”
- Virtual currency
- Court opinions of note under the money laundering statutes and the BSA
- Forfeiture policy and enforcement
You can read more about these topics areas in the blogs that follow. Click here to read the full article 2016 Year in Review: Money Laundering (Part Two). Click here if you missed Part One of our 2016 year in review.
Under Internal Revenue Code section 7609(f), the IRS may issue a “John Doe” administrative summons to discover the identities of unknown taxpayers. A “John Doe” summons can be a powerful enforcement tool because it allows the government to force third parties, such as banks and credit card companies, to provide numerous records regarding suspected tax code violations by persons whose precise identities are unknown to the IRS but who, as a group, are suspected of tax evasion. The IRS may serve a “John Doe” summons on a third party only with federal court approval.
The federal courts continued in 2016 to produce a stream of cases pertaining to money laundering. We focus on three below because they involve analysis of basic issues that frequently arise in money laundering litigation.
The first case tests the money laundering statute’s reach in prosecution of an alleged international fraud perpetrated primarily outside of the United States—an increasingly common fact pattern as cross-border cases proliferate and the U.S. Department of Justice (DOJ) prosecutes more conduct occurring largely overseas. The other two cases involve defense victories that focus on critical issues of mental state: the question of specific intent under the BSA, and the question, under the money laundering statutes, of knowledge by a third party that a transaction involved proceeds of another person’s crime. The issue of third-party knowledge is often crucial in prosecutions of professionals. Continue Reading 2016 Year End Review: Money Laundering Opinions of Note
The field of forfeiture saw significant action in 2016. The IRS offered to return forfeited funds used in structuring, but Congress still may clip its ability to forfeit such funds. Meanwhile, DOJ renewed a controversial program that incentivizes local law enforcement to aggressively pursue forfeiture. It filed a major forfeiture action which reminds law firms of their own need to vet the source of funds flowing into firm bank accounts. Finally, the U.S. Supreme Court made it clear that “clean” funds cannot be restrained pretrial when a defendant needs those funds for his criminal defense, even if the government wants to restrain the money in order to pay for forfeiture or restitution if the defendant is convicted. Continue Reading 2016 Year in Review: Forfeiture
As the world knows, the Panamanian law firm Mossack Fonseca was the subject of a stunning data breach of approximately 11.5 million financial and legal documents in April 2016. These leaked documents, the so-called “Panama Papers,” have been publicized primarily by the International Consortium of Investigative Journalists and allegedly reveal a global system of undisclosed offshore accounts, money laundering, and other illegal activity. The effect of the Panama Papers has been explosive—the documents allegedly implicate world leaders, financiers, celebrities, and other prominent individuals from across the world in the use of shell companies to conceal assets and possible illegal activity from their home governments. The Office of the U.S. Attorney for the Southern District of New York has indicated that it is launching an investigation into these matters, as have enforcement agencies in many other countries.
To date, reports have suggested that relatively few U.S. citizens have employed the services—legitimate or otherwise—of Mossack Fonseca. However, and even before the Panama Papers came to light, reports also have suggested that individuals from across the globe have perceived that the United States is a secure place to hide assets. The states of Nevada, Wyoming, and Delaware—which allow for the quick creation of limited liability companies without identifying the true beneficial owners—have been criticized in particular. The Panama Papers have sharpened the national and global focus on the risks associated with money laundering, tax evasion, terrorist financing, and other illicit activity arising from the creation and use of U.S. entities whose true owners are obscured through corporate forms, as well as the need to identify the people behind these entities. The Panama Papers also illustrate how the growing possibility and ease of massive data breaches upends any notion that even the most powerful can count on privacy.
Although stated efforts at regulatory reform have been ongoing for years, the Panama Papers scandal clearly motivated the U.S. government to act in 2016 to address the alleged attempts by non-U.S. individuals to launder their proceeds of illegal activities through U.S. financial transactions. As discussed below, a key focus of the U.S. government’s recent regulatory campaign—and of international enforcement efforts—is on identifying the true beneficial owners involved in financial transactions. This trend of expanding duties increases the potential risks—simply due to the expanding universe of required government scrutiny and filings—for entities and individuals accepting money from, or making representations on behalf of, possible bad actors from abroad or in the United States.