Department of Justice (DOJ)

U.S. Money Laundering Charges Stemmed from Foreign Bribes to Foreign Official by Foreign Companies

On August 25, a U.S. District Court Judge for the Southern District of New York sentenced former Guinea Minister of Mines and Geology, Mahmoud Thiam, to seven years in prison, followed by three years of supervised probations, for laundering $8.5 million bribes paid to him by China Sonangol International Ltd. and China International Fun, SA (CIF).  The judge also entered an order for the forfeiture of the full of $8.5 million of laundered funds.  The sentence followed Thiam’s conviction by a jury in May 2017 of money laundering.

Although the alleged money laundering transactions charged in the indictment involved wire transfers from foreign banks to bank accounts held in New York City, all of the bribery which produced the illicit proceeds at issue in the money laundering charges occurred entirely overseas. As we will discuss, this case serves as a reminder that the offense of money laundering centers on a discrete financial transaction, not the underlying illegal activity. This case also illustrates the willingness of the U.S. Department of Justice (“DOJ”) to pursue cases primarily involving conduct which occurred abroad, and also how the DOJ may use the money laundering statutes – assuming that there is a U.S. jurisdictional hook – to pursue certain individuals who would be untouchable under the Foreign Corrupt Practices Act: the foreign officials themselves who are receiving the bribes. Continue Reading Former Guinean Minister of Mines Sentenced to Seven Years in Prison for Laundering $8.5 Million in Bribes Paid by Chinese Companies in Exchange for Mining Rights

As widely reported, the Spanish police raided last year the Madrid offices of the Chinese state-run Industrial and Commercial Bank of China (“ICBC”), the world’s biggest bank by assets. In the nearly 18 months following that raid and the numerous arrests made at that time, very little information about this money laundering investigation became known publically. That is, until Reuters recently published a lengthy article resulting from its review of “thousands of pages of confidential case submissions” and its “interviews with investigators and former ICBC employees.” The article raises numerous questions regarding the enforcement of European money laundering laws against Chinese banks operating abroad, as well as certain unique political and diplomatic considerations that may exist in those enforcement efforts. Below, we will compare these efforts with similar U.S. enforcement efforts, which are potentially gaining steam. Continue Reading High-Profile Spanish Money Laundering Investigation of Chinese Bank Raises Questions About Future of Similar U.S. Enforcement

On July 26, FinCEN, in coordination with the U.S. Attorney’s Office for the Northern District of California (“NDCA USAO”), assessed a $110,003,314 civil money penalty against BTC-e a/k/a Canton Business Corporation (“BTC-e”) for willfully violating the Bank Secrecy Act (“BSA”), and a $12 million penalty against Alexander Vinnik, a Russian national who is one of the alleged operators of BTC-e, for his role in the violations.  FinCEN’s press release indicates that this is the first enforcement action it has taken against a foreign-located money services business (“MSB”) doing business in the United States.  As we previously have blogged, FinCEN released interpretive guidance in March 2013 stating that an administrator or exchanger of virtual currency is an MSB under the BSA unless a limitation or exemption applies.

In a parallel criminal investigation, Vinnik was arrested and detained in Greece and charged in a 21-count superseding indictment brought by the NDCA USAO and DOJ’s Computer Crime and Intellectual Property Section. The superseding indictment alleges that Vinnik and BTC-e operated an unlicensed MSB doing business in the U.S., in violation of 18 U.S.C. § 1960, and committed money laundering, in violation of 18 U.S.C. §§ 1956 and 1957, by facilitating virtual currency transactions involving various crimes, including computer hacking, identity theft, tax refund fraud schemes, public corruption, and drug trafficking. The superseding indictment also provides some clues to the fate of the collapsed virtual currency exchange Mt. Gox, once reportedly the largest such exchange in the world. Continue Reading FinCEN Takes First Action Against Foreign-Located MSB—“The Virtual Currency Exchange of Choice for Criminals”—For Willfully Violating U.S. AML Laws

On Friday, the Department of Justice (“DOJ”) filed a civil forfeiture complaint in the Southern District of Texas seeking recovery of approximately $144 million in assets that allegedly represent the proceeds of foreign corruption and which were laundered in and through the U.S. The complaint’s narrative focuses on Diezani Alison-Madueke, who is Nigeria’s former Minister for Petroleum Resources.  The 52-page complaint, which contains additional attachments, is very detailed – but nonetheless interesting reading – so we will discuss here only three salient points:

  • The most eye-catching property subject to forfeiture, the spectacular yacht Galactica Star (which you can inspect here), apparently has no discernible nexus to the U.S. – except that the funds used to acquire the yacht allegedly were transferred through correspondent bank accounts at financial institutions which process their U.S. dollar wire transactions through the U.S.
  • The complaint emphasizes the continued enforcement focus on high-end U.S. real estate as a potential vehicle for money laundering from abroad.
  • The complaint purports to quote a recording of a conversation allegedly made by Ms. Alison-Madueke herself, in which she allegedly offers a co-schemer some critiques on his approach to laundering illicit funds.

Continue Reading Alleged Nigerian Oil Industry Corruption and Civil Forfeiture: More Extraterritorial Application of U.S. Law; More High-End Real Estate; and Advice on Laundering

Two days after North Korea’s successful long-range ballistic missile test, the U.S. District Court for the District of Columbia unsealed a memorandum opinion which granted the Department of Justice “damming” warrants to seize all funds in bank accounts belonging to five Chinese companies which allegedly were used to hide transactions with North Korea using U.S. currency in violation of U.S. sanctions and money laundering laws. The underlying conduct allegedly resulted in over $700 million of prohibited transactions being processed by eight international banks. The opinion is noteworthy not only because it demonstrates the important relationship between money laundering laws and foreign policy, but also for the government’s use of anticipatory warrants to seize the assets upon arrival to the targeted accounts, and to prevent those assets from exiting.

Continue Reading Damming the Funding to North Korea: Anticipatory Seizure Warrants as a Tool to Enforce Sanctions and Thwart Money Laundering Transfers

Part Three of a Three-Part Series

In the third and final part of this series on marijuana-related businesses (“MRBs”), we explore how the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) have commenced actions against MRBs and operators for allegedly fraudulent and deceptive securities practices.  The sample of such actions which we discuss here serve to demonstrate not only the risks the investing public may face in investing in MRBs, but also as a reminder to MRBs seeking to capitalize on the industry’s explosive growth of the exacting standards of the securities laws and the government’s commitment to enforcing them in this industry.

Although the cases we discuss here are not tied specifically to AML/BSA enforcement cases, but rather to traditional allegations of securities violations, the practical point is that anyone who is considering wading into this industry should remember that there are multiple federal agencies which may pursue their own enforcement agendas relating to MRBs. Although we previously have noted during this series that the Financial Criminal Enforcement Network issued guidelines giving banks the go-ahead to work with MRBs, and although the 2013 DOJ Cole Memo seems to suggest that financial institutions can serve MRBs under certain circumstances, our discussion here reflects that there still are other government agencies which may have their own notions regarding what is acceptable conduct by a MRB.  As to the SEC specifically, these actions also are consistent with the recent trend of the SEC inserting itself into AML-related enforcement. Continue Reading The Marijuana Industry and the Securities Laws

Part Two of a Three-Part Series

In the second part of this series, we explore the practical effects of the FinCEN and DOJ guidance documents on industries attempting to serve marijuana related business (“MRBs”). On June 27, 2017, the Tenth Circuit issued an interesting and divided opinion showing us how difficult it can be to square the prohibitions in the federal Controlled Substances Act (“CSA”) and money laundering statutes with state legislation legalizing certain MRB activity and the seemingly permissive nature of the FinCEN and DOJ guidance documents. Continue Reading Continued and Unexpected Roadblocks to Serving the Marijuana Industry: Fourth Corner Credit Union v. Federal Reserve Bank

Part One of a Three-Part Series

We begin this week with a three-part series on banking and the marijuana industry. States continue to pass medical and recreational use marijuana legislation despite that the fact that the substance remains classified as a Schedule I drug subject to the federal Controlled Substances Act.  Thus, the medical and recreational marijuana industries continue to struggle with access to banking and credit, and those who attempt to serve these industries find themselves subject to the Bank Secrecy Act (“BSA”) and the criminal money laundering provisions.  As we will detail this week, the struggle for financial institutions attempting to service the marijuana industry comes not only from the BSA and AML provisions, but in other forms.  We start this week with an overview of the guidance documents issued by the federal government which identify the enforcement priorities and also potential windows for financial institutions to service the marijuana industry.  We will follow up with a discussion of a recent federal court decision illustrating the practical difficulties of squaring the prohibitions of the federal drug laws with permissive state laws and the federal guidance documents.  We will conclude with an exploration of how federal agencies beyond the Department of Justice (“DOJ”) and the Financial Crimes Enforcement Network (“FinCEN”), such as the Securities and Exchange Commission (“SEC”), can further muddy these waters by staking out their own regulatory and enforcement priorities.  –Priya Roy Continue Reading Banking and the Marijuana Industry

Settlement of FinCEN Action Against Former AML Chief Compliance Officer Serves as Possible Bellwether of Future Cases

This post discusses individual liability in AML/BSA enforcement, which is an area of increasing attention. Indeed, according to public statements by the government, individual liability is the focus of enhanced scrutiny across the enforcement table.

Man looking over shoulder with suspicionAlthough the raw number of enforcement actions against individuals in the AML/BSA realm (or even in the broader realm of general financial crime) has not climbed dramatically, even a few enforcement actions can have a profound effect on an industry – and that appears to be occurring in the AML realm. We begin our discussion here with a recent settlement of a high-profile enforcement action against a former AML compliance officer, and how it highlights potential individual liability.  Ironically, special scrutiny can apply to the very people specifically tasked with maximizing compliance at a corporation, and such scrutiny can end up pitting them against a company’s management and board. Continue Reading Individual Accountability in AML Cases