Department of Justice (DOJ)

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.

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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.

On February 23, the Financial Action Task Force (“FATF”) signaled that the inter-governmental body “will step up its efforts in monitoring the use of cryptocurrencies in money laundering.”  While the 37-member international body remains without an official policy for implementation, the pronouncement nonetheless demonstrates the heightened Anti-Money Laundering (“AML”) concern from regulators across the globe concerning illicit uses of cryptocurrency.

Notably, the FATF’s pronouncement comes on the heels of recent enforcement-related measures taken in various countries.  As we previously have blogged, the European Parliament and its executive arm, the European Council, recently agreed to an amendment to the Fourth Anti-Money Laundering Directive to include measures targeting exchange platforms for virtual currencies, such as Bitcoin, as well as prepaid cards.  More recently, France’s top financial markets regulator issued a statement that online trading platforms for cryptocurrency derivatives fall under the European Union’s central legislation regulating financial markets.  In the U.K., the Parliament’s Treasury Committee announced on February 22 that it has launched a probe to examine both the impact of cryptocurrencies on financial institutions and how best to police the new technology.  Meanwhile, South Korea’s ban on anonymous trading of cryptocurrencies—part of the country’s new policies which represent the first AML guidelines for cryptocurrencies among the nations of the FATF—took effect on January 30. Continue Reading Global Regulators to Maintain AML Pressure on the Cryptocurrency Industry

This week, the U.S. Senate Committee on the Judiciary and the U.S. Senate Committee on Banking, Housing and Urban Affairs held hearings focused in part on Anti-Money Laundering  (“AML”) and the Bank Secrecy Act (“BSA”).  We discuss highlights of the testimony of the Chairpersons of the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”), as well as testimony from a senior official at the Justice Department and a representative of the U.S. Chamber of Commerce, concerning upcoming changes to beneficial ownership requirements and the current regulatory landscape of the cryptocurrency industry. Continue Reading AML/BSA Focus by U.S. Senate Committee Testimony – From Beneficial Ownership to Cryptocurrency

Attorney General Sessions Announces Rescission of Obama Administration Policies on Marijuana Enforcement; Financial Institutions Lose Grounds to Permit Financial Transactions with Marijuana Businesses

In a single-page memorandum issued today, Attorney General Sessions tersely rescinded a string of DOJ enforcement policies announced during the Obama Administration — chief among them the “Cole Memo,” described below — which collectively had indicated that although marijuana was still illegal under federal drug laws and the DOJ would continue its enforcement of those laws, the DOJ also would defer to state governments that had developed regulatory regimes legalizing marijuana under defined circumstances.  Although Attorney General Sessions is well known for his personal distaste for marijuana-related activity, he previously had not been entirely clear as to exactly what position his DOJ would take in regards to the Cole Memo and related enforcement.

Although this policy change has many potential implications, its primary relevance to Anti-Money Laundering (“AML”), the Bank Secrecy Act (“BSA”), and money laundering issues is that the Cole Memo had provided the support for the federal government to issue guidance that, under very defined circumstances, financial institutions could provide services to state-licensed marijuana businesses. Continue Reading Marijuana Enforcement: DOJ Cole Memo Up in Smoke

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