Extraterritorial Application of US Law

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

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

Proposed Settlement Comes After Court Issues Rulings on Extraterritorial Application of U.S. Criminal Law, Evidence of Intent to Conceal and Tracing of Money Laundering Proceeds

On the eve of trial this past Friday, the government announced an agreement to settle, subject to court approval, a major civil forfeiture action in the Southern District of New York.  In the case, United States v. Prevezon Holdings, Ltd. et al., the government alleged an elaborate scheme involving money laundering and other offenses committed in Russia, Cyprus, and Manhattan. The case gained some notoriety in the press due to lurid allegations of the suspicious death while in pretrial detention in Moscow of a Russian lawyer who had uncovered the tax refund fraud scheme, and the alleged defenestration earlier this year of a lawyer working for the decedent’s family. Although the civil forfeiture complaint filed in 2013 sought to forfeit at least $230 million worth of assets, the parties settled for approximately $5.9 million. In the wake of this settlement, both the defense and the government now appear to be claiming victory.

The buildings located on the Red Square: Kremlin wall (at left) and Saint Basil's Cathedral (at right), Moscow, Russia. UNESCO World Heritage Site

This post will analyze an opinion issued by the court in this case last week, prior to the settlement, denying summary judgment to the defense.  The legal rulings contained therein are perhaps not as suitable for a Hollywood-style thriller as some of the content of the government’s press releases and pleadings, but nonetheless represent important issues in the field of money laundering and forfeiture.  Primarily, we analyze an increasingly common and key question: when can U.S. law apply to conduct occurring primarily overseas?  This question has broad implications for federal criminal law enforcement in general, including for RICO and tax fraud prosecutions, as well as for potential civil lawsuits brought by shareholders or other plaintiffs. Continue Reading Forfeiture Case Based on Alleged Elaborate $230 Million Russian Laundering and Fraud Scheme to Settle

The Supreme Court granted certiorari on April 3 to decide whether Jordan-based Arab Bank may be liable for claims including allegations that its New York branch processed transactions for known terrorists. While the central issue before the Court will be the scope of the Alien Tort Statute (“ATS”) – namely whether it permits corporate liability for violations of international law – Jesner v. Arab Bank also illustrates how alleged AML/BSA failures can lead to yet another avenue for secondary legal liability for financial institutions, as we previously have noted in other contexts. Depending on the outcome of the Court’s opinion in Jesner, such U.S. exposures may extend to foreign financial institutions even when the alleged conduct occurs primarily abroad.Detail view of the United States Supreme Court Continue Reading Weighing Corporate Liability under the Alien Tort Statute: What it Means for AML/CFT Controls

IED Bomb still lifeOn March 24, 2017, the U.S. Department of Justice unsealed an indictment charging Kassim Tajideen, an alleged prominent financial supporter of the Hizballah terror organization, with evading U.S. sanctions and conspiring to commit money laundering.  Tajideen, of Beirut, Lebanon, was arrested in Morocco earlier this month and has made his initial appearance in federal court in Washington, D.C.

According to the government, Tajideen, through his multi-billion dollar network of businesses based in Lebanon and Africa, contributed tens of millions of dollars to Hizballah. For this reason, in May 2009, the Department of Treasury’s Office of Foreign Assets Control (“OFAC”) designated Tajidden as a Specially Designated Global Terrorist (“SDGT”).  This designation makes it illegal for U.S. companies to do business with Tajideen or any entity that he controls.  More broadly, it is illegal for U.S. companies to transact business with any entities or individuals on OFAC’s blacklists.

The indictment charges Tajideen with one count of conspiracy to evade U.S. sanctions, specifically the International Emergency Economic Powers Act (“IEEPA”) and the Global Terrorism Sanctions Regulations, by transacting business with three U.S. businesses, referred to only as Business A, Business B and Business C, and by concealing from OFAC that he was benefitting from these transactions. Tajideen is also charged with seven counts of unlawful transactions with a SDGT, and one count of conspiracy to commit money laundering.

According to the indictment, Tajideen heads a large-scale commodity distribution business based primarily in Lebanon, the United Arab Emirates and Angola, but which operates throughout the world, including in the U.S. The business utilized what the government says was “a web of vertically integrated companies, partnerships and trade names.” The indictment further alleges that Tajideen and others engaged in a scheme to do business with U.S. companies while concealing Tajideen’s involvement.  As part of that scheme, between approximately July 2013 and the present, Tajideen, his employee, codefendant Imad Hassoun, and other unnamed co-conspirators illegally caused at least 47 wire transfers totaling over $27 million to be sent to entities in the U.S. for the purchase of frozen poultry and other items.  These payments caused the U.S. entities to illegally ship goods from the U.S. without obtaining the proper licenses from the U.S. Department of the Treasury. The count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h), charges that Tajideen and others conspired to both promote and conceal the conspirators’ illegal business transactions with U.S. persons through numerous wire transfers from bank accounts held by Tajideen’s companies in the United Arab Emirates to bank accounts held within the U.S. in order to pay for transactions involving Businesses A, B and C.

It has been reported that the investigation is continuing. Specifically, the government wants to determine whether Businesses A, B or C knowingly did business with Tajideen after he was designated a SDGT. Tajideen is alleged to have restructured his business empire after the designation and to have created new trade names in order to evade the sanctions and continue doing business with U.S. companies.  But Tajideen’s alleged deception may not save Businesses A, B and C from the government’s crosshairs.  Companies are responsible for conducting due diligence to determine whether entities and individuals with whom they do business – including middlemen, corporate shells and newly formed firms – are linked to individuals or entities on OFAC’s blacklists.  So while this indictment shows that the U.S. is taking aggressive action against Hizballah, it also underscores the need for U.S. companies to have robust export control compliance programs so that they can ensure they are not doing business with terrorists.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch.

The U.S. money laundering statutes have a broad global reach and may be used to prosecute cases involving alleged schemes perpetrated almost entirely outside of the United States. These types of allegations seem to be an increasingly common fact pattern as cross-border cases proliferate and U.S. prosecutions more often involve conduct occurring largely overseas. A recent indictment fits squarely within this trend.

GlobeThe U.S. Department of Justice (DOJ) recently announced the unsealing of four related and complex indictments returned in the District of Columbia; according to the DOJ press release, 19 people were charged “with taking part in various international fraud and money laundering conspiracies that led to more than $13 million in losses[.]” The press release credited a broad array of law enforcement agencies, including Interpol. Again emphasizing the international aspect of the indictments, the press release stated that “[s]ixteen of the 19 defendants were arrested . . . . in New York and Los Angeles, as well as Hungary, Bulgaria, Germany, and Israel[,]” and that “[t]he arrests followed a multi-year investigative effort by federal and international law enforcement agencies to target multimillion-dollar fraud and money laundering schemes perpetrated by a transnational organized crime network.”

The four indictments are lengthy and we will discuss only one of them, in order to focus on the potentially broad jurisdictional reach of the “international” money laundering provision under 18 U.S.C. § 1956(a)(2). Continue Reading Indictments Spotlight Broad Extraterritorial Reach of U.S. Money Laundering Statutes