Undercover Investigations

A Guest Blog by Bruce Zagaris, Esq.

Today we are very pleased to welcome guest blogger Bruce Zagaris, who is a Partner at the Washington, D.C. law firm of Berliner, Corcoran & Rowe.  He is the editor of the International Enforcement Law Reporter; the author of International White Collar Crime: Cases and Materials; and an Adjunct Professor at the Texas A & M University School of  Law.  Mr. Zagaris also is a member of the Task Force on the Gatekeeper and the Profession of the American Bar Association (“ABA”).

As Mr. Zagaris explains immediately below, growing international trends have led the ABA Task Force to consider a new Model Rule of Professional Conduct that would impose basic “client due diligence” requirements on U.S. lawyers to determine whether their clients are engaging in money laundering or terrorist financing.  This development relates directly to issues about which we previously have blogged, including European perceptions of lawyers as potential gatekeepers and of the United States as a haven for money laundering and tax evasion.  The possible new Model Rule potentially would represent a significant shift in how the U.S. legal profession regards itself and its relationship to its clients.  We hope that you enjoy this discussion by Mr. Zagaris of these important issues. -Peter Hardy

Increasingly, international bodies are calling for higher standards for gatekeepers, known in the parlance of the Financial Action Task Force (“FATF”) as “designated non-financial businesses and professions” (“DNFBPs”). DNFBPs include lawyers, accountants, real estate agents, and trust and company service providers (other than trust companies).  In particular, in the United States, lawyers play a key role in areas that give rise to potential money laundering:  company formation; real estate transactions; business planning; tax planning; wealth management; trust and estate work; and formation and operation of charities, including transnational philanthropy.

In 2006 and again in 2016, the FATF, an intergovernmental body in charge of making and overseeing compliance with international money laundering standards, performed Mutual Evaluation Reports (“MERs”) to assess compliance by the United States with international standards.  While the FATF gave the U.S. high marks generally, both MERs found the U.S. “non-compliant” in gatekeepers and entity transparency.

As a result of this international trend, the ABA’s Task Force on the Gatekeeper and the Profession has prepared and discussed a new ABA Model Rule of Professional Conduct that would impose basic “client due diligence” requirement on lawyers.  We discuss this potential new model rule, and the developments which have led to its consideration, below.  Clearly, due diligence for lawyers will increasingly be on the radars of banks, financial institutions, and law firms. Continue Reading AML Due Diligence Standards for U.S. Lawyers

The District Court for the Eastern District of New York has denied motions for acquittal and new trial by a Florida attorney convicted at trial of assisting in an undercover money laundering “sting” operation.

Although the sting operation was orchestrated by an undercover FBI agent, it was modeled on a similar, uncharged and actual scheme to launder the proceeds of fake stock certificates in which the attorney allegedly had participated previously, and which had been run by the defendant’s former client – who introduced the attorney to the undercover FBI agent.  As is typical for money laundering prosecutions of third-party professionals, the key issue was knowledge. Continue Reading “Sting” Money Laundering Scheme and Cooperating Client Ensnares Attorney

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