We previously have blogged on actions taken by the DOJ’s “Task Force KleptoCapture,” an interagency law enforcement task force with a mandate to target sanctioned Russian and pro-Russian oligarchs. While explicitly launched in May 2022 as a direct response to Russia’s full-scale invasion of Ukraine, the task force’s mission is consistent with the U.S. government’s characterization of Russia as a kleptocratic regime (see our post here) and the Biden Administration’s promotion of anti-corruption as a “core United States national security interest” (see our posts here and here).

This week, DOJ announced (via both a press release and a filmed podium announcement by Attorney General Merrick Garland) a series of enforcement actions in five separate federal cases in districts up and down the East Coast, dealing with money laundering and evasion of sanctions, in several cases centered on quintessentially oligarchic luxury goods: high-end real estate and superyachts.  The enforcement actions also emphasize the continuing themes in these cases of the use of shell companies, proxies and lawyers to allegedly evade sanctions.

Continue Reading The American Front in Russia’s War on Ukraine: DOJ’s “Task Force KleptoCapture” Continues Focus on Operations of Sanctioned Oligarchs

On February 16, the Financial Crimes Enforcement Center (“FinCEN”) published a Notice of Proposed Rulemaking (“NPRM”) regarding residential real estate.  The final version of the NPRM published in the Federal Register is 47 pages long.  We have created a separate document which more clearly sets forth the proposed regulations themselves, at 31 C.F.R. § 1031.320, here.

FinCEN also has published a Fact Sheet regarding the NPRM, here.  The Fact Sheet, slightly over four pages long, is helpful and walks through the basics of many of the proposed requirements.

The NPRM proposes to impose a nation-wide reporting requirement for the details of residential real estate transactions, subject to some exceptions, in which the buyer is a covered entity or trust.  Title agencies, escrow companies, settlement agents, and lawyers need to pay particular attention to the NPRM because, based on FinCEN’s “cascade” approach to who should be responsible for complying with the reporting requirements, these parties are the most likely to be responsible.

Although the NPRM pertains only to residential transactions, FinCEN has indicated that it intends to publish a separate proposed rulemaking in 2024 regarding commercial real estate transactions.

Continue Reading FinCEN Proposes BSA Reporting Requirements for Residential Real Estate

The South Dakota Division of Banking (the “Division”) issued a Memorandum notifying all licensed South Dakota money lenders and non-residential mortgage lenders that the Division has taken the position that they are subject to the Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) obligations imposed by a 2020 Final Rule published by the Financial Crimes Enforcement Network (“FinCEN”) regarding banks lacking a federal functional regulator (“Final Rule”). The Final Rule became effective in 2020, and the Memorandum requires licensees to comply by March 31, 2024.  No other state has taken this same position, and the Final Rule itself stated that it applied to approximately 567 banks. 

Accordingly, all money lender and non-residential mortgage lender licensees covered by the Memorandum must develop a BSA/AML compliance program that aligns with the Memorandum’s requirements, which are equivalent to that of a “bank” under FinCEN’s regulations. The compliance program must include a risk assessment, ongoing transaction monitoring, and filing of Suspicious Activity Reports (“SARs”) and Currency Transaction Reports (“CTRs”), among other requirements. In addition, licensees must register with FinCEN for BSA e-filing.

Continue Reading South Dakota Regulator Requires BSA/AML Compliance for Money Lender Licensees and Non-Residential Mortgage Lenders

Third of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

As we have blogged, the Department of Justice (“DOJ”) has been busy lately in regards to money laundering and Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) prosecutions.

In our first blog post in this three-part series, we discussed a significant prosecution of an individual, and two related corporate non-prosecution agreements involving the gaming industry.  In our second blog post, we discussed two unusual prosecutions involving, respectively, an executive of a bank and an alleged AML specialist working with small financial institutions.

In our final post of this series, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the massive fraud and money laundering scheme perpetrated by his cryptocurrency client.  Specifically, on January 25, lawyer Mark Scott (“Scott”) was sentenced to 10 years in prison for allegedly laundering approximately $400 million in connection with a fraudulent cryptocurrency scheme known as “OneCoin.”  Scott was a former partner at the international law firm of Locke Lord.  Although the alleged facts and circumstances of this case are both extreme and lurid, it nonetheless reminds lawyers of the need to be careful about getting too involved in the businesses of their clients, particularly in the presence of multiple red flags.

Continue Reading Former Big Law Lawyer Sentenced to 10 Years in Prison for Allegedly Laundering $400 Million in Crypto Client Funds

Recently, the Industrial and Commercial Bank of China Ltd. (“ICBC”) entered into two consent orders. The first consent order is with the New York State Department of Financial Services (the “NYDFS”) for alleged deficiencies in the bank’s Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) and Office of Foreign Assets Control (“OFAC”) compliance screening programs over the past several examination cycles, as well as alleged violations of sharing confidential supervisory information. As we will discuss, the NYDFS consent order finds that ICBC violated New York banking law by backdating internal certifications – not themselves required by statute or regulation – and then not immediately disclosing these “false entries” to the NYDFS.

ICBC also entered into an Order to Cease and Desist (“C&D Order”) with the Board of Governors of the Federal Reserve (the “Federal Reserve”) for the alleged improper disclosure of confidential supervisory information, or CSI.  Generally, CSI is information relating to a regulatory examination or investigation, which cannot be disclosed without the agreement of the financial institution’s examining regulator – which here, of course, is the Federal Reserve.  As noted above, the NYDFS consent order also contains allegations of improper disclosure of CSI, which is also protected as confidential under New York banking law.  Ironically, the alleged disclosure of CSI was to the bank’s foreign regulator.

This is not the first time ICBC has had issues involving alleged BSA/AML deficiencies. In 2018, ICBC entered into a consent Cease and Desist Order with the Federal Reserve for similar BSA/AML deficiencies at its New York branch, about which we blogged here. Despite ICBC’s noted efforts in enhancing BSA/AML and OFAC compliance programs and promptly reporting the unauthorized disclosure of confidential supervisory information to the regulators, the bank was subjected to a $30 million civil money penalty from the NYDFS and another $2.4 million civil money penalty from the Federal Reserve.

Continue Reading ICBC Agrees to Two Consent Orders for Alleged BSA/AML Deficiencies and Disclosure of Confidential Supervisory Information

Second of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”).  

In the first blog post in this series, we discussed a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry.  In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

In this second post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

As we previously noted, all of these cases, although all unique, are also united in certain ways – particularly in regards to the need for institutions and professionals to perform sufficient due diligence regarding the conduct and source of funds of high-risk clients and customers.

Continue Reading Criminal Case Round-Up: Recent Prosecutions Involving Financial Institution Officers

First of Three Posts in a Related Series on Recent AML and Money Laundering Prosecutions

The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”). 

In this first blog post, we will discuss a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry

In the next related post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

Although these cases are all unique and interesting in their own way, they are also all united in certain ways – particularly in regards to the need for institutions to perform sufficient due diligence regarding the conduct and source of funds of high- or higher-risk customers, and the related need for institutions to ensure that their own employees are not undermining the institutions’ AML compliance programs.

Continue Reading Criminal Case Round-Up: Recent Prosecutions Involving Casinos

Today we are very pleased to welcome, once again, guest blogger Dr. Kateryna Boguslavska of the Basel Institute on Governance (“Basel Institute”), who will discuss the Basel Institute’s release of the 12th annual Public Edition of the Basel AML Index (the “Index”). The data-rich annual Index is a research-based ranking that assesses countries’ risk exposure to money laundering and terrorist financing. It is one of several excellent online tools developed by the Basel Institute to help both public- and private-sector practitioners tackle financial crime.  We are excited to continue this annual dialogue between the Basel Institute and Money Laundering Watch.

Established in 2003, the Basel Institute is a not-for-profit Swiss foundation dedicated to working with public and private partners around the world to prevent and combat corruption, and is an Associated Institute of the University of Basel. The Basel Institute’s work involves action, advice and research on issues including anti-corruption collective action, asset recovery, corporate governance and compliance, and more.

Dr. Kateryna Boguslavska is Project Manager for the Basel AML Index at the Basel Institute. A political scientist, she holds a PhD in Political Science from the National Academy of Science in Ukraine, a master’s degree in Comparative and International Studies from ETH Zurich as well as a master’s degree in Political Science from the National University of Kyiv-Mohyla Academy in Ukraine. Before joining the Basel Institute, Dr. Boguslavska worked at Chatham House in London as an Academy Fellow for the Russia and Eurasia program.

This blog post again takes the form of a Q & A session, in which Dr. Boguslavska responds to several questions posed by Money Laundering Watch about the 12th Basel AML Index. We hope you enjoy this discussion of global money laundering risks — which addresses terrorist financing, de-risking, non-profits, forfeiture, emerging technologies, and more.  – Peter Hardy

Continue Reading The Basel AML Index: Forfeiture, Non-Profits, Crypto, and More. A Guest Blog.

The Financial Crimes Enforcement Network (“FinCEN”) recently released a Financial Trend Analysis (“FTA”) focusing on identity-related suspicious activity.  The FTA was issued pursuant to section 6206 of the Anti-Money Laundering Act of 2020, which requires FinCEN to periodically publish threat pattern and trend information derived from BSA filings.

FinCEN examined information from Bank Secrecy Act (“BSA”) filings submitted in the 2021 calendar year.  According to FinCEN’s analysis, 1.6 million “BSA filings” – presumably, the vast majority of which constituted Suspicious Activity Reports (“SARs”) – were identity-related, representing a total of $212 billion in suspicious activity.  These filings constituted 42% of filings for that year, thereby meaning that approximately 3.8 million SARs were filed in 2021.

The descriptions and the explanations in the FTA necessarily turn on how the SAR filings chose to describe the suspicious activity at issue.  This is presumably why most of the activity falls into the vague category of “general fraud” – because, apparently, this is the particular box on the SAR form which most of the SAR filers happened to choose.  However, and we will describe, the activity in fact animating the vast majority of these SARs is some form of identity theft.

Continue Reading FinCEN Analysis Reveals $212 Billion in Identity-Related Suspicious Activity

The beneficial ownership information (“BOI”) registry under the Corporate Transparency Act (“CTA”) is now up and running at the Financial Crimes Enforcement Network (“FinCEN”).  This post will follow up on a previous blog regarding the recently-published CTA BOI access regulations (the “Access Rule”).  As we will discuss, the Access Rule leaves open many important questions for financial institutions (“FIs”) covered by the CTA, as they await further proposed regulations from FinCEN regarding alignment of the CTA with the Customer Due Diligence (“CDD”) Rule.

The full federal register publication for the Access Rule is here.  It is 82 pages long.  We therefore have created this separate 13-page document, which is slightly more user-friendly, setting forth only the actual regulations (now published at 31 C.F.R. § 1010.955).

Continue Reading Final CTA Access Rule Answers Some Questions, and Leaves Open Others