Andrew N. D'Aversa

Subscribe to Andrew N. D'Aversa's Posts

daversaa@ballardspahr.com | 215.864.8113 | view full bio

Andrew focuses his practice in matters involving white collar defense/internal investigations and complex civil litigation.  His work includes cases involving allegations of money laundering and fraud schemes committed through financial institutions.  His work in the BSA/AML sphere also extends to advising clients on state money services statutes and regulations relating to virtual currency and related products.  Andrew has served as a judicial law clerk to the Honorable Noah L. Hillman of the U.S. District Court for the District of New jersey, and to the Honorable Anthony J. Sirica for the U.S. Court of Appeals of the Third Circuit.

Contact:Read more about Andrew N. D'Aversa

On February 8, 2022, the Department of Justice announced the seizure of a record $3.6 billion in stolen BTC it alleges was tied to the 2016 hack of Bitfinex, a virtual currency exchange.  A husband-wife duo, Ilya “Dutch” Lichtenstein and Heather Morgan of New York, New York were arrested the same day and charged via a criminal complaint with conspiracy to commit money laundering and conspiracy to defraud the United States.  Lichtenstein and Morgan are being held on $5 million and $3 million in bail, respectively, and will be on house arrest pending trial.

The Statement of Facts by the government in support of the criminal complaint filed against the defendants reveals a vast and complicated web of transactions that allegedly permitted Lichtenstein and Morgan to transfer approximately 25,000 of the 119,754 BTC stolen by hackers—valued at “only” $71 million at the time of the theft but now worth about $4.5 billion—to various virtual currency exchangers.  According to the Statement of Facts, the stolen BTC was shuttled to an unhosted wallet (i.e., a cryptocurrency wallet not controlled by a third-party but by the user) with over 2,000 BTC addresses, then to various accounts at the “darknet market AlphaBay,” later to a number of accounts at four different virtual currency exchangers, then to more unhosted BTC wallets, and finally to accounts at six more virtual currency exchangers where it was converted into fiat currency, gift cards, and precious metals.  The defendants further allegedly liquidated BTC through a BTC ATM and purchasing non-fungible tokens.

As if the sheer volume and layers of accounts was not enough, the duo allegedly:

  • Moved the funds in a “series of small amounts, totaling thousands of transactions”;
  • Used software to “automate transactions” which allowed for “many transactions to take place in a short period of time”;
  • “Layered” transactions by depositing and withdrawing the BTC through many accounts to obfuscate the trail, including through extensive layering activity that employed the “peel” chain technique; and
  • “Chain hopped” by converting BTC to anonymity-enhanced virtual currency to cut and disguise the blockchain trail.

Continue Reading  A Record $3.6 Billion Seizure and the Twisting Paths of Money Laundering in the Digital World

Farewell to 2021, and welcome 2022 — which hopefully will be better year for all.  As we do every year, let’s look back — because 2021 was a very busy year in the world of money laundering and BSA/AML compliance, and 2022 is shaping up to be the same.

Indicative of the increased pace and…

Caracas, Venezuela

Indictment Alleges $1.6 Billion in Corrupt Contracts, Funneled Through Shell Companies and Correspondent Accounts, and Paid With Gold Sold on Behalf of Venezuela

On October 21, 2021, a grand jury indictment was unsealed in the Southern District of Florida charging two Venezuelan and three Colombian citizens with one count of conspiracy to commit money laundering and four counts of money laundering.  The indictment revealed an alleged bribery scheme involving a former Venezuelan state governor and Venezuelan government authorities that provide food and medicine to citizens in need.  A portion of the $1.6 billion in contracts secured by alleged bribes was laundered into or through the United States through a web of accounts and businesses.  This indictment serves as yet another example of the United States Department of Justice’s (“DOJ”) use of money laundering charges to combat corruption in Venezuela (as we have blogged about repeatedly: here, here, here, here, here and here).  It also represents another example of DOJ using the money laundering statutes to charge foreign government officials at the highest levels when the Foreign Corrupt Practices Act cannot apply.
Continue Reading  (More) Money Laundering Charges Announced for Alleged $1.6 Billion Venezuelan Corruption Scheme

Global AML Compliance Faces Challenges Relating to Regulator Expertise, the Travel Rule, Decentralized Finance, and “Regulator Shopping”

Today we are very pleased to welcome guest blogger Federico Paesano from the Basel Institute on Governance (“Basel Institute”). The Basel Institute recently issued its Basel AML Index for 2021 (“Basel AML Index”). This data-rich and fascinating annual publication, one of several online tools developed by the Basel Institute to help both public- and private-sector practitioners tackle financial crime, is a research-based ranking that assesses countries’ risk exposure to money laundering and terrorist financing. This year, we will focus on the section of the Basel AML Index which analyzes data from the Financial Action Task Force (“FATF”) on how jurisdictions are responding to money laundering and terrorist financing threats related to virtual assets.  The Basel AML Index concludes: “not well at all.”

Federico Paesano is a Senior Financial Investigation Specialist at the Basel Institute’s International Centre for Asset Recovery, and leads its Cryptocurrencies and Anti-Money Laundering Compliance Training.  For 14 years, Federico worked for the Italian Financial Police, ending his career as Chief Investigator, leading and conducting judicial and financial investigations, focusing in particular on economic crimes such as corruption and money laundering.  In July 2009, he was seconded by the Italian Government to the European Union Police Mission in Afghanistan (“EUPOL”) as Mentor to the Minister of Interior on Anticorruption.  Along with Europol and Interpol, Federico and the Basel Institute are co-organizing on December 7–8, 2021 the 5th Global Conference on Criminal Finances and Cryptocurrencies, which focuses on the emerging threat posed by criminals using new payment methods to conceal the proceeds of their crimes. His Quick Guide to Cryptocurrencies and Money Laundering Investigations may be found here.

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 green corruption.  Money Laundering Watch was pleased to have Gretta Fenner and Dr. Kateryna Boguslavska of the Basel Institute guest blog on the Basel AML Indices for 2020 and 2019.

This blog post again takes the form of a Q & A session, in which Federico responds to questions posed by Money Laundering Watch about the Basel AML Index 2021 and wider debates on the topic. We hope you enjoy this discussion of money laundering risks and virtual assets — which addresses regulators’ frequent lack of expertise, tracing of cryptocurrency transactions, the Travel Rule, the challenges posed by decentralized finance, “regulator shopping,” and more.  —Peter Hardy and Andrew D’Aversa
Continue Reading  The Basel AML Index 2021: Virtual Assets and Money Laundering. A Guest Blog.

European Commission Proposes EU-Level Supervisory Authority and Cryptocurrency Travel Rule

European Banking Authority Offers New Guidelines on AML Compliance Officers

Just as the United States has expanded significantly its anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) regulatory and enforcement regime through recent passage of the AML Act of 2020, the European Union (“EU”) has taken significant steps this summer towards implementing a rigorous new transnational AML enforcement framework.  Recent legislative proposals by the European Commission (the EU’s executive branch) aim to combat cross-border crime by ensuring uniform implementation and enforcement of AML/CFT principles, rules, and regulations, and by creating new recordkeeping requirement for certain cryptocurrency transactions.  Following the announcement of these legislative proposals, the European Banking Authority proposed in late July new EU-wide guidelines for AML/CFT compliance officers.  We examine each of these in turn.
Continue Reading  European Union Round-Up:  A Summer of AML Enforcement and Compliance Proposals

Agenda Highlights Intersection of National Security, Corruption and Anti-Money Laundering

On June 3, 2021, President Biden unveiled a National Security Study Memorandum entitled Memorandum on Establishing the Fight Against Corruption as a Core United States National Security Interest (the “Memo”).  It reveals—as the title might suggest—that the Biden administration views “countering corruption as a core United States national security interest.”  Corruption “corrodes public trust” in foreign nations, and—because of its cross-border nature—threatens “United States national security . . . and democracy itself.”  This threat to democracy is created by, for example, “[a]nonymous shell companies, opaque financial systems, and professional service providers [that] enable the movement and laundering of illicit wealth, including in the United States.”  Under the rubric of curbing illicit finance and promoting transparency, the Memo amplifies the importance of the Corporate Transparency Act (the “CTA”).

To combat these risks, the Biden administration will use a whole-of-government approach.  The Memo calls for an interagency review to tap the expertise of a wide array of agencies and executive departments, including the Departments of the Treasury, Justice, Homeland Security, State, Commerce, and Energy.  Within 200 days, an interagency review must be completed and a report and recommendations (the “Report”) must be submitted to the President.  The Report will serve as the basis for the Biden administration’s strategy in its fight against corruption, both at home and abroad.

The Report has significant implications for many stakeholders: domestic and foreign financial institutions, U.S. corporations transacting business abroad, and foreign businesses and individuals operating or seeking to operate in the U.S. – as well as their professional advisors.

The Financial Accountability and Corporate Transparency Coalition (the “FACT Coalition”) has already heaped praise on the Memo, stating it represents “real progress in combating this global scourge” of corruption.  And the Memo represents just one part of a broader federal focus on corruption.  The Memo comes about a month and a half after President Biden’s Executive Order targeting Russia’s use of “transnational corruption to influence foreign governments.”  It also comes just a day after the announcement of a bipartisan Congressional caucus, the Congressional Caucus against Foreign Corruption and Kleptocracy (the “Caucus”).  The Caucus will focus exclusively on foreign corruption, what Sen. Ben Cardin calls a “national security priority of the highest order.”  The Caucus will provide a means of educating members of Congress and coordinating efforts across committees.  Additionally, the Memo’s release preceded by just a few days Vice President Harris’ visit to Latin America.  According to a senior administration official, a major focus of Vice President Harris’ trip will be conversations on anti-corruption measures.
Continue Reading  President Biden Unveils Broad Vision to Crack Down on Foreign and Domestic Corruption

Sixth Post in an Extended Series on Legislative Changes to BSA/AML Regulatory Regime

As we have blogged, the Anti-Money Laundering Act of 2020 (“AMLA”) contains major changes to the Bank Secrecy Act (“BSA”), coupled with other changes relating to money laundering, anti-money laundering (“AML”), counter-terrorism financing (“CTF”), and protecting the U.S. financial system against illicit foreign actors.

A recurring theme of the changes offered by AMLA is information sharing. AMLA mandates that the Department of Treasury’s supervision priorities must include “appropriate frameworks for information sharing among financial institutions, their agents and service providers, their regulatory authorities, associations of financial institutions, the Department of the Treasury, and law enforcement authorities.” The increased emphasis on information sharing is accompanied by provisions requiring confidentiality and data security protocols.

The Financial Crimes Enforcement Network (“FinCEN”) is already beginning to address AMLA’s focus on the sharing and protection of information, as it explained in its recent detailed Report on FinCEN’s Innovation Hours Program, which focuses on fostering technological innovation in AML/CTF compliance.  In this post, we explore AMLA’s expansion of information sharing, corresponding privacy and data security protections, and the tensions that lie therein.
Continue Reading  AMLA Information-Sharing and Privacy and Data Security Concerns

The Comptroller of the Currency (the “OCC”) has been busy, and focused on technology.  We discuss two recent developments: proposed regulations that would allow the OCC to grant exemptions relating to Suspicious Acivity Reports (“SARs”), and the OCC’s announcement that national banks and federal savings associations may employ both independent node verification networks (“INVNs”) and stablecoins to perform banking functions.

SAR Filing Exemptions

In late December, the OCC proposed new regulations to amend the “Suspicious Activity Report regulations to allow the OCC to issue exemptions . . . for national banks or federal savings associations that develop innovative solutions intended to meet Bank Secrecy Act requirements more efficiently and effectively.” While the Financial Crimes Enforcement Network (“FinCEN”) has long held the power to grant exemptions, the OCC does not possess equivalent authority. “As financial technology and innovation” rapidly evolve in monitoring and reporting financial crime, the OCC has determined it must create a flexible regulatory mechanism to keep pace.
Continue Reading  The OCC Embraces Technology, Proposes Exemption to SAR Requirements and Announces Acceptance of Distributed Ledgers and Stablecoins

Farewell to 2020.  Although it was an extremely difficult year, let’s still look back — because 2020 was yet another busy year in the world of money laundering and BSA/AML compliance.

We are highlighting 12 of our most-read blog posts from 2020, which address many of the key issues we’ve examined during the past year…

On November 5, 2020, the Council of the European Union approved a new action plan to strengthen anti-money laundering and combatting terrorism financing across the EU. The Action Plan, “an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing,” appears to be motivated by the perceived failures in preventing the Danske Bank scandal (which we’ve blogged about here, and more generally, here, here, here, here, here, and here). In light of “[m]ajor divergences” and “serious weaknesses” in enforcement, it appears the Council believes the EU’s “anti-money laundering and countering the financing of terrorism” framework (“AML/CFT framework”) “needs to be significantly improved.” As we have blogged, the EU historically has issued numerous reports identifying systemic vulnerabilities to money laundering and suggesting process-based recommendations for how to address such threats. These recommendations typically have not addressed a basic issue: the actual prosecution of bad actors.

This new Action Plan contains some teeth. If its legislative proposals are enacted and implemented, it would allow the EU to close cross-border loopholes, update its rulebook, and strengthen the implementation and enforcement of the AML/CFT framework through EU-level supervision. Even if the more ambitious proposals do not pass legislative scrutiny, the Action Plan shows the EU is keenly focused on combatting the threat of cross-border money laundering and that it has many tools available at its disposal, some of which it is already using. Unified and coordinated implementation of the AML/CFT framework coupled with increased information sharing between members and between public and private partners should aid detection and enforcement efforts across the EU.
Continue Reading  Council of the European Union Unveils Ambitious New AML Action Plan