gershelb@ballardspahr.com | 646.346.8034 | view full bio

Brad focuses his practice on representing individuals and companies in white-collar criminal and civil matters, including government inquiries and internal investigations. Brad has significant experience in a wide range of enforcement, criminal and regulatory matters, including those relating to fraud, foreign bribery, and public corruption. His experience spans multiple state and federal law enforcement agencies, including the DOJ, FINRA, SEC, and New York County District Attorney’s Office. Additionally, he has represented clients in criminal and regulatory investigations for alleged violations of the False Claims Act and the Foreign Corrupt Practices Act.

Happy New Year! And, happy birthday to Money Laundering Watch, which is entering its fourth year.

Let’s look back2019 has been yet another busy year in the world of money laundering and BSA/AML. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined during

Remarks Focus on Account Takeovers, BEC Schemes, Beneficial Ownership, Technological Innovation and SARs

FinCEN Director Kenneth A. Blanco delivered prepared remarks on September 24 at the 2019 Federal Identity (FedID) Forum and Exposition in Tampa, Florida.

Director Blanco summarized the topics of his remarks by stating the following:

  1. First, I would like to tell you

Opinion Allows DOJ Broad Access to Foreign Banks’ Correspondent Account Records Relating to Alleged Front Company Operating for North Korea

On August 6, the U.S. Court of Appeals for the District of Columbia kept in place $50,000-per-day fines on three Chinese banks—whose identities are redacted—for refusing to comply with subpoenas issued by the Department of Justice (“DOJ”) for records of a Hong Kong company (“Company”) that allegedly facilitated hundreds of millions of dollars of transactions for a North Korean state-owed entity (“NKE”), in violation of U.S. sanctions.

We will focus on the court’s ruling that a subpoena issued under a provision of the USA PATRIOT Act allows access to records held by foreign banks that use U.S. correspondent accounts, including records of transactions that do not themselves pass through a U.S. correspondent account, if those transactions were part of a larger scheme to access dollar funding through a U.S. correspondent account.

Background

According to the U.S. government, North Korea’s weapons programs pose “a grave and growing threat” to the security of the U.S. and—indeed—the world. In order to finance those programs, North Korea “uses state-owned entities and banks” to conduct financial transactions “in support” to finance its efforts. To impede those efforts, the U.S. maintains a robust sanctions regime against North Korea and the various entities it controls. Certain of those sanctions—enacted in 2013— are intended to cut off North Korea’s access to the U.S. financial system. But North Korea is said to evade those restrictions through, among other means, its use of front company transactions originating in foreign-based banks, which are in turn processed through correspondent bank accounts in the U.S.
Continue Reading D.C. Circuit Rules in Favor of Broad Reach of Patriot Act Subpoenas

The Issue of Who Truly Runs and Owns Entities Contines to Gnaw at Congress and Law Enforcement

First Post in a Two-Post Series on the ILLICIT CASH Act

On June 10, a bipartisan group of lawmakers in the U.S. Senate released a discussion draft of legislation proposing to overhaul the nation’s anti-money laundering (“AML”) laws. The discussion draft, titled The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act (“the Act”), is very detailed and sets forth many proposed changes to the Bank Secrecy Act (“BSA”) over the course of 102 pages.

In this post, we will focus on a key provision of the Act, which sets forth a version of the now-familiar requirement aimed directly at tracking the beneficial ownership (“BO”) of U.S. entities. In our next post on the Act, we will summarize its many other provisions.
Continue Reading Lawmakers Renew Effort to Overhaul AML Laws, Including Greater Beneficial Ownership Transparency

On April 15, the UK Treasury released proposed steps, entitled a “consultation,” to adopt the EU’s Fifth Money Laundering Directive (“5AMLD”) into national law, while also seeking comments and evidence from stakeholders to inform the final government decisions on adoption of 5AMLD. In certain respects, the exchequer suggests that it might expand the scope of 5AMLD, in part by targeting a perceived gap in stemming the flow of illicit funds in the real property sector. To achieve that goal, it sets forth the possibility of imposing new duties on landlords to carry out extensive due diligence on their tenants, subject to further feedback.

Continue Reading UK’s Anti-Money Laundering Laws May Extend to Private Landlords

Happy New Year! But while 2018 is still (just barely) with us, let’s take a look back.

2018 has been a very busy year in the world of money laundering and AML/BSA. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined this year.

Second Post in a Two-Part Series

Opinion Stresses Importance of Narrative Sections and Supporting Documentation for SARs

In our first post in this series, we discussed the Securities and Exchange Commission’s (“SEC”) enforcement action against Alpine Securities, Inc. (“Alpine”), a clearing broker that provides services for microcap securities traded in the over-the-counter market, and in particular Alpine’s continued challenge to the SEC’s authority to enforce alleged violations of the Bank Secrecy Act (“BSA”). Judge Denise Cote of the Southern District of New York has repeatedly rejected that argument and, on December 11, granted partial summary judgement in the SEC’s favor, finding in part that the SEC indeed has the authority not only to exam for, but also to enforce, alleged BSA violations.

In this post, we turn to the court’s very detailed findings in support of its grant of summary judgment in favor of the SEC as to most of the case, finding that Alpine committed thousands of violations relating to Suspicious Activity Reports, or SARs. Specifically, the court found as a matter of summary judgment that Alpine was liable, among other things, for thousands of violations of Rule 17a-8 of the Securities Exchange Act of 1934 (“Exchange Act”), which obligates a broker-dealer to comply with certain regulations promulgated under the BSA, including 31 C.F.R. § 1023.320 (“Section 1023.320”), which dictates how a broker-dealer must file SARs.

Although the decision clearly carries significant implications for the SEC’s case against Alpine, it also may serve as a potential bellwether for other broker-dealers who transact microcap securities. The district court’s opinion sets forth extremely detailed findings regarding a variety of SAR-related failures, including alleged failures to (i) provide adequate narrative descriptions in SARs actually filed; (ii) file required SARs; (iii) file SARs on time; and (iv) maintain adequate supporting documentation regarding decisions whether to file a SAR. The opinion also underscores the dangers in AML/BSA compliance of relying on templates and mechanistic or “cookie cutter” processes. It is not enough to simply file SARs defensively – rather, once a decision to file a SAR has been made, each SAR must be supported and contain adequate detail.
Continue Reading Court Decision Reinforces SAR Obligations of Penny Stock Clearing Brokers

First Post in a Two-Part Series

On December 11, Judge Denise Cote of the Southern District of New York granted, in part, the Securities and Exchange Commission’s (“SEC”) motion for summary judgement in its action against Alpine Securities, Inc. (“Alpine”), finding that the clearing broker was liable for thousands of violations of Rule 17a-8 of the Securities Exchange Act of 1934 (“Exchange Act”), which requires broker-dealers to report potentially illegal trading activity under the Bank Secrecy Act (“BSA”). This enforcement action is significant in numerous respects, including the question raised repeatedly by Alpine – and what appears to be one of first impression – as to whether, in the absence of explicit authority, the SEC may file suit to enforce alleged violations of the BSA.

In our next post, we will discuss the Alpine court’s detailed findings that Alpine committed thousands of alleged SAR-related violations.


Continue Reading Clearing Broker Continues to Take Aim at SEC’s Ability to Enforce the BSA

Charges Represent First Criminal Case Based Solely on Alleged Unauthorized SAR Disclosure

On October 17, the U.S. Attorney for the Southern District of New York (“SDNY”) announced the arrest of a senior employee at the Financial Crimes Enforcement Network (“FinCEN”). That employee, Natalie Mayflower Sours Edwards, has been charged with unlawfully disclosing Suspicious Activity Reports