In the rainforests of Guatemala, Honduras and Nicaragua, the fires often start when drug traffickers try to clear large swaths of land. Due to the dry bush and lack of rainfall, the flames often spread out of control, but in the end, the result is the same: oaks, palms, acacia and mahogany trees are replaced
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.
In the past month, the Government Accountability Office (“GAO”), a non-partisan legislative agency that monitors and audits government spending and operations, has issued a series of reports urging banking regulators and certain executive branch agencies to adopt recommendations related to trade-based money laundering (“TBML”) and derisking. These reports underscore (1) the importance of TBML as a key, although still inadequately measured, component of money laundering worldwide, and (2) that the GAO remains interested in assessing how banks’ regulatory concerns may be influencing their willingness to provide services.
Taken together, the GAO’s recent activity signals that even in the face of unprecedented public health and regulatory challenges posed by COVID-19, the GAO still expects banking regulators and agencies alike to fulfill its prior commitments on other, unrelated topics.
Case Sheds Light on Latest Methods to Evade Detection: “Peeling” Chains
On March 2, the U.S. government sanctioned and indicted two Chinese nationals for helping North Korea launder nearly $100 million in stolen cryptocurrency. The indictment, filed in the District of Columbia, charges the defendants with conspiring to commit money laundering transactions designed to both “promote” and “conceal” the underlying crimes of wire fraud (the theft of the cryptocurrency via hacking) and operating as an unlicensed money transmitter — the latter of which is also charged in the indictment as an additional count.
According to the related and detailed civil forfeiture complaint, these funds were only a portion of those stolen in 2018 by state-sponsored hackers for North Korea from a South Korean exchange. These actions, notable in several respects, provide a glimpse at the latest methods of laundering cryptocurrency.
Anyone attempting to launder illicit cryptocurrency faces at least two big challenges. First, due to rigid know-your-customer rules, one cannot simply deposit large amounts of funds at an exchange without raising red flags. Second, because all cryptocurrency transactions are recorded on a blockchain, they can be traced.
To clear these hurdles, the complaint alleges that North Korean hackers used “peeling chains.” In a peeling chain, a single address begins with a relatively large amount of cryptocurrency. A smaller amount is then “peeled” off this larger amount, creating a transaction in which a small amount is transferred to one address, and the remainder is transferred to a one-time change address. This process is repeated – potentially hundreds or thousands of times – until the larger amount is pared down, at which point the amount remaining in the address might be aggregated with other such addresses to again yield a large amount in a single address, and the peeling process goes on.
Continue Reading Two Chinese Nationals Charged with Money Laundering Over $100 Million in Cryptocurrency for North Korea
Happy New Year! And, happy birthday to Money Laundering Watch, which is entering its fourth year.
Let’s look back. 2019 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:
- 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.
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
“V-bucks,” the in-game virtual value currency of the wildly popular video game, Fortnite, is reportedly being used to launder the proceeds of stolen credit cards. An investigation by The Independent reveals that discounted V-bucks are being sold in surprisingly large quantities on the dark web – the relatively hidden section of the internet only accessible using special software. Yet these purportedly ill-gotten gains are also being spread throughout the open web, albeit on a smaller scale, through advertising on well-known social media platforms.
It has been acknowledged for years that gaming currencies offer an attractive prospect to commit money laundering. Indeed, a 2013 report for the United Nations Office on Drugs and Crime revealed that online games were becoming increasingly popular venues for criminals to “clean” their money through “the opening of numerous different accounts on various online games to move money.” Among the most common methods was the transfer of in-game currency to associates in other countries, who would then exchange it for fiat currency.
In light of such news, we discuss the factors that determine whether in-game and in-app virtual currencies, such a V-bucks, may be subject to the nation’s traditional anti-money laundering (“AML”) rules and regulations.
Continue Reading Popular Video Game Serves as a Reminder of Regulatory Risks of In-game/In-app Virtual Currencies
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.