grugant@ballardspahr.com | 215.864.8320 | view full bio

Terence’s practice focuses on representing clients involved in criminal, regulatory, and administrative investigations and litigation, and in civil litigation matters involving the federal securities laws and other allegations of fraudulent business practices. He represents financial institution clients in matters implicating their practices under the BSA and related AML laws, including compliance program advice, internal investigations, regulatory examinations, and related civil litigation.

Internal Investigation Report Stresses Lack of Intentional Misconduct – But the Investigation May Broaden

Westpac Banking Corporation (“Westpac”), Australia’s second largest retail bank, has been besieged by serious allegations of violating Australia’s Anti-Money Laundering (“AML”) and Counter-Terrorism Financing (“CTF”) Act. Just as Westpac was attempting to put some of these problems behind it, new potential AML/CTF problems have come to light.

In this post, we discuss what to expect for Westpac going forward, and the potential broadening of Australian regulator’s investigation into Westpac – a recent revelation quickly coming on the heels of Westpac’s public release on June 4 of the findings by the bank’s own internal investigation report into allegations that systemic compliance failures resulted in Westpac committing over 23 million breaches of Australia’s AML/CTF laws, pertaining in part to financial transactions involving alleged child exploitation. We previously have blogged on these alleged breaches (and the Statement of Claim brought by AUSTRAC, Australia’s AML/CTF regulator, stemming from those breaches), as well as on the private securities suits that followed these serious revelations.

The headline finding in the internal investigation report — which has been criticized — was its conclusion that the significant AML/CTF violations and failures it admitted were “due to technology failings and human error,” and that “[t]here was no evidence of intentional wrongdoing.” Consistent with a theme that emerges in many AML scandals, the lack of adequate and sufficiently trained personnel has been a key factor here.  Likewise, the Westpac internal investigation report also underscores the limits of automated AML/CFT systems.  Ultimately, any AML/CFT program is only as good as the people running it.
Continue Reading Westpac’s Alleged AML Failures Back in the News

On May 18, the Financial Crimes Enforcement Network (“FinCEN”) issued an Advisory “to alert financial institutions to rising medical scams related to the COVID-19 pandemic. This [A]dvisory contains red flags, descriptions of COVID-19 related medical scams, and information on reporting suspicious activity.” According to FinCEN, “[t]his is the first of several advisories FinCEN intends to issue concerning financial crimes related to the COVID-19 pandemic.” FinCEN also issued a companion Notice to the Advisory that “provides detailed filing instructions for financial institutions, which will serve as a reference for future COVID-19 advisories.”

Although FinCEN has made clear that future advisories will follow, the May 18 Advisory and Notice are themselves the latest in a string of prior pronouncements by FinCEN relating to the global pandemic. As we have blogged, FinCEN updated its March 16, 2020 COVID-19 Notice for the stated reason of assisting “financial institutions in complying with their Bank Secrecy Act (“BSA”) obligations during the COVID-19 pandemic, and announc[ing] a direct contact mechanism for urgent COVID-19-related issues.” FinCEN, of course, is not the only regulatory body addressing Anti-Money Laundering (“AML”) issues implicated by COVID-19. As we also have blogged, the Financial Action Task Force (“FATF”) recently issued a paper entitled “Covid-19-Related Money Laundering and Terrorist Financing – Risk and Policy Responses” This FATF Paper follows up on the April 1, 2020 statement issued by FATF’s President on COVID-19 and measures to combat illicit financing.

The Advisory is surprisingly specific when describing the possible scams and potential red flags that FinCEN believes that financial institutions should be monitoring for in order to detect, prevent, and report such suspicious activity. In addition to providing a list of red flags, the Advisory provides specific case studies demonstrating the real-world concerns surrounding these scams. Although this level of detail is helpful to financial institutions when integrating the Advisory into their own programs, it also seems to impose potential heightened due diligence requirements on financial institutions when dealing with companies engaged in providing medical services and supplies.
Continue Reading FinCEN Issues Advisory on Medical Scams Relating to COVID-19

We are very pleased to announce that we have published a detailed chapter, The Intersection of Money Laundering and Real Estate, in Anti-Money Laundering Laws and Regulations 2020, a publication issued by International Comparative Legal Guides (ICLG).

Money laundering and anti-money laundering concerns relating to the real estate industry is a topic on which

On May 4, the Financial Action Task Force (“FATF”) issued a paper entitled “Covid-19-Related Money Laundering and Terrorist Financing – Risk and Policy Responses (“Paper”). This Paper follows up on the April 1, 2020 statement issued by FATF’s President on COVID-19 and measures to combat illicit financing, on which we previously blogged. As we also have blogged, the COVID-19 pandemic will cause many financial institutions to face significant Anti-Money Laundering (“AML”) issues because of the unfortunate confluence of increased fraud schemes seeking to capitalize on the pandemic, coupled with the fact that many BSA/AML compliance teams will be straining to maintain an adequate amount of staff and degree of communication.
Continue Reading FATF Issues Paper on COVID-19 Enhanced AML and Fraud Risks

Second Post in a Two-Post Series on Recent FATF Activity

As we just blogged, the Financial Action Task Force (“FATF”) issued a statement from its President on COVID-19 and measures to combat illicit financing during the pandemic (the “Statement”). Before turning its attention to COVID-19, however, FATF issued a more traditional report, and one with potentially longer-term implications: its 3rd Enhanced Follow-up Report & Technical Compliance Re-Rating of the United States’s Anti-Money Laundering (“AML”) and Counter-Terrorist Financing (“CTF”) (the “United States Report”) measures. The United States Report was the third follow-up on a mutual evaluation report of the United States that was adopted in October 2016. During the first two evaluations, “certain technical compliance deficiencies” were identified. The United States Report evaluates the United States efforts’ in addressing those deficiencies. Moreover, FATF evaluated the United States’ progress in implementing new recommendations since February 2016.

FATF’s judgment: The United States has improved, particularly in the area of customer due diligence and the identification of beneficial ownership.
Continue Reading Financial Action Task Force Grades America’s AML Compliance

First Post in a Two-Post Series on Recent FATF Activity

Members presumably working from home, the Financial Action Task Force (“FATF”) was active last week, first issuing its 3rd Enhanced Follow-up Report & Technical Compliance Re-Rating of the United States’s Anti-Money Laundering (“AML”) and Counter-Terrorist Financing (“CTF”) (the “United States Report”) measures and, later, a statement from its President on COVID-19 and measures to combat illicit financing (the “Statement”).

In this post, we will discuss FATF’s Statement on the Coronavirus. In our next post, we will address FATF’s United States Report.

The Statement, issued on April 1, 2020, functions as both a high-level reminder to financial institutions of methods for continuing to carry-out know-your-customer (“KYC”) and other AML obligations while “facing confinement or strict social-distancing measures” and a warning to financial institutions to remain vigilant to increases in fraudulent activity – and resulting money laundering – so often associated with crises like the current Coronavirus pandemic.

The thrust of the Statement is an acknowledgement that the Coronavirus pandemic has created a perfect storm for money laundering where rapid and high-volume financial transactions from myriad sources for myriad purposes are occurring simultaneously with the almost spontaneous and enormous downsizing in personnel to monitor those transactions as many AML professionals shelter from home. Indeed, we recently blogged on this very threat posed by COVID-19 to financial institutions’ AML and anti-fraud systems (that is, the combination of increased fraud and a reduced capacity to guard against it) when discussing FinCEN’s latest pronouncement on COVID-19 issues.
Continue Reading Financial Action Task Force Update: Statement on COVID-19’s Implications for AML Programs

Some Commentary on the Unfortunate Relationship Between Crisis and Fraud

The Financial Crimes Enforcement Network (“FinCEN”) released today an update (“Update”) on its March 16, 2020 COVID-19 Notice, on which we previously blogged, for the stated reason of assisting “financial institutions in complying with their Bank Secrecy Act (BSA) obligations during the COVID-19 pandemic, and announc[ing] a direct contact mechanism for urgent COVID-19-related issues.” Further, the Update states that “FinCEN is committed to promoting the success of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including the need to facilitate expeditious disbursal of CARES Act funds.”  This post will summarize briefly the Update, and make a few high-level comments.

The COVID-19 pandemic — pernicious, unpredictable and continually evolving — resists facile pronouncements.  With that caveat, it is rational to predict that many financial institutions subject to the BSA will face significant issues in the very near future because of the unfortunate confluence of increased fraud schemes seeking to capitalize on the pandemic, coupled with the fact that many BSA/AML compliance teams will be straining in this age of “social distancing” and enforced working remotely to maintain an adequate amount of staff and degree of communication needed to catch and report suspicious activity, among other obligations under the BSA.  Stated otherwise, we are entering a time of maximum fraud and a reduced capacity to stand guard.

Further, as the pandemic continues and then recedes, the previously existing fraud schemes will come to light — just like during the financial crisis of 2008, when the Bernie Madoffs of the world were exposed — because desperate investors will be demanding their cash back, and some soon will discover that their money actually was stolen a while ago.  Investigations, prosecutions and litigations will ensue.

Turning to the Update by FinCEN, we summarize here greatly.  In our view, the Update provides some generally helpful information, but little in the way of concrete guidance.
Continue Reading FinCEN Issues COVID-19 AML Update for Financial Institutions

The Financial Crimes Enforcement Network (“FinCEN”) just issued a release, entitled “The Financial Crimes Enforcement Network (FinCEN) Encourages Financial Institutions to Communicate Concerns Related to the Coronavirus Disease 2019 (COVID-19) and to Remain Alert to Related Illicit Financial Activity.”  Given the topic and the simplicity of the release, this post merely provides the release in

AML Scandals Seem to Inevitably Spawn Investor Lawsuits

As we recently blogged, Westpac, Australia’s second-largest retail bank, has been embroiled in a scandal arising from approximately 23 million alleged breaches of Australia’s anti-money laundering/countering terrorist financing (“AML/CTF”) laws and regulations involving nearly $12 billion in transactions. The scandal broke on November 20, 2019 when the Federal Court of Australia filed a Statement of Claim (“SOC”) detailing how Westpac allegedly failed to monitor transactions involving its correspondent banks that, in turn, facilitated child exploitation abroad.

In this post, we discus the Westpac scandal, its massive consequences and the details of follow-on private securities litigation, including in U.S. courts. As we further discuss, the same legal threats continue to bedevil Dankse Bank, the center of the world’s largest AML scandal.
Continue Reading Investors Bring 10b-5 Action Against Westpac Over Money Laundering Scandal

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