hardyp@ballardspahr.com | 215.864.8838 | view full bio

Peter is a national thought leader on money laundering, tax fraud, and other financial crime. He is the author of Criminal Tax, Money Laundering, and Bank Secrecy Act Litigation, a well-reviewed and comprehensive legal treatise published by Bloomberg BNA.

He advises corporations and individuals from many industries against allegations of misconduct ranging from money laundering, tax fraud, mortgage fraud and lending law violations, securities fraud, health care fraud, public corruption, Foreign Corrupt Practices Act violations, and identity theft and data breaches.  He also advises on compliance with the Bank Secrecy Act and Anti-Money Laundering requirements.

Peter spent more than a decade as a federal prosecutor before entering private practice, serving as an Assistant U.S. Attorney in Philadelphia working on financial crime cases. He was a trial attorney for the Criminal Section of the Department of Justice’s Tax Division in Washington, D.C.

Testimony Supports Bill Requiring States to Collect Beneficial Ownership Information at Entity Formation

As we have blogged, the proposed Corporate Transparency Act of 2019 (the “Act”) seeks to ensure that persons who form legal entities in the U.S. disclose the beneficial owners of those entities. Specifically, the Act would amend the Bank Secrecy Act (“BSA”) to compel the Secretary of Treasury to set minimum standards for state incorporation practices. Thus, applicants forming a corporation or LLC would be required to report beneficial ownership information directly to FinCEN, and to continuously update such information.

If passed, the Act would build significantly upon FinCEN’s May 11, 2018 regulation regarding beneficial ownership (“the BO Rule,” about which we blog frequently and have provided practical tips for compliance here and here). Very generally, the BO Rule requires covered financial institutions to identify and verify the identities of the beneficial owners of legal entity customers at account opening. The issue of beneficial ownership is at the heart of current global anti-money laundering efforts to enhance the transparency of financial transactions.

On May 21, the U.S. Senate Committee on Banking, Housing and Urban Affairs, held a hearing entitled: “Combating Illicit Financing by Anonymous Shell Companies Through the Collection of Beneficial Ownership Information.” This hearing, which provided fuel for passage of the Act, featured the exact same trio of speakers who had appeared before the Committee during a November 2018 hearing on “Combating Money Laundering and Other Forms of Illicit Finance: Regulator and Law Enforcement Perspectives on Reform,” which pertained to a broader set of potential changes to the BSA. The speakers were:

  • Grovetta Gardineer, Senior Deputy Comptroller for Bank Supervision Policy and Community Affairs at the Office of the Comptroller of the Currency (“OCC”) (written remarks here)
  • Kenneth A. Blanco, Director of FinCEN (written remarks here); and
  • Steven D’Antuono, Acting Deputy Assistant Director of the FBI (written remarks here).

Unlike the broader November 2018 hearing, which featured some distinct tensions between certain positions of the OCC and those of FinCEN and the FBI, this hearing reflected close alignment amongst the speakers. Every speaker stressed the advantages to be reaped by law enforcement, regulators and the public if a national database of beneficial owners was required and created. Only the OCC acknowledged the need to consider the issue and sometimes competing concern of the regulatory burden imposed on financial institutions by the current BSA/AML regime, and even the OCC seemed to assume that a national database on beneficial ownership would represent only a boon to financial institutions, as opposed to yet more data – however helpful – to be absorbed and acted upon to the satisfaction of regulators. None of the speakers addressed some of the potential ambiguities and problems inherent in the current language of the Act, such as the fact that the Act lacks precision and fails to define the critical terms “exercises substantial control” or “substantial interest,” both of which drive the determination of who represents a beneficial owner.
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The Financial Crimes Enforcement Network (“FinCEN”) has, once again, extended its Geographic Targeting Order (“GTO”) requiring U.S. title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate performed without a bank loan or similar form of external financing.  Again, the monetary threshold remains at $300,000, and purchases

We are pleased to offer the latest episode in Ballard Spahr’s Consumer Financial Monitor Podcast series — a weekly podcast focusing on the consumer finance issues that matter most, from new product development and emerging technologies to regulatory compliance and enforcement and the ramifications of private litigation.

In this podcast, we review the many recent

I am really honored to be moderating the Practising Law Institute’s 2019 Anti-Money Laundering Conference in New York City on May 14, 2019, starting at 9 a.m.  My co-chairs are Nicole S. Healy of Ropers Majeski Kohn & Bentley PC, and Jamie Boucher of Skadden Arps Slate Meagher & Flom LLP.  PLI’s AML conference in

As we previously blogged, the District of Massachusetts held in AER Advisors Inc. v. Fidelity Brokerage Services, LLC, that the safe harbor provision of the Bank Secrecy Act (BSA) provides unqualified protection to financial institutions and their employees from civil liability for filing a Suspicious Activity Report, or SAR. An update: the First Circuit recently upheld this ruling in an opinion which, consistent with the holdings of most other federal courts, clearly found that the safe harbor protections for SAR filings are absolute.
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On April 2nd, the New Directions in Anti-Kleptocracy Forum, organized by the Harriman Institute at Columbia University, will identify emerging issue areas relating to kleptocracy. I am excited to be serving as a co-panelist on the forum’s Art Market as a Node of Kleptocracy panel, which will discuss beneficial ownership and the luxury

The potential role of high-end art and antiquities in money laundering schemes has attracted increasing attention over the last several years, particularly as the prices for such objects steadily rise and a tightening global enforcement and regulatory net has rendered other possible avenues for money laundering increasingly less attractive. The effort to subject U.S. dealers in art and antiquities to Anti-Money-Laundering (“AML”) obligations recently has gained new life.  As we blogged, the House Financial Services Committee just released three proposed bills to codify many of the reform ideas that have been swirling around the Bank Secretary Act (“BSA”) and AML and Combating the Financing of Terrorism (“CFT”) laws.  One of the bills — entitled as the “To make reforms to the Federal Bank Secrecy Act and anti-money laundering laws, and for other purposes” —  catalogues various detailed provisions seeking to reform the BSA and AML laws.  Nestled admist all of the other, generally higher-profile proposals (such as the creation of a BSA whistleblower program), one short section of this bill simply expands the list of defined “financial institutions” covered by the BSA to include “dealers in art or antiquities,” and then states that the Secretary of the Treasury shall issue implementing regulations within 180 days of the bill’s enactment.

Regardless of whether this provision ultimately is enacted, the underlying issue will persist.  This post discusses some of the general concerns that the art and antiquities world can be misused as a conduit for dirty money.  We then discuss the AML Standards for Art Market Operators proposed by the Basel Institute on Governance, and similar standards set forth by the Responsible Art Market, both of which attempt to set forth a framework for those in the business of trading art to mitigate their money laundering risks.
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As we have blogged (here and here), the United States – despite its self-perception as a global financial cop and “good guy” – is often regarded by the world as a haven for money laundering and tax evasion. The U.S. just took another black eye in the arena of global perception: the European Commission (“EC”) has placed the U.S. Virgin Islands, Puerto Rico, Guam and American Samoa on a list of 23 high-risk jurisdictions which it says are “posing significant threats” to the European Union’s financial system as a result of deficiencies in their Anti-Money Laundering (“AML”) and Countering the Financing of Terror (“CFT”) systems. Specifically, the EC perceives these jurisdictions as being attractive to money laundering and tax crimes. The listed United States’ territories and Commonwealths are not alone; they dubiously share space on the EC’s blacklist with Saudia Arabia and Panama.

Not surprisingly, the U.S. reaction was swift and angry: the U.S. Department of Treasury released a statement declaring that the list was flawed; the list was created without any meaningful input from the United States; and that the list contradicted the more careful analysis conducted by the Financial Action Task Force. Further, the Treasury Department stated that U.S. financial institutions should ignore this blacklisting, and did not need to apply any greater scrutiny to implicated transactions.
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Typical Virtual Currency Exchanges Do Not Require PA Money Transmitter Licenses

The Pennsylvania Department of Banking and Securities (“DoBS”) just released Guidance declaring that virtual currency, “including Bitcoin,” is not considered “money” under the Pennsylvania Money Transmission Business Licensing Law, otherwise known as the Money Transmitter Act (“MTA”). Therefore, according to the Guidance, the operator of the typical virtual currency exchange platform, kiosk, ATM or vending machine does not represent a money transmitter subject to Pennsylvania licensure.

This Guidance is important because it has implications beyond merely the burdens imposed by Pennsylvania law for obtaining a money transmitter license. As we previously have blogged (here, here and here), it is a federal crime under 18 U.S.C § 1960 to operate as an unlicensed money transmitter business, which is defined in part as a business “operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable.” Thus, a state law violation can become a federal violation. Further, the Financial Crimes Enforcement Network (“FinCEN”) has issued Guidance declaring that administrators or exchangers of digital currency – including popular crypto currencies such as Bitcoin – represent money transmitting businesses which must register with FinCEN under 31 U.S.C. § 5330 as money services businesses (“MSBs”), which in turn are governed by the Bank Secrecy Act (“BSA”) and related reporting and anti-money laundering compliance obligations. Moreover, a failure to register with FinCEN as a MSB when required also represents a separate violation of Section 1960. Drawing on the FinCEN guidance, federal courts have upheld the convictions of individuals who ran virtual currency exchanges and consequently were convicted of violating Section 1960 for operating unlicensed or unregistered money transmitter businesses.
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As reported in Reuters and other media outlets, the partial government shutdown has impaired the ability of the U.S. Treasury to maintain many of its anti-money laundering and counter-terrorist financing (“AML/CTF”) efforts.  Specifically, the Financial Crimes Enforcement Network (“FinCEN”), the Office of Foreign Assets Controls (“OFAC”) and the Office of Terrorism and Financial Intelligence (“TFI”)