kearneyb@ballardspahr.com | 215.864.8275 | view full bio

Brian assists corporate clients in white collar criminal and civil matters. His white collar practice includes providing advice on AML and BSA litigation and compliance, including matters involving suspicious activity reports. Prior to law school, Brian spent a decade as an educator at Saint Joseph’s Preparatory School in Philadelphia.

Last Wednesday, FinCEN Deputy Director Jamal El-Hindi appeared at the annual conference of the Money Transmitter Regulators Association and delivered prepared remarks. The topics of his address covered three issues of continuing interest: (i) innovation and reform with respect to implementation of the Bank Secrecy Act (BSA); (ii) FinCEN supervision of non-banking financial institutions; and (iii) maintaining a strong culture of compliance.
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The Federal Reserve and the Financial Crimes Enforcement Network, or FinCEN, both recently issued reports addressing worrisome trends in technology-assisted financial fraud.  The reports seek to engage the financial services industry in partnering more closely to reduce associated losses.

Specifically, the Federal Reserve issued a report entitled Synthetic Identity Fraud in the U.S. Payment System. FinCEN issued a report entitled Manufacturing and Construction Top Targets for Business Email Compromise. Collectively, the reports reflect how techonology-driven fraud and identity theft schemes can target financial institutions, businesses and consumers alike, thereby impacting the Anti-Money Laundering and related anti-fraud programs of the financial institutions implicated by such schemes.
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As we have blogged, there is perplexing, significant and ongoing uncertainty regarding just how federal criminal and Bank Secrecy Act laws will be – or will not be – enforced against financial institutions providing banking services to marijuana-related businesses (“MRBs”). As our blog has discussed, recent bipartisan efforts in the 116th Congress to

UK-based Standard Chartered Bank (“SCB”) announced the terms of significant settlements last week with various U.S. and U.K. governmental agencies, resolving a series of related investigations into the bank’s alleged violations of international sanctions and concomitant failures of anti-money laundering (“AML”) controls over a period stretching from 2007 to 2014. The bank will pay a total of $1.1 billion in combined forfeitures and fines to various national and state agencies in the two countries — and extend, once again, its deferred prosecution agreements (“DPAs”) with the U.S. Department of Justice (“DOJ”) and the New York County District Attorney’s Office (“NYDA”).

Specifically, the bank will pay: a $480 million fine and a $240 million forfeiture to the DOJ; approximately $639 million to the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”); over $292 million to the NYDA; almost $164 million to the Board of Governors of the Federal Reserve System; and $180 million to the New York Department of Financial Services.  The bank also will pay over £102 million (an amount approximately equal to over $133 million) to the U.K.’s Financial Conduct Authority (“FCA”).  After certain payments are credited against some of these penalties, the total will exceed $1 billion.


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Federal legislators continue to struggle over the growing disconnect between increasing State legalization of the cannabis industry, and the continued illegality of cannabis under federal law. This struggle represents an increasingly pressing question for financial institutions, given the burgeoning market involving cannabis-related products – including third parties who provide services and equipment to growers and distributors – and its need for safe, traditional banking services. The latest chapter in this struggle was a hearing, entitled “Challenges and Solutions: Access to Banking Services for Cannabis-Related Businesses,” held by the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions on February 13. The recorded webcast is available here.

We previously have blogged about the unsteady regulatory ground on which financial institutions have been operating with regard to cannabis-related businesses, an industry legalized in many states but still in violation of federal drug laws and thus exposing its financial service providers to potential Bank Secrecy Act (“BSA”) violations and federal money laundering charges. The terrain grew only more perilous at the beginning of 2018 with then-Attorney General Sessions’ decision to rescind the Cole Memo, and with it the prior limited assurance that the DOJ would not make prosecution of persons working in or with state-licensed cananbis businesses a DOJ priority.

The 2018 midterm elections, however, changed the landscape yet again. This post will discuss last week’s hearing and the growing opportunities and stubborn obstacles which it highlighted.
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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.

The U.S. Department of Justice (“DOJ”) continues to pursue Venezuelan nationals through high-dollar and high-profile money laundering and foreign bribery charges. The latest development in this ongoing saga is the recent sentencing of the former national treasurer of Venezuela, Alejandro Andrade Cedeno (“Andrade”), by the Southern District of Florida to a decade in prison, after Andrade pleaded guilty last year to a single-count information charging him with conspiracy to commit money laundering (specifically, a conspiracy to violation 18 U.S.C. § 1957, the so-called “spending” money laundering provision, which requires transactions involving over $10,000 in criminal proceeds, but no specific intent) in an alleged sprawling bribery and money laundering scheme. His plea agreement (the “Plea”) was one of several connected proceedings unsealed on November 20, most notable of which is the grand jury indictment (the “Indictment”) of fugitive Raúl Gorrín Belisario (“Gorrín”), the owner of Venezuelan cable news network Globovision, erstwhile resident of Miami, and alleged architect of the money laundering conspiracy.

Although he retired to Florida after having served as the head of the Venezuelan treasury, Andrade did not begin his career in the world of high finance. Rather, his climb to power and wealth began when he used to serve as the bodyguard for the President of Venezuela, Hugo Chavez.

As we will discuss, there is more to come. Aside from telling a lurid tale of corruption rewarded through high-end bribes involving aircraft, real estate (widely acknowledged as a major vehicle for laundering) and thoroughbred horses, Andrade’s plea agreement contains cooperation language, and his counsel has stated publically that Andrade has been cooperating with the DOJ for some time. Notably, Andrade was charged only with a single count of Section 1957, which has a statutory maximum sentence of 10 years – exactly the sentence imposed on Andrade, whose advisory Federal Sentencing Guidelines range was presumably much, much higher. It is fair to assume that Andrade will be pursuing a second sentencing hearing at which his sentence could be reduced based on his cooperation with the government.

Andrade’s case is part of a steady stream of money laundering and bribery charges recently brought by the DOJ which relate to Venezuela, which is reeling from massive inflation and a near-existential economic crisis that is inflicting widespread suffering. His case also represents another instance of the DOJ’s increasing tactic of using the money laundering statutes to charge foreign officials who cannot be charged directly under the Foreign Corrupt Practices Act (“FCPA”).
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Part Three of a Three-Part Series

In the third and final part of this series on marijuana-related businesses (“MRBs”), we explore how the Securities and Exchange Commission (“SEC”) and the Department of Justice (“DOJ”) have commenced actions against MRBs and operators for allegedly fraudulent and deceptive securities practices.  The sample of such actions which we discuss here serve to demonstrate not only the risks the investing public may face in investing in MRBs, but also as a reminder to MRBs seeking to capitalize on the industry’s explosive growth of the exacting standards of the securities laws and the government’s commitment to enforcing them in this industry.

Although the cases we discuss here are not tied specifically to AML/BSA enforcement cases, but rather to traditional allegations of securities violations, the practical point is that anyone who is considering wading into this industry should remember that there are multiple federal agencies which may pursue their own enforcement agendas relating to MRBs. Although we previously have noted during this series that the Financial Criminal Enforcement Network issued guidelines giving banks the go-ahead to work with MRBs, and although the 2013 DOJ Cole Memo seems to suggest that financial institutions can serve MRBs under certain circumstances, our discussion here reflects that there still are other government agencies which may have their own notions regarding what is acceptable conduct by a MRB.  As to the SEC specifically, these actions also are consistent with the recent trend of the SEC inserting itself into AML-related enforcement.
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Part One of a Three-Part Series

We begin this week with a three-part series on banking and the marijuana industry. States continue to pass medical and recreational use marijuana legislation despite that the fact that the substance remains classified as a Schedule I drug subject to the federal Controlled Substances Act.  Thus, the medical and recreational marijuana industries continue to struggle with access to banking and credit, and those who attempt to serve these industries find themselves subject to the Bank Secrecy Act (“BSA”) and the criminal money laundering provisions.  As we will detail this week, the struggle for financial institutions attempting to service the marijuana industry comes not only from the BSA and AML provisions, but in other forms.  We start this week with an overview of the guidance documents issued by the federal government which identify the enforcement priorities and also potential windows for financial institutions to service the marijuana industry.  We will follow up with a discussion of a recent federal court decision illustrating the practical difficulties of squaring the prohibitions of the federal drug laws with permissive state laws and the federal guidance documents.  We will conclude with an exploration of how federal agencies beyond the Department of Justice (“DOJ”) and the Financial Crimes Enforcement Network (“FinCEN”), such as the Securities and Exchange Commission (“SEC”), can further muddy these waters by staking out their own regulatory and enforcement priorities.  –Priya Roy
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