The U.S. Attorney’s Office for the Southern District of New York announced the unsealing of a superseding indictment charging Jennifer Shah and another person for conspiring to commit wire fraud and money laundering. Shah, described in promotional materials as having an “extravagant personality and sharp tongue,” is a star on the reality television series The
Mary focuses her practice on white collar matters and complex commercial litigation. She advises clients on BSA and AML matters, including government and internal investigations. She also counsels financial institutions on SAR filings and confidentiality requirements. Prior to joining Ballard Spahr, Mary worked for a Washington, D.C. law firm, representing clients in market manipulation and failure to supervise enforcement actions brought by the CFTC and FERC. She also advised financial institutions on compliance with the Dodd-Frank Act and corresponding agency regulations.
SARs Do Not Need to Be Filed At the First Sign of Potential Problems
Honoring “Keep Open” Letters from Law Enforcement Should Not Lead to Criticism
On January 19, 2021, the Financial Crimes Enforcement Network (FinCEN), along with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration jointly published Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations. The agencies provided answers to certain frequently asked questions (FAQs) in an effort to (1) clarify for financial institutions the regulatory requirements related to Suspicious Activity Reports (SARs) that they must comply with; and (2) help financial institutions focus their resources on Bank Secrecy Act (BSA) reporting activities that provide the most value to law enforcement.
The banking agencies developed these FAQs in response to recommendations made by the Bank Secrecy Act Advisory Group, which are detailed in FinCEN’s Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness published in September 2020. Notably, the FAQs do not change existing legal obligations or create new regulatory requirements. Instead, they address several questions that have emerged among anti-money laundering compliance personnel. Generally, they are helpful and make clear that a decision to file a SAR in a particular case is driven by specific circumstances and good judgment, rather than a rigid “check the box” mentality.…
Continue Reading FinCEN and Other Federal Banking Agencies Provide Much-Needed Guidance on Suspicious Activity Reports
Farewell to 2020. Although it was an extremely difficult year, let’s still look back — because 2020 was yet another busy year in the world of money laundering and BSA/AML compliance.
We are highlighting 12 of our most-read blog posts from 2020, which address many of the key issues we’ve examined during the past year…
“Germany’s Enron” Continues to Stagger Forward
It’s time to talk about Wirecard AG. In many respects, it’s yet another accounting fraud scandal – albeit a massive one. But now, inevitably, it also has become a money laundering scandal, courtesy of German law enforcement authorities – and also now U.S. authorities – which are looking into the alleged misuse of shell companies to facilitate the pursuit of pornography, gambling and marijuana distribution. And it’s a story that clearly will be with us for some time, like the Danske Bank disaster. We surely will be blogging on this scandal going forward.
The fallout from the massive, years-long accounting scandal involving Wirecard, the German-based fintech giant, recently has blossomed to implicate alleged money laundering failures by the company and even systemic failures on the part of German regulatory authorities. Wirecard, a payment processor publicly valued more than some of the world’s largest banks, has been in a free-fall since a bombshell report by the Financial Times (“FT”) on February 7, 2019 revealed Wirecard’s widespread accounting fraud after being tipped off by a whistleblower.
As with the Dankse Bank scandal, a whistleblower allegedly was instrumental in causing the financial house of cards to collapse. This is also a story of investigative journalism and its consequences. Please check out this YouTube video by a FT reporter describing the efforts by himself and his colleagues to investigate Wirecard, and what he believed occurred as a result.
This June, Wirecard filed for insolvency and disclosed that it owed creditors almost $4 billion and that 1.9 billion euros – two-thirds of the company’s 2019 revenue – was missing from its accounts. In an effort to calm investors, Wirecard announced earlier this month that James Freis – previously the director of the Financial Crimes Enforcement Network (“FinCEN”) – would serve as the new CEO just after German authorities arrested Wirecard’s longstanding CEO, Markus Braun, for his alleged role in the scandal. Wirecard initially hired Fries as a Compliance Officer but, in a shocking turn of events, appointed him as interim CEO the very next day.
Despite these efforts, Wirecard’s legal troubles continue to grow and new reports emerged last week implicating the company in various money laundering schemes entirely unrelated to the accounting fraud. In an even stranger twist: with the details of both scandals emerging, the spotlight has turned to the alleged inaction of Germany’s regulatory authorities – putting aside the issue of Wirecard’s own auditors – and how they can and should prevent future scandals.…
Continue Reading Wirecard: A Scandal
Kenneth Blanco, Director of the Financial Crimes Enforcement Network (“FinCEN”), recently provided remarks about FinCEN’s “Travel Rule” at the first truly-virtual Consensus Blockchain Conference. The Travel Rule, which became effective in 1996, requires money services businesses (“MSBs”) – including cryptocurrency exchanges – to maintain identifying information on all parties in fund transfers of over $3,000 between financial institutions. As we discuss below, this principle creates real-world practical problems in the digital currency industry, in which it is not necessarily easy to obtain such information, unlike the traditional banking industry.
During his remarks, Director Blanco applauded the Financial Action Task Force’s (“FATF”) guidance issued last June, about which we have blogged here, instructing its 180 international member governments to similarly demand that virtual asset service providers (“VASPs”) collect “accurate originator information and required beneficiary information” on transactions of $1,000 or more. FATF’s pronouncement sent some shockwaves through the digital currency industry.
Notably, Director Blanco also lauded the efforts of cross-sector organizations and working groups to develop international standards and solutions to aid compliance with the Travel Rule. He urged for continued cooperation between FinCEN and the virtual currency industry to effectively implement Anti-Money Laundering (“AML”) measures consistent with the Travel Rule.…
Continue Reading FinCEN Director Blanco Urges Collaboration Across Virtual Currency Industry to Comply with Travel Rule
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…
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 examine two recent OCC…
Regulatory Examination and Related Enforcement Also Highlights Perceived Risks of Banking Crypto Clients
The Department of the Treasury’s Office of the Comptroller of the Currency (“OCC”) recently issued a Consent Order against M.Y. Safra Bank arising from the bank’s decision to accept a variety of high-risk, Digital Asset Customers (“DACs”), allegedly without implementing the necessary Bank Secrecy Act (“BSA”) and Anti-Money Laundering (“AML”) controls. Although the OCC did not impose a monetary penalty against the bank, it demanded that the bank implement and maintain a remarkably broad array of potentially costly and extremely detailed measures to strengthen its AML program. And, notably, the OCC specifically tasked the bank’s Board of Directors with implementing, overseeing, and reporting on these measures.
We describe here the OCC’s examination into and requirements imposed on M.Y. Safra Bank. The Consent Order is a reminder to the boards and management of all financial institutions that if they pursue novel and higher-risk customers – certainly, a potentially defensible business plan in our increasingly competitive business environment – then they absolutely have to adjust accordingly their AML compliance program and accompanying transaction monitoring to compensate for such increased risk. This is particularly true when those new customers employ novel technologies or business products which require a particularized ability to understand and address from an AML perspective. New, creative business lines are not necessarily bad – so long as the implementation of the AML compliance program is adjusted appropriately to identify and manage the new risk.
The Consent Order also is a reminder that, as the BSA/AML Examination Manual of the Federal Financial Institutions Examination Council states, “[t]he board of directors, acting through senior management, is ultimately responsible for ensuring that the bank maintains an effective BSA/AML internal control structure,” and otherwise must create a culture of compliance.
This Consent Order and related OCC AML exam and enforcement issues – including the liability of not just institutions, but also the potential individual liability of AML in-house professionals – will be the topic of a forthcoming installment in Ballard Spahr’s Consumer Finance Monitor Podcast by the firm’s AML Team. Please stay tuned our podcast, and read on here.…
Continue Reading OCC Action Highlights Increased Accountability Facing Boards of Directors
Note to Government Personnel: Don’t Disclose SARs
This week, major developments unfolded in the cases against two former federal government employees for their respective roles in disclosing Suspicious Activity Reports (“SARs”) in violation of the Bank Secrecy Act (“BSA”).
Historically, prosecutions pertaining to improper SAR disclosures have been supremely rare, so the fact that two court hearings involving this issue occurred in a single week is particularly notable. Both involve defendants allegedly acting on their own perceived sense of duty – perceptions which ran afoul of the law.
First, Natalie Mayflower Sours Edwards, a former senior advisor at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), pleaded guilty to one felony count of conspiring to unlawfully disclose SARs related to Paul Manafort, Richard Gates, Maria Butina, Prevezon Alexander, and the Russian Embassy to a reporter. Second, John C. Fry, a former employee of the Internal Revenue Service (“IRS”), was sentenced to five years of supervised probation and ordered to pay a $5,000 fine after similarly pleading guilty to his role in disclosing SARs to embattled attorney Michael Avenatti that related to likewise-embattled attorney Michael Cohen. Both prosecutions underscore the seriousness with which federal authorities view such disclosures. Likewise, they reflect that potentially subjective good intentions – of course – still don’t excuse violations of the carefully-crafted prohibitions in the BSA against the disclosure of SARs.
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…