A Textbook Case of Alleged Money Laundering?On November 18, 2019, the U.S. Attorney for the Southern District of New York announced the arrest and unsealed the indictment of Bruce Bagley – a 73-year-old college professor whose scholarship focuses on U.S.-Latin American relations, with an emphasis on drug trafficking and security issues. He has been
The U.S. Attorney for the Southern District of New York has charged Turkish state-owned bank Halkbank (formally known as Türkiye Halk Bankasi A.S.) with money laundering, bank fraud and sanctions offenses under the International Emergency Economic Powers Act, or IEEPA, arising from the Bank’s alleged involvement in a multibillion-dollar scheme to evade U.S. sanctions on Iran. As alleged in the six-count indictment, senior officials at Halkbank designed and executed the Bank’s systemic and illicit movement of Iranian oil revenue moving through the Bank to give Iran access to the funds. This case is an extension of prosecutions initiated in late 2017 against nine individual defendants in the scheme, including bank employees and the former Turkish Minister of the Economy.
Continue Reading DOJ Charges Turkish State-Owned Halkbank With Money Laundering, Fraud, and Iran-Related Sanctions Offenses
A recent decision out of the United States District Court for the Eastern District of Virginia adjudicating a seemingly straight-forward alleged fraud and money laundering scheme reminds us that money laundering charges still require the government to establish elements which can be difficult to prove, including, importantly, specific intent.
United States v. Millender involved an investment fraud scheme charged against a husband and wife and their associate. Terry and Brenda Millender were, respectively, the founder and pastor, and the “First Lady” of the Victorious Life Church (“VLC”) in Alexandria, Virginia. The evidence at trial established that Mr. Millender conceived of and founded Micro-Enterprise Management Group (“MEMG”), purportedly for the purpose of helping the poor in developing countries by making small, short-term loans to entrepreneurs who wished to start or expand existing businesses. Mrs. Millender was the co-founder, registered agent, and signatory of MEMG. To fund the enterprise, MEMG solicited “loans” from VLC congregants and other private lenders. MEMG promised its investors high rates of return through profits on the entrepreneur loans and assured them that the loans were securely backed by MEMG assets. Moreover, written materials soliciting investment represented that MEMG had a successful history of making micro-loans in Africa and had established relationships with on-going projects. Later, Mr. Milliner founded a second entity, Kingdom Commodities Unlimited (“KCU”), purportedly for the purpose of brokering Nigerian oil deals, and promising investors substantial returns on what they claimed were short term loans. The defendants solicited over $600,000 from investors from 2008 until 2015.
The Millender opinion reflects the complexity of the different prongs of the money laundering statutes, and their somewhat overlapping and competing requirements. The opinion is particularly noteworthy because of its procedural posture: despite jury verdicts finding guilt, the district court nonetheless found at least as to some counts that there was insufficient evidence as a matter of law of knowledge and specific intent.
Continue Reading Money Laundering and Specific Intent Can Be Difficult to Prove
As we have blogged, the United States Attorney’s Office for the Southern District of Florida is pursuing charges against eight individuals for allegedly conspiring to launder $1.2 billion embezzled from a Venezuelan state-owned oil company and other unlawfully-derived funds. On August 22, 2018, Matthias Krull, the first of those co-defendants, pled guilty for his role in the charged conspiracy. Krull, a German national and former high-ranking executive at Swiss bank Julius Baer who was based in Panama at the time of the alleged scheme, faces up to 10 years in prison according to the terms of the Plea Agreement but, due to his potential cooperation with authorities as reflected by paragraphs 10 to 12 of the Plea Agreement, may serve less. The conduct of Krull illustrates the potentially key role of professionals in elaborate money laundering schemes.
Continue Reading Update: First Defendant Pleads and Agrees to Cooperate in $1.2 Billion Alleged Venezuelan Laundering Scheme
On July 24, 2018, the United States Attorney’s Office for the Southern District of Florida unsealed a criminal complaint (the “Complaint”) charging eight individuals with conspiracy to commit money laundering under 18 U.S.C. § 1956(h) and 1956(a)(2) and interstate and foreign travel in aid of racketeering enterprises under 18 U.S.C. § 1952 for their alleged involvement in a sprawling, highly sophisticated $1.2 billion international money laundering conspiracy. Among those charged were four Venezuelan nationals with assorted connections to Venezuelan public officials and the country’s state-owned oil company; a Columbian national and American citizen with ties to American financial firms; a Portuguese national and purported “professional money launderer”; a German national described by the government as a “high-level banker at a large Swiss bank”; and a Uruguayan national with ownership interest in at least one American bank known to the government to facilitate money laundering. The Complaint also identifies nine unnamed co-conspirators and implicates numerous unnamed American and international financial institutions.
The Complaint — the product of a joint investigation by the Department of Justice and Immigration and Customs Enforcement’s Homeland Security Investigations — sets forth allegations of conduct designed to embezzle $1.2 billion from a Venezuelan oil company and launder that money through fraudulent transactions involving the sale of false securities and high-end real estate and through fraudulent contractual relationships in the United States and Europe. The defendants are described as “sophisticated operators with respect to the international banking system [who] are aware of banks’ general due diligence and anti-money laundering practices, including know-your-customer (KYC) requirements.” The Complaint sets forth an elaborate tale which encompasses a litany of current “hot” topics in money laundering and on which we have blogged, including alleged corruption in the Venezuelan oil industry; moving the proceeds of official corruption through the international financial system; the potential laundering of foreign assets through high-end real estate in the United States, and the misuse of shell companies to hide the true beneficial owners.
Continue Reading 8 Charged With Highly Sophisticated $1.2 Billion International Money Laundering Conspiracy
Earlier this month, the District Court for the Central District of California imposed a prison sentence of one year and a day, with three years of supervised release, on defendant Theresa Lynn Tetley, who had pleaded guilty to: (i) the unlicensed operation of a digital currency exchange due to failure register with the Financial Crimes Enforcement Network (“FinCEN”), in violation of 18 U.S.C. § 1960(a) and (b)(1)(B), and (ii) a money laundering charge, in violation of 18 U.S.C. § 1956(a)(3)(B), arising out of an undercover “sting” operation run by the Drug Enforcement Agency and Internal Revenue Service-Criminal Investigation involving the attempt to conceal proceeds supposedly obtained by selling drugs. Tetley also was ordered to pay a $20,000 fine and forfeit 40 Bitcoin, $292,264 in cash, and 25 gold bars that were the alleged proceeds of her illegal activity.
The Court imposed a sentence significantly lower than the sentence of 30 months requested by the government, a recommendation which already was lower than the advisory sentencing range recommended by the Federal Sentencing Guidelines (“Guidelines”) of 46 to 57 months in prison, as calculated by the U.S. Probation Office.
Tetley, a 50 year old woman living in Southern California, is a former stockbroker and real estate investor. She operated her digital currency exchange under the alias “Bitcoin Maven” for over three years, running an unregistered Bitcoin for cash exchange service. According to the government, her service “fueled a black-market financial system” that “purposely and deliberately existed outside the regulated bank industry” and which catered to an alleged major darknet vendor of illegal narcotics. According to the defense, however, the defendant “departed from a lifetime of integrity and good deeds and showed terrible judgment by failing to comply with federal registration requirements and buying bitcoins from individuals who represented themselves as engaged in criminal activity.”
In this post, we will drill into this sentencing and the parties’ respective positions, which provide a window into the prosecution and sentencing of alleged crimes involving both digital currency and undercover money laundering operations — and into the process for the sentencing of federal crimes in general, and how other factors which are entirely unrelated to the facts of the specific offense can be important. Further, the Tetley case is interesting in part because it represents a sort of “hybrid” case — seen from time to time in money laundering cases involving professionals — which straddles both the typically very different realms of “pure” financial crime cases and illegal narcotics cases. The government sentencing memorandum is here; the defense sentencing memorandum is here.
Continue Reading Unlicensed Bit Coin Exchange Operator Sentenced to One Year and a Day for Attempted Money Laundering in Undercover Sting Operation and Failure to Register with FinCEN
I had the pleasure of being interviewed by Isaac Chotiner of Slate, the daily on-line magazine, regarding the mechanics of the federal money laundering statutes. Isaac was particularly interested in how those statutes might apply to real estate transactions – a topic of definite interest these days. Please see the interview here.
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As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.
The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far. Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA. In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.
Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment. The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.” Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.
As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology. There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business. However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it. Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA.
Continue Reading DOJ Employs Money Laundering Statute to Prosecute Venezuelan Oilmen for Foreign Bribery
Attorney General Sessions Announces Rescission of Obama Administration Policies on Marijuana Enforcement; Financial Institutions Lose Grounds to Permit Financial Transactions with Marijuana Businesses 
In a single-page memorandum issued today, Attorney General Sessions tersely rescinded a string of DOJ enforcement policies announced during the Obama Administration — chief among them the “Cole Memo,” described below — which collectively had indicated that although marijuana was still illegal under federal drug laws and the DOJ would continue its enforcement of those laws, the DOJ also would defer to state governments that had developed regulatory regimes legalizing marijuana under defined circumstances. Although Attorney General Sessions is well known for his personal distaste for marijuana-related activity, he previously had not been entirely clear as to exactly what position his DOJ would take in regards to the Cole Memo and related enforcement.
Although this policy change has many potential implications, its primary relevance to Anti-Money Laundering (“AML”), the Bank Secrecy Act (“BSA”), and money laundering issues is that the Cole Memo had provided the support for the federal government to issue guidance that, under very defined circumstances, financial institutions could provide services to state-licensed marijuana businesses.
Continue Reading Marijuana Enforcement: DOJ Cole Memo Up in Smoke
As the world now knows, an indictment against Paul Manafort, Jr., a former campaign chairperson for now-President Donald Trump, and Manafort’s associate, Richard Gates III, was unsealed yesterday. Brought by Special Counsel Robert S. Mueller, the indictment alleges that Manafort and Gates, while working as political consultants and lobbyists, acted as agents of the Government of Ukraine and other foreign entities; failed to properly register and report as such agents; generated tens of millions of dollars from this work; laundered these earnings through various U.S. and foreign entities and bank accounts; and hid these same earnings from the Internal Revenue Service (“IRS”) and the Financial Crimes Enforcement Network (“FinCEN”).
This post will discuss some legal aspects of the specific charges. This post will not delve into any potential political ramifications of the indictment, or speculate as to what the indictment may or may not supposedly reveal regarding the work of the Special Counsel in general. Standing alone, the indictment is a fascinating document for those interested in money laundering and international tax evasion issues, and highlights the potentially powerful overlap of money laundering charges, tax fraud charges, and alleged violations of the Bank Secrecy Act (“BSA”).
In particular, we will discuss: