Case Involves “Right to Control” Theory on Illicit Access to Bank Accounts Through Evasion of Banks’ AML Controls.  These Cases Will Continue.

In United States v. An, et al., 22-cr-640 (KAM) (E.D.N.Y. May 7, 2024), the Eastern District of New York recently addressed and rejected an argument by defendants that Ciminelli v. United States required dismissal of money laundering charges against them because the government had failed to allege that they had deprived or attempted to deprive banks of “property”. In attempting to harmonize the government’s approach with Ciminelli, the court defined a property interest by the banks in their customers’ accounts that will likely require further refinement by the Second Circuit, and perhaps draw the attention of the Supreme Court.

We previously blogged on the Supreme Court’s decision in Ciminelli, in which Justice Thomas, writing for a unanimous Court, rejected the Second Circuit’s longstanding “right to control” theory of fraud as a basis of liability under the federal wire fraud statute. In that post, we articulated the possible ramifications for the Department of Justice (“DOJ”) and its prosecution of bank fraud cases, because the opinion did not limit itself to wire fraud but instead made frequent and more general reference to “the federal fraud statutes”.  We suggested that the DOJ may have to reconsider its tactic of charging bank fraud, rather than a violation of the Bank Secrecy Act (“BSA”), based upon a defendant’s alleged acts of concealment which impacted victim banks’ ability to comply with the BSA.

The An opinion is complicated, and we summarize here only.  Although the DOJ won the motion at issue, which turned on the face of the indictment, related factual issues remain for trial.  Further, the basic legal issue may produce different outcomes in different courts.

Continue Reading  EDNY Upholds Money Laundering Charge Against Defense Attack Under Ciminelli

Farewell to 2023, and welcome 2024.  As we do every year, let’s look back.

We highlight 10 of our most-read blog posts from 2023, which address many of the key issues we’ve examined during the past year: criminal money laundering enforcement; compliance risks with third-party fintech relationships; the scope of authority of bank regulators; sanctions

In January, we blogged on the Southern District of New York sentencing of Danske Bank to three years of probation and a forfeiture of $2.059 billion. As we noted at the time, the bank was charged with bank fraud, rather than violation of the Bank Secrecy Act (“BSA”), even though the “heart of the criminal case” was Danske Bank’s concealment (now acknowledged via plea) of its own AML failures in its dealings with three U.S. banks, thus impacting their own compliance with the BSA.

This was, of course, not the first time that the Department of Justice (“DOJ”) has used bank fraud charges instead of proceeding under the BSA in dealing with a foreign bank.  Indeed, the pending case against Turkish bank Halkbank involves in part bank fraud charges.

But DOJ may be forced to reconsider tactics soon: The Supreme Court’s decision earlier this month in Ciminelli v. United States, et al., which addressed and ultimately voided the Second Circuit’s longstanding “right to control” theory of fraud as a basis for liability under the federal wire fraud statute, could have ramifications for DOJ’s approach using the similarly structured bank fraud statute.

Continue Reading  Will Ciminelli’s Impact on Wire Fraud Cases Ripple Out to Bank Fraud?