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Regulators’ Joint Statement Attempts to Clarify AML Expectations Regarding Potential Corrupt Actors

On August 21, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and other banking regulators – specifically the Federal Reserve, the FDIC, the National Credit Union Administration, and the OCC – issued a joint statement that provides additional guidance in applying Bank Secrecy…

High Profile Corruption, High End Real Estate, Shell Companies . . . and Fine Art

Second of Two Posts on Evolving Issues Regarding Real Estate and Money Laundering

In our last post, we blogged on a major regulatory tool to combat the use of real estate as a potential vehicle for money laundering: the real estate Geographic Targeting Orders (“GTOs”) issued by the Financial Crimes Enforcement Network. Today we explore a major enforcement tool in action: civil forfeiture of real estate by the U.S. Department of Justice (“DOJ”).

This summer, the International Unit of the DOJ’s Money Laundering and Asset Recovery Section (MLARS) filed numerous complaints for civil forfeiture for real estate and other assets. This blog post will highlight a few – but not all – of these interesting and high-profile cases. Some of these cases may have been informed by data and leads obtained through the GTOs.

We explore here a trio of civil forfeiture actions pertaining, respectively, to alleged public corruption cases arising out of Gambia, Nigeria, and Malaysia. All of these cases involve foreign public officials who allegedly obtained wealth through corruption schemes committed abroad and laundered that money through shell companies to purchase real estate and other assets – sometimes located in the U.S., but sometimes not. Although the officials’ alleged initial crimes – the “specified unlawful activity,” or SUAs, as underlying crimes are defined under the federal money laundering statutes – took place overseas, the U.S. money laundering statutes provide that foreign misappropriation, embezzlements, and theft of public funds to benefit a public official constitute SUAs, thereby allowing the U.S. government to pursue civil forfeiture claims against assets located in the U.S. or abroad which are linked to the funds from underlying crimes committed primarily or even outside of the U.S.

This is the “civil forfeiture version” of a tactic used with increasing frequency by DOJ on which we repeatedly have blogged: the use of the criminal money laundering statutes to prosecute foreign officials for spending the fruits of entirely foreign crimes, when some of the financial transfers involved in the subsequent money laundering transactions occurred in the U.S.

Finally, another theme running throughout the allegations in these civil forfeiture actions is the unfortunate connection between money laundering and corruption and human rights abuses.…
Continue Reading Civil Forfeiture of Real Estate to Fight Money Laundering: A Round-Up

This is a picture of a Black Rhinoceros.  It is one of two Rhinoceros species in Africa.  It is estimated that there were approximately 125,000 Black Rhinoceroses in 1960.  Now, there are less than 6,000. Three subspecies are already extinct. Although loss of habitat is certainly a contributing factor, much of this decimation is attributable to poaching and the illegal wildlife trade (“IWT”).

The Financial Action Task Force (“FATF”) just released an important report entitled Money Laundering and the Illegal Wildlife Trade (the “Report”).  The lengthy and detailed Report makes clear that the IWT is pernicious cocktail of animal slaughter/abuse and complex financial crime, often run by highly organized groups that thrive on international cooperation by complicit actors and the use of shell companies.  The Report bemoans the fact that the IWT benefits from a lack of focus and priority by law enforcement. Accordingly, the Report seeks to spread awareness of the IWT, provide general guidance on combatting it, and propose action steps.  One theme of the Report is that effectively combatting the IWT requires financial investigations and money laundering charges.…
Continue Reading Money Laundering and the Illegal Wildlife Trade

The District of Connecticut recently vacated a defendant’s convictions at trial for violating the Foreign Corrupt Practices Act (“FCPA”) — but declined to similarly vacate his related money laundering convictions.  This case provides another example of how the money laundering statutes can be a particularly powerful and flexible tool for federal prosecutors, and how they can yield convictions even if the underlying offenses do not (and perhaps are not even charged).

The case involves Lawrence Hoskins, a British citizen who had been employed by Alstom UK Limited but worked primarily for a French subsidiary of Alstom, the parent company.  Hoskins allegedly participated in a corruption scheme involving a project in Indonesia.  The bidding process for the project also involved Alstom Power Inc. (“API”), another subsidiary of Alstom that is based in Windsor, Connecticut.  According to the government, Alstom hired two consultants, Sharafi and Aulia, who bribed Indonesian officials to secure the contract for the project.

Much ink has been spilled by the media and legal commentators regarding the district court’s decision (which the government is appealing) to vacate the defendant’s FCPA convictions, on the grounds that he did not qualify as an “agent” of API for the purposes of the FCPA statute.  We will not focus on that issue here. Rather,  we of course will focus on the fact that the defendant’s convictions for money laundering, and conspiring to launder money, nonetheless survived.  Importantly for the money laundering charges, the district court did not find that there in fact was no underlying corruption scheme.  Rather, the court found that the defendant could not be convicted under the FCPA for allegedly participating in this scheme.  Thus, there was still a “specified unlawful activity,” or SUA, which produced “proceeds” to generate money laundering transactions.

The case also reminds us that, as we have blogged, it is relatively easy for the U.S. government to prosecute foreign individuals for conduct occurring almost entirely overseas, because the nexus between the offense conduct and the U.S. does not need to be robust for U.S. jurisdiction to exist.…
Continue Reading High-Profile FCPA Prosecution Reflects: Government Can Lose on Lead Corruption Charges But Still Win on Related Money Laundering Charges

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 Hagia Sophia Church in Istanbul, Turkey

Indictment Alleges that Bank and its Officers Used Front Companies to Evade Prohibitions on Iran’s Access to the U.S. Financial System

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 Modest Proposal

The European Union (“EU”) recently has grappled with a series of massive money laundering scandals and strategized about how to more effectively combat international money laundering and corruption. Generally, the EU has continued to issue a series of reports identifying systemic vulnerabilities to money laundering and suggest process-based recommendations for how to address future threats. These recommendations typically mirror the same range of process-based improvements set forth in earlier reports: from enhancing cross-border information sharing to increasing resources for adequate implementation and enforcement of anti-money laundering (“AML”) and counter financing of terrorism (“CFT”) policies implemented by EU member states and financial institutions. Noticeably absent from these recommendations is one of the most powerful deterrents available – and a distinctly American approach – prosecuting the bad actors.

Although many of the recent EU money laundering scandals rest on conduct occurring years ago, the recurring waves of scandals strongly suggest that the EU – like the U.S. – has a serious problem with money laundering that is not going away any time soon. They likewise indicate that the EU’s financial system will continue to be abused by bad actors who appear to be unfazed by any potential consequences. The EU therefore should consider emulating – at least in part – the American approach of more aggressively investigating and prosecuting individuals, including the corrupt politicians, kleptocrats, drug dealers, fraudsters, and other criminals from around the globe who are laundering sometimes massive amounts of funds through European financial institutions.

Very recently, in a different but related context, the Chairman of the U.S. Securities and Exchange Commission (“SEC”), Jay Clayton, delivered a speech during which he bemoaned his perception that his foreign counterparts failed to rigorously enforce their own anti-corruption laws. Specifically, Chairman Clayton asserted the following:

Corruption is corrosive. We see examples where corruption leads to poverty, exploitation and conflict. Yet, we must face the fact that, in many areas of the world, our work may not be having the desired effect. Why? In significant part, because many other countries, including those that have long had similar offshore anti-corruption laws on their books, do not enforce those laws.

Granted, the above comments pertained specifically to enforcement of the Foreign Corrupt Practices Act (“FCPA”), and arguably the comments were in furtherance of a pro-American message regarding international competition between countries. The comments nonetheless exemplifies a certain American perception: the U.S. aggressively prosecutes individuals, whereas Europe does not. Obviously, this issue entails a lot of cultural baggage on both sides.

Although there are viable criticisms of the U.S. approach (both in theory and in practice), and although the EU’s strong focus on process and institutions’ AML and CFT systems is critical, any government’s enforcement “tool bag” must include targeted prosecutions of the people responsible for the laundering violations. Otherwise, few bad actors around the world will think twice about continuing to turn to EU institutions for their laundering needs. This blog post explores this idea.…
Continue Reading The EU’s Efforts to Combat Money Laundering, the Financing of Terrorism and Corruption Seem to Overlook a Very American Approach: Prosecute People

Today we are very pleased to welcome guest bloggers Gretta Fenner and Dr. Kateryna Boguslavska of the Basel Institute on Governance (“Basel Institute”). The Basel Institute recently issued its Basel AML Index for 2019. As they explain below, this data-rich and fascinating Index, on which we blogged last year, is one of several online tools developed by the Basel Institute to help both public- and private-sector practitioners tackle financial crime.  The Index is a research-based ranking that assesses countries’ risk exposure to money laundering and terrorist financing.

Established in 2003, the Basel Institute is a not-for-profit Swiss foundation dedicated to working with public and private partners around the world to prevent and combat corruption, and is an Associated Institute of the University of Basel. The Basel Institute’s work involves action, advice and research on issues including anti-corruption collective action, asset recovery, corporate governance and compliance, and more.

Gretta Fenner is the Managing Director of the Basel Institute, where she also holds the position of Director of the Institute’s International Centre for Asset Recovery. She is a political scientist by training and holds bachelor’s and master’s degrees from the Otto-Suhr-Institute at the Free University Berlin, Germany, and the Paris Institute for Political Science (Sciences Po), France. She also holds an MBA from the Curtin University Graduate School of Business, Australia.

Dr. Kateryna Boguslavska is Project Manager for the Basel AML Index at the Basel Institute. A political scientist, she holds a PhD in Political Science from the National Academy of Science in Ukraine, a master’s degree in Comparative and International Studies from ETH Zurich as well as a master’s degree in Political Science from the National University of Kyiv-Mohyla Academy in Ukraine. Before joining the Basel Institute, Dr. Boguslavska worked at Chatham House in London as an Academy Fellow for the Russia and Eurasia program.

This blog post takes the form of a Q & A session, in which Ms. Fenner and Dr. Boguslavska respond to several questions posed by Money Laundering Watch about the Basel AML Index 2019. We hope you enjoy this discussion of global money laundering risks — which addresses AML compliance vs. actual effectiveness, kleptocracy, transparency, de-risking, and more. –Peter Hardy…
Continue Reading What the Basel AML Index Reveals About Global Money Laundering Risks

Last week, a grand jury in the Southern District of Florida indicted two former Venezuelan officials, charging them with seven counts of money laundering and one count of money-laundering conspiracy. The charges relate to bribes and kickbacks provided to the officials who headed the country’s energy department and state-owned electricity company, Corporacion Electrica Nacional, S.A. (“Corpoelec”). The former officials allegedly received cash payments and received wire transfers, including from a bank in the Southern District of Florida.

As we have blogged about here, here, here, the U.S. Department of Justice (“DOJ”) has been pursuing Venezuelan nationals through high-dollar, high profile money laundering and foreign bribery charges. We also have previously discussed how the DOJ has been utlizing the money laundering statutes as a way to accomplish what the Foreign Corrupt Practices Act (“FCPA”) cannot accomplish directly – the bringing of charges against a foreign official.…
Continue Reading Two Former Venezuelan Officials and Energy Executives Indicted as DOJ Continues to Use Money Laundering Charges to Combat Foreign Corruption