Art & Antiquities; Beneficial Owners; Foreign Corruption — and MoreWe are really pleased to be moderating, once again, the Practising Law Institute’s 2021 Anti-Money Laundering Conference on May 11, 2021, starting at 9 a.m. This year’s conference again will be entirely virtual — but it will be as informative, interesting and timely as
U.N. Report Focus on Improving Accountability, Transparency and Good GovernanceOn March 2, 2020 the United Nations released a Report on Financial Integrity For Sustainable Development (the “Report”). Although the Report is lengthy and wide-ranging, we will focus here on the portions of the Report which target the humanitarian toll of Illicit Financial Flows (IFFs) from money laundering, tax abuse, cross-border corruption, and transnational financial crime – all of which can drain resources from sustainable development, worsen inequality, fuel instability, undermine governance, and damage public trust. We also will focus on the portions of the Report which make recommendations designed to expand anti-money laundering (“AML”) compliance.
First, the Report makes evidence-based recommendations focused on accountability, designed to close international enforcement and compliance gaps. Those recommendations include: (i) all countries enacting legislation providing for the widest range of legal tools to pursue cross-border financial crime; (ii) the international community developing an agreed-upon international standard for settlement of cross-border corruption cases, and (iii) businesses holding accountable all executives, staff, and board members who foster or tolerate IFFs in the name of the business.
Second, the Report makes other recommendations on several AML-related issues on which we have blogged: (i) each country creating a central registry of beneficial ownership information for legal entities; (ii) creating global standards for professionals, including lawyers, accountants, bankers and real estate agents; (iii) improving protections for human rights defenders, anti-corruption advocates, investigative journalists and whistleblowers; and (iv) promoting the exchange of information internationally among law enforcement officers and other authorities.
The Report clearly envisions that corporations can and should play a pivotal role in contributing resources in the fight against corruption, money laundering and cross-border financial crime. To start, Boards and management, particularly those of financial and professional service institutions, must engage in oversight to ensure that compensation, benefits, and employment itself are contingent upon financial integrity. Investors also should embrace financial integrity for sustainable development and be clear with the companies in which they invest that they expect effective anti-corruption policies and regulatory compliance. Integrity will be cultivated when organizational leadership hold board members, executives, and staff accountable if they foster or tolerate IFFs in the name of the business. Moreover, the Report observes that governments can foster financial integrity by imposing liability for failing to prevent bribery or corruption.
Continue Reading United Nations Targets Corruption and Illicit Cross-Border Finance
On February 24, the Department of Justice’s (“DOJ”) Criminal Division Fraud Section released its 2020 Year In Review (“the Report”) touting its white-collar enforcement successes. Among them: four cases in which the DOJ wielded the United States’ money laundering statutes to pursue alleged overseas bribery recipients who are beyond the reach of the Foreign Corrupt Practices Act (“FCPA”). This is a pattern we have covered previously (here, here, here, here, here, here and here). While the FCPA imposes liability on American citizens and entities that bribe foreign officials, it does not impose liability on the foreign officials receiving the bribe. Enter 18 U.S.C. §§ 1956 and 1957. As illustrated in the Report’s cases, 2020 marked a continuation of the DOJ’s willingness to use the money laundering statutes to pursue corrupt foreign activity that uses U.S. financial institutions, however tangentially.
Continue Reading DOJ Fraud Section 2020 Year in Review: Money Laundering Statute Remains an Overseas Enforcement Tool
On November 25, 2020, Natalino D’Amato (“D’Amato”), a Venezuelan executive, was charged in an 11-count indictment with allegedly laundering $160 million between 2013 and 2017. The indictment, filed in the Southern District of Florida, includes one count of conspiracy to commit money laundering, four counts of international money laundering, three counts of promotional money laundering, and three counts of engaging in transactions involving criminally derived property. It is the latest episode in the enforcement campaign of the U.S. Department of Justice (“DOJ”) against alleged corruption involving Venezuela in general, and Venezuela’s state-owned and controlled energy company Petróleos de Venezuela S.A. (“PDVSA”) in particular.
Continue Reading (Another) Venezuelan Executive Indicted in a $160 Million Money-Laundering and Corruption Scheme
DOJ Charges a U.S. Billionaire, an Alleged International Drug Conspiracy Using Chinese Bank Accounts and a Guatemalan Casino, and a Former Top Mexican Official in the “War on Drugs”The term “October Surprise” garnered new meaning this year among money laundering enthusiasts with the announcement of three major indictments. All three announcements came on October 15 – at the midpoint of a month of news cycles otherwise dominated by the upcoming United States presidential election. Although these three indictments are all very different from one another in many ways, they all share a core element: the cross-border transfer of allegedly dirty money.
The Department of Justice (“DOJ”) unsealed a 39-count indictment returned by a federal grand jury in San Francisco, California, charging billionaire Robert T. Brockman, the Chief Executive Officer of Ohio-based software company Reynolds & Reynolds, with conspiring to defraud the United States, tax evasion, wire fraud, money laundering, failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”), evidence tampering and destruction of evidence. The charges involve an alleged scheme to conceal approximately $2 billion in income from the Internal Revenue Service (“IRS”), which law enforcement officials have said is the largest ever tax charge in the United States. The wire fraud charges do not attempt to “bootstrap” the false tax returns at the heart of the tax evasion scheme into a wire fraud scheme, but rather rest on an alleged scheme to defraud investors in the software company’s debt securities. Still, Brockman’s indictment is yet another example of the potentially powerful overlap of money laundering and tax fraud charges, both of which often implicate the issue of beneficial ownership and the use of shell companies.
Continue Reading Criminal Enforcement Round Up: October Yields a Trio of High-Profile Money Laundering Charges With International Focus
Regulators’ Joint Statement Attempts to Clarify AML Expectations Regarding Potential Corrupt ActorsOn 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 ArtIn 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