Last week, the Southern District of California partially unsealed a superseding indictment (the “Indictment”) revealing allegations against 29 alleged members of an international money laundering organization (“MLO”) tied to some of the largest and most powerful drug trafficking organizations in Mexico, and who allegedly laundered over $32 million in drug proceeds from the United States
Indictment Alleges $1.6 Billion in Corrupt Contracts, Funneled Through Shell Companies and Correspondent Accounts, and Paid With Gold Sold on Behalf of Venezuela
On October 21, 2021, a grand jury indictment was unsealed in the Southern District of Florida charging two Venezuelan and three Colombian citizens with one count of conspiracy to commit money laundering and four counts of money laundering. The indictment revealed an alleged bribery scheme involving a former Venezuelan state governor and Venezuelan government authorities that provide food and medicine to citizens in need. A portion of the $1.6 billion in contracts secured by alleged bribes was laundered into or through the United States through a web of accounts and businesses. This indictment serves as yet another example of the United States Department of Justice’s (“DOJ”) use of money laundering charges to combat corruption in Venezuela (as we have blogged about repeatedly: here, here, here, here, here and here). It also represents another example of DOJ using the money laundering statutes to charge foreign government officials at the highest levels when the Foreign Corrupt Practices Act cannot apply.…
Continue Reading (More) Money Laundering Charges Announced for Alleged $1.6 Billion Venezuelan Corruption Scheme
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…
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.
“Largest Ever U.S. Criminal Tax Charge” Bring Money Laundering Charges as Well
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
“Front” Seafood Businesses Allegedly Hid the Proceeds From Smuggled Shark Fins and Marijuana Distribution
Last week, the U.S. Attorney’s Office for the Southern District of Georgia unsealed an indictment returned in July, charging twelve defendants and two businesses with wire and mail fraud conspiracy, drug trafficking conspiracy, and money laundering conspiracy. The indictment describes a transnational criminal organization that allegedly began as early as 2010 and spanned multiple locations including, Georgia, District of Columbia, California, Florida, Michigan, Arizona, Hong Kong, Mexico, and Canada. The indictment accuses the defendants of submitting false applications for import/export licenses to the U.S. Fish and Wildlife Services, and using two seafood businesses and dozens of bank accounts to hide the proceeds of illegal activities.
According to the indictment, the criminal organization engaged in an international wildlife trafficking scheme involving shark finning—where a shark is caught at sea, its fins are removed, and the remainder of the living shark is discarded and left to die in the ocean. According to the indictment, shark finning supports the demand for shark fin soup, an Asian delicacy. Shark finning is among many illegal wildlife trade practices.…
Continue Reading DOJ and Multi-Agency Task Force Charge International Money Laundering, Drug Trafficking, and Illegal Wildlife Trade Scheme
Indictment Again Highlights the Role of Correspondent Banking in Money Laundering
On May 28, 2020, the U.S. Department of Justice (“DOJ”) unsealed a 50-page indictment against 28 North Korean and 5 Chinese bankers accused of using more than 250 front companies to obscure $2.5 billion in illicit financial dealings (“the Indictment”). The complex and far-flung scheme purportedly involved covert branches of North Korea’s state-owned Foreign Trade Bank (“FTB”)—all opened in foreign countries in an attempt to access the U.S. financial system, and to circumvent sanctions intended to guard against threats to national security, foreign policy, and the U.S. economy. The Indictment charges the individuals with conspiring to launder money, violations of the “international” prong of the money laundering statute (about which we have blogged), bank fraud, and violations of the International Emergency Economic Powers Act.
Although the Indictment is interesting standing alone, it also represents the latest in a series of enforcement actions involving North Korea and the U.S. financial system.…
Continue Reading 28 North Korean and 5 Chinese Bankers Accused of a $2.5 Billion Laundering Scheme
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
Case Sheds Light on Latest Methods to Evade Detection: “Peeling” Chains
On March 2, the U.S. government sanctioned and indicted two Chinese nationals for helping North Korea launder nearly $100 million in stolen cryptocurrency. The indictment, filed in the District of Columbia, charges the defendants with conspiring to commit money laundering transactions designed to both “promote” and “conceal” the underlying crimes of wire fraud (the theft of the cryptocurrency via hacking) and operating as an unlicensed money transmitter — the latter of which is also charged in the indictment as an additional count.
According to the related and detailed civil forfeiture complaint, these funds were only a portion of those stolen in 2018 by state-sponsored hackers for North Korea from a South Korean exchange. These actions, notable in several respects, provide a glimpse at the latest methods of laundering cryptocurrency.
Anyone attempting to launder illicit cryptocurrency faces at least two big challenges. First, due to rigid know-your-customer rules, one cannot simply deposit large amounts of funds at an exchange without raising red flags. Second, because all cryptocurrency transactions are recorded on a blockchain, they can be traced.
To clear these hurdles, the complaint alleges that North Korean hackers used “peeling chains.” In a peeling chain, a single address begins with a relatively large amount of cryptocurrency. A smaller amount is then “peeled” off this larger amount, creating a transaction in which a small amount is transferred to one address, and the remainder is transferred to a one-time change address. This process is repeated – potentially hundreds or thousands of times – until the larger amount is pared down, at which point the amount remaining in the address might be aggregated with other such addresses to again yield a large amount in a single address, and the peeling process goes on.…
Continue Reading Two Chinese Nationals Charged with Money Laundering Over $100 Million in Cryptocurrency for North Korea
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…
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