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Director Blanco Stresses Importance of BSA Filings to Criminal Investigations and Prosecutions

As we have blogged, Kenneth Blanco, the Director of Financial Crimes Enforcement Network (“FinCEN”), has publically and repeatedly stressed the value of Suspicious Activity Reports (“SARs”) and other Bank Secrecy Act (“BSA”) filings in the context of discussing anti-money laundering (“AML”) enforcement — arguably, partly in order to provide a counter-narrative to a reform movement which questions the investigatory utility to governments and the mounting costs to the financial industry of the current BSA reporting regime.

Last week, and consistent with this approach and a general desire to “message” the importance of the BSA, Director Blanco hosted FinCEN’s fifth annual awards ceremony to recognize the efforts of Federal, state, local, and tribal law enforcement agencies in using the BSA to pursue and prosecute financial crimes.

In his remarks, Blanco credited the BSA for mandating or encouraging information-sharing and reporting, which “provides leads, helps expand cases, identifies networks of criminal and other bad actors, and often helps to alert the regulatory and law enforcement communities to trends in illicit activity, making our communities safer.” Under Secretary for Terrorism and Financial Intelligence Sigal P. Mandelker also made remarks, observing that the success stories underlying the awards “make clear that BSA data is critical in the fight against financial crime.”

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First Post in a Two-Part Series

Recent actions in the crypto realm demonstrate that authorities and regulators have not slackened their commitment to applying and enforcing Anti-Money Laundering (“AML”) laws and regulations in the crypto industry.  These actions serve as reminders that not only is the government keeping a close eye on cryptocurrency, but its oversight and enforcement can and will come from many angles. What’s more, the government’s recent various proactive and reactive compliance efforts relating to cryptocurrency illustrate the policy principles behind its compliance initiatives from the theoretical to the stark, real world consequences they are intended to avoid.

In this post, we address recent major developments across a spectrum of regulatory, civil, and criminal enforcement cases involving cryptocurrencies, AML and money laundering – courtesy of the combined efforts of the Financial Crimes Enforcement Network (“FinCEN”), the New York Department of Financial Services (“NYDFS”), and the U.S. Department of Justice.

In our next post, we will discuss a 30-page Guidance just issued today by FinCEN, entitled “Application of FinCEN’s Regulations to Certain Business Models Involving Convertible Virtual Currencies” – which was accompanied by a 12-page FinCEN Advisory entitled “Advisory on Illicit Activity Involving Convertible Virtual Currency.”…
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Authorities Begin to Focus on Individual Responsibility

This week, Danish prosecutors charged Thomas Borgen, the former chief executive officer of Danske Bank, for his involvement in the money laundering scandal arising out of Danske Bank’s Estonian branch, involving an astonishing 200 billion euros ($224 billion) in alleged suspicious transactions. Borgen, whose home prosecutors reportedly raided…

I am really honored to be moderating the Practising Law Institute’s 2019 Anti-Money Laundering Conference in New York City on May 14, 2019, starting at 9 a.m.  My co-chairs are Nicole S. Healy of Ropers Majeski Kohn & Bentley PC, and Jamie Boucher of Skadden Arps Slate Meagher & Flom LLP.  PLI’s AML conference in…

UK-based Standard Chartered Bank (“SCB”) announced the terms of significant settlements last week with various U.S. and U.K. governmental agencies, resolving a series of related investigations into the bank’s alleged violations of international sanctions and concomitant failures of anti-money laundering (“AML”) controls over a period stretching from 2007 to 2014. The bank will pay a total of $1.1 billion in combined forfeitures and fines to various national and state agencies in the two countries — and extend, once again, its deferred prosecution agreements (“DPAs”) with the U.S. Department of Justice (“DOJ”) and the New York County District Attorney’s Office (“NYDA”).

Specifically, the bank will pay: a $480 million fine and a $240 million forfeiture to the DOJ; approximately $639 million to the U.S. Treasury Department Office of Foreign Assets Control (“OFAC”); over $292 million to the NYDA; almost $164 million to the Board of Governors of the Federal Reserve System; and $180 million to the New York Department of Financial Services.  The bank also will pay over £102 million (an amount approximately equal to over $133 million) to the U.K.’s Financial Conduct Authority (“FCA”).  After certain payments are credited against some of these penalties, the total will exceed $1 billion.

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On April 2nd, the New Directions in Anti-Kleptocracy Forum, organized by the Harriman Institute at Columbia University, will identify emerging issue areas relating to kleptocracy. I am excited to be serving as a co-panelist on the forum’s Art Market as a Node of Kleptocracy panel, which will discuss beneficial ownership and the luxury…

In recognition of the significance South America has played in recent FCPA enforcement, yesterday the FBI announced that it will establish a team of agents in Miami focused on FCPA cases in Miami and South America. Leslie Backschies, the Chief of the FBI’s international corruption unit, told reporters on March 4, 2019, that the new…

The Danske Bank money laundering scandal continues to reveal its many permutations and confirm its status as the largest money laundering case in history. We summarize here certain events since November 2018, since we last have blogged about the case (see here, here, and here). Proving that no one is immune from the potential taint, notable events include an investigation announced by the Estonian financial regulator; an investigation into that same Estonian regulator itself; the commencement of the inevitable investor lawsuit; and scrutiny of what some have described as the “cleanest” bank in the world, Swedbank, one of the most important banks in Northern Europe.…
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Former Bankers Allegedly Concealed “Master of Kickbacks” from Internal Compliance Department

Sculpture on top of Credit Suisse headquarters in Zürich, Switzerland

A detailed indictment unsealed on January 3 in the Eastern District of New York alleges that former Credit Suisse bankers, a Lebanese businessman, and former top officials in Mozambique, including the former Minister of Finance, participated in a $2 billion corruption, fraud and money laundering scheme (“the Indictment”).

The defendants, including three former members of Credit Suisse’s Global Financing Group, face charges of conspiracy to commit money laundering, wire fraud, securities fraud, and Foreign Corrupt Practices Act (“FCPA”) violations. As we will discuss, the former bankers are alleged to have thwarted Credit Suisse’s compliance department by circumventing internal controls and hiding information in order to convince the bank to fund the illicit investment projects at issue.

The Indictment represents another example of DOJ using the money laundering statutes to enforce the FCPA, as we have blogged repeatedly: defendant Manuel Chang, the former Minister of Finance of Mozambique, has been charged with conspiracy to launder the proceeds of FCPA violations, but not with violating the FCPA itself – because the FCPA provides that it cannot be used to directly charge foreign officials themselves. The Indictment is also another example of the DOJ using the money laundering and FCPA statutes to prosecute conduct, however reprehensible if proven, committed entirely by non-U.S. citizens operating in foreign countries and involving alleged corruption by foreign officials, with an arguably incidental connection to the U.S. Although the Indictment alleges that certain illicit loans were sold in part to investors located in the U.S., the Indictment again recites now-familiar allegations that the illegal monetary transactions at issue, including bribe and kickback payments, in part flowed through U.S. correspondent bank accounts as the money traveled from one foreign country to another.

Ultimately, the alleged scheme highlights the bribery, kickback, and money laundering risks that financial institutions must consider when vetting and funding international projects. And, it starkly illustrates that internal controls may not always be sufficient to protect institutions from fraud when internal bad actors conspire to circumvent the processes.…
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Government Alleges that Broker Dealer Ignored Major Red Flags Raised by Pay Day Lending Scheme

For the first time, a broker-dealer, Central States Capital Markets, LLC (Central States), has been prosecuted for violating the Bank Secrecy Act (BSA). Central States stipulated to the accuracy of a deferred prosecution agreement‘s (DPA) Statement of Facts, which detailed significant failures to comply with its customer identification procedures (CIP), failures to investigate and file Suspicious Activity Reports (SARs), and failures to monitor red flag transactions.

The government’s prosecution of Central States is not surprising given its recent heightened interest in ensuring that financial gatekeepers like broker-dealers are complying with the AML/BSA laws. Indeed, the allegations show that Central States failed to take basic steps to comply with their AML/BSA obligations despite having procedures and processes in place.…
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