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On June 23, 2021, the Department of Justice unsealed a criminal complaint and affidavit filed in the Southern District of Florida that alleges a vast scheme to launder money through illegal gold mining.  The DOJ charged Jesus Gabriel Rodriguez, Jr., the CEO and President of Transvalue, Inc., a South Florida-based armored car service, with one count of conspiring to commit money laundering.  The affidavit attached to the complaint alleges that Rodriguez conspired with employees of a South Florida-based gold refining company to import thousands of kilograms of illicitly-sourced gold from Curacao worth millions of dollars, and then use his company’s fleet of armored trucks to thwart the anti-money laundering (“AML”) program of a U.S. precious metals refinery receiving the gold.

As we have blogged, gold is an especially effective medium for money laundering because it has universal and readily ascertainable value and is difficult to trace.  Curacao, a Caribbean island with no gold mines, is commonly part of the route for gold illegally mined in, and smuggled out of, South America (including Venezuela) and Africa.
Continue Reading  DOJ Charges Armored Car Service CEO for Elaborate Scheme to Launder Money Through Illegal Gold

Last week, the law enforcement agencies across the globe executed a historic two-day takedown of hundreds of alleged criminals who used securely encrypted communication devices to further their criminal enterprises.  The operation, dubbed “Operation Trojan Shield,” involved over 9,000 law enforcement officers deployed worldwide to search more than 700 locations, which resulted in more than 800 arrests.  Their secret weapon? The encrypted communication devices used by these criminal organizations were manufactured and distributed by a company called ANOM, which just happens to be owned and operated by the Federal Bureau of Investigation (“FBI”).

To date, government press releases throughout the world have focused on the arrests and the seizures of contraband:  more than eight tons of cocaine; 22 tons of marijuana; two tons of methamphetamine/amphetamine; six tons of precursor chemicals; 250 firearms; and more than $48 million in various worldwide currencies and cryptocurrencies.  However, law enforcement agencies also have been clear that, of course, spin-off investigations are in the works.  As we discuss, money laundering already is a focus, and presumably numerous money laundering charges will be forthcoming over the years as a result of this operation, including as to any third parties or professionals knowingly involved in helping to move the massive amount of illicit proceeds.
Continue Reading  The Ultimate Inside Job: FBI-Owned Encrypted Communication Devices Take Down Criminal Syndicates Worldwide – With Money Laundering Cases Across the Globe to Follow

Art & Antiquities; Beneficial Owners; Foreign Corruption — and More

We 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…

Much has occurred in the last two months regarding the relationship between financial institutions and Marijuana-Related Businesses, or MRBs.  In this post, we discuss three major developments, all of which share a complex connection.  First, the National Credit Union Administration (“NCUA”) recently pursued its first enforcement action against a credit union for Anti-Money Laundering (“AML”) compliance failures when servicing MRBs.  Second, two cannabis industry executives were convicted of bank fraud for allegedly tricking banks and other financial institutions into unwittingly extending financial services to their MRB.  Third, and despite this enforcement drumbeat regarding MRBs, Congress has introduced again, with bi-partisan support, the SAFE Banking Act, which seeks to normalize the banking of cannabis by prohibiting federal bank regulators from taking certain actions against financial institutions servicing MRBs.
Continue Reading  Banking and Cannabis Enforcement Round Up:  NCUA Imposes First Penalty Relating to Cannabis Banking Services; Cannabis Industry Execs Convicted of Defrauding Banks into Providing Financial Services; Congress Re-Introduces the SAFE Banking Act

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

Reunification of Korean Peninsula Memorial at the Entrance to Pyongyang

Related Money Laundering Case Relying on ATM Cash-Outs and BEC Schemes Also Unsealed

On February 17, the Department of Justice unsealed a sprawling indictment against three members of North Korea’s military intelligence agency – known as the Reconnaissance General Bureau –…

Covered Companies Must Report Beneficial Ownership to National Database Upon Incorporation

First Blog Post in an Extended Series on Legislative Changes to BSA/AML Regulatory Regime

Change is upon us.  The U.S. House and Senate have passed – over a Presidential veto – the National Defense Authorization Act (“NDAA”), a massive annual defense spending bill.  As we have blogged, this bill, now law, contains historic changes to the Bank Secrecy Act (“BSA”), coupled with other changes relating to money laundering, anti-money laundering (“AML”), counter-terrorism financing (“CTF”) and protecting the U.S. financial system against illicit foreign actors. This sweeping legislation will affect financial institutions, their clients, and law enforcement and regulators for many years.  This will be the first post of many on these important legislative changes, which should produce related regulatory pronouncements throughout 2021.

Today, we will focus on the enactment that has received the most attention:  the NDAA’s adoption of the Corporate Transparency Act (“CTA”) and its requirements for covered legal entities to report their beneficial owners at the time of their creation to a database accessible by U.S. and foreign law enforcement and regulators, and to U.S. financial institutions seeking to comply with their own AML compliance obligations.  The issue of beneficial ownership and the misuse of shell corporations has been at the heart of global AML regulation and enforcement for many years.  This legislation will be held out as a partial but important response to the continuing critiques by the international community of the United States as a haven for money laundering and tax evasion, often due to the perception that U.S. and state laws on beneficial ownership reporting are lax.

Beyond “just” the CTA, the breadth of the BSA/AML legislation is substantial. We have discussed BSA/AML reform for years, and many of the reforms (acknowledging that the word “reform” often involves a value judgment, and whether a particular change represents “reform” is typically in the eye of the beholder) that have been repeatedly bandied about by Congress, industry, think tanks and law enforcement are incorporated into this legislation, or at least referenced as topics for further study and follow-up.  We therefore will be blogging repeatedly on the many and various components of this legislation, which implicates a broad array of key issues: BSA/AML examination priorities; attempting to modernize the BSA regulatory regime, including by improving feedback by the government on the usefulness of SAR reporting; potential “no action” letters by FinCEN; requiring process-related studies tied to the effectiveness and costs of certain BSA requirements, including current SAR and CTR reporting; increased penalties under the BSA for repeat offenders; greater information sharing among industry and the government; enhancing the ability of the government to investigate the use of correspondent bank accounts; cyber security issues; focusing on trade-based money laundering; adding a whistleblower provision to the BSA; and including dealers in antiquities to the definition of “financial institutions” covered by the BSA.
Continue Reading  U.S. Passes Historic BSA/AML Legislative Change

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

On November 5, 2020, the Council of the European Union approved a new action plan to strengthen anti-money laundering and combatting terrorism financing across the EU. The Action Plan, “an Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing,” appears to be motivated by the perceived failures in preventing the Danske Bank scandal (which we’ve blogged about here, and more generally, here, here, here, here, here, and here). In light of “[m]ajor divergences” and “serious weaknesses” in enforcement, it appears the Council believes the EU’s “anti-money laundering and countering the financing of terrorism” framework (“AML/CFT framework”) “needs to be significantly improved.” As we have blogged, the EU historically has issued numerous reports identifying systemic vulnerabilities to money laundering and suggesting process-based recommendations for how to address such threats. These recommendations typically have not addressed a basic issue: the actual prosecution of bad actors.

This new Action Plan contains some teeth. If its legislative proposals are enacted and implemented, it would allow the EU to close cross-border loopholes, update its rulebook, and strengthen the implementation and enforcement of the AML/CFT framework through EU-level supervision. Even if the more ambitious proposals do not pass legislative scrutiny, the Action Plan shows the EU is keenly focused on combatting the threat of cross-border money laundering and that it has many tools available at its disposal, some of which it is already using. Unified and coordinated implementation of the AML/CFT framework coupled with increased information sharing between members and between public and private partners should aid detection and enforcement efforts across the EU.
Continue Reading  Council of the European Union Unveils Ambitious New AML Action Plan