We are really pleased to be moderating the Practising Law Institute’s 2020 Anti-Money Laundering Conference on May 12, 2020, starting at 9 a.m. Perhaps needless to say, this year’s conference will be entirely virtual. But the conference still should be as informative, interesting and timely as always. Our conference co-chair, Nicole S. Healy of Ropers
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
Government Suggests that Unusual Pleas are Just the Tip of an Iceberg
Chinese law generally prohibits its citizens from converting more than $50,000 in Chinese yuan into foreign currency in a year. On Monday, two men living in Las Vegas pleaded guilty in federal district court in the Southern District of California to operating an unlicensed money transmitter business, in violation of 18 U.S.C. § 1960. Allegedly, they ran a scheme in which they helped clients circumvent this Chinese law — as well as the anti-money laundering programs of U.S. financial institutions — by converting electronic funds in China into hard currency in the United States, which the clients then used to gamble at casinos.
The case reflects the continuing ingenuity employed by individuals to use expanding technologies to circumvent currency controls and money laundering laws. The case is also interesting because the defendants allegedly ran their scheme with the help of insiders at the casinos, who provided assistance in exchange for a cut of the cash.…
Continue Reading Guilty Pleas Highlight Illicit Funneling of Chinese Cash to Casinos
Note to Government Personnel: Don’t Disclose SARs
This week, major developments unfolded in the cases against two former federal government employees for their respective roles in disclosing Suspicious Activity Reports (“SARs”) in violation of the Bank Secrecy Act (“BSA”).
Historically, prosecutions pertaining to improper SAR disclosures have been supremely rare, so the fact that two court hearings involving this issue occurred in a single week is particularly notable. Both involve defendants allegedly acting on their own perceived sense of duty – perceptions which ran afoul of the law.
First, Natalie Mayflower Sours Edwards, a former senior advisor at the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”), pleaded guilty to one felony count of conspiring to unlawfully disclose SARs related to Paul Manafort, Richard Gates, Maria Butina, Prevezon Alexander, and the Russian Embassy to a reporter. Second, John C. Fry, a former employee of the Internal Revenue Service (“IRS”), was sentenced to five years of supervised probation and ordered to pay a $5,000 fine after similarly pleading guilty to his role in disclosing SARs to embattled attorney Michael Avenatti that related to likewise-embattled attorney Michael Cohen. Both prosecutions underscore the seriousness with which federal authorities view such disclosures. Likewise, they reflect that potentially subjective good intentions – of course – still don’t excuse violations of the carefully-crafted prohibitions in the BSA against the disclosure of SARs.
Happy New Year! And, happy birthday to Money Laundering Watch, which is entering its fourth year.
Let’s look back. 2019 has been yet another busy year in the world of money laundering and BSA/AML. We are highlighting 12 of our most-read blog posts, which address many of the key issues we’ve examined during…
ABA Tax Fraud Panel to Discuss IRS CI and Crypto Criminals
The Internal Revenue Service – Criminal Investigation (IRS CI) has made it clear that it is focusing on the abuse of digital currencies to further tax evasion, money laundering, and other offenses. IRS-CI also has made it clear that this is an international effort, and that it is trying to partner with law enforcement agencies across the globe in order to coordinate and share investigative leads.
This is a hot topic, and we are honored that Ballard Spahr will be moderating a panel on these very same issues, at the ABA’s annual Tax Fraud/Tax Controversy Conference in Las Vegas on December 12, entitled Charging Cryptocurrency Violations—Tax Crimes or Money Laundering. We are pleased to be joined by our wonderful panelists, Evan J. Davis, Betty J. Williams, and Ian M. Comiskey. This is a unique conference, and we invite you to attend if you are interested in the fascinating cross-section of tax evasion and money laundering.
This blog will discuss the recent efforts by IRS-CI to “up its game” in investigating cross-border offenses committed through cryptocurrency, such as its participation in the international Joint Chiefs of Global Tax Enforcement task force. We then will discuss a recent high-profile case which exemplifies these two goals of fighting crypto-related crime and collaborating with foreign law enforcement officials to do so: the notorious “Welcome to Video” case, which led to a global takedown of a darkweb child pornography website, its administrator, and its customers. The Welcome to Video investigation, led by IRS-CI, also illustrates a key point we will discuss at the ABA conference: that cryptocurrency is only “pseudo-anonymous,” and that its protections can yield to a determined combination of modern digital forensics and old-fashioned investigative techniques.…
Continue Reading IRS CI Highlights International Efforts to Tackle Cryptocurrency Abuse, Money Laundering and Tax Evasion
Arrest is Culmination of Elaborate FBI Sting Targeting Banker Who Allegedly Catered to Drug Dealers
On November 12, 2019, the U.S. Attorney for the Southern District of Florida announced two key money-laundering developments concerning high-profile Guatemalans: the arrest of Alvaro Estuardo Cobar Bustamante, the director of a national Guatemalan bank, and the unsealing of a case against and guilty plea of Manuel Antonio Baldizon Mendez, a former presidential candidate in Guatemala who cooperated in the FBI and DEA sting operation against Cobar.
The government’s press release, coupled with its charging documents discussed below, underscore Guatemala’s strategic importance to drug traffickers and, by extension, money launderers. These developments likewise emphasize: (1) the increasing degree of international coordination often required to root out and prosecute both crimes; and (2) the United States’ willingness to prosecute alleged bad actors abusing the financial system, of which we have blogged about here.
Guatemala’s Strategic Importance to Central and South American Drug Trafficking Organizations
Since at least as early as 2013, the FBI and DEA have conducted extensive and numerous investigations into Drug Trafficking Organizations (“DTOs”) in Guatemala. Both agencies have emphasized the strategic importance of Guatemala for large-scale DTOs because it is a key transportation hub in the cocaine trafficking pipeline that begins in Colombia and moves through Central America and Mexico before branching off into various locations in the United States. Colombian and Mexican DTOs, seeking to avoid detection from U.S. law enforcement, often buy and sell multi-ton quantities of cocaine in Guatemala which, in turn, creates a plethora of opportunities for Guatemalan DTOs to serve as intermediaries receiving and re-selling cocaine.…
Continue Reading International Efforts to Combat Guatemalan Money Laundering Schemes Nets High-Profile Arrest and Guilty Plea
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