Recent DOJ Forfeiture Action Against High-End Real Estate in Notorious Corruption Scheme Underscores Issues We are pleased to be presenting on Money Laundering and the Real Estate Industry on May 20 before the Real Estate Services Providers Council (RESPRO), a national non-profit trade association representing businesses before federal and state policy makers, and
As expected, on May 8, 2020, the Financial Crimes Enforcement Network (“FinCEN”) reissued its Geographic Targeting Orders (“GTOs”) requiring U.S. title insurance companies to identify the natural persons behind legal entities used in purchases of residential real estate performed without a bank loan or similar form of external financing. The monetary threshold remains at $300,000,
The Financial Crimes Enforcement Network (“FinCEN”) released today an update (“Update”) on its March 16, 2020 COVID-19 Notice, on which we previously blogged, for the stated reason of assisting “financial institutions in complying with their Bank Secrecy Act (BSA) obligations during the COVID-19 pandemic, and announc[ing] a direct contact mechanism for urgent COVID-19-related issues.” Further, the Update states that “FinCEN is committed to promoting the success of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), including the need to facilitate expeditious disbursal of CARES Act funds.” This post will summarize briefly the Update, and make a few high-level comments.
The COVID-19 pandemic — pernicious, unpredictable and continually evolving — resists facile pronouncements. With that caveat, it is rational to predict that many financial institutions subject to the BSA will face significant issues in the very near future because of the unfortunate confluence of increased fraud schemes seeking to capitalize on the pandemic, coupled with the fact that many BSA/AML compliance teams will be straining in this age of “social distancing” and enforced working remotely to maintain an adequate amount of staff and degree of communication needed to catch and report suspicious activity, among other obligations under the BSA. Stated otherwise, we are entering a time of maximum fraud and a reduced capacity to stand guard.
Further, as the pandemic continues and then recedes, the previously existing fraud schemes will come to light — just like during the financial crisis of 2008, when the Bernie Madoffs of the world were exposed — because desperate investors will be demanding their cash back, and some soon will discover that their money actually was stolen a while ago. Investigations, prosecutions and litigations will ensue.
Turning to the Update by FinCEN, we summarize here greatly. In our view, the Update provides some generally helpful information, but little in the way of concrete guidance.
Continue Reading FinCEN Issues COVID-19 AML Update for Financial Institutions
The Financial Crimes Enforcement Network (“FinCEN”) just issued a release, entitled “The Financial Crimes Enforcement Network (FinCEN) Encourages Financial Institutions to Communicate Concerns Related to the Coronavirus Disease 2019 (COVID-19) and to Remain Alert to Related Illicit Financial Activity.” Given the topic and the simplicity of the release, this post merely provides the release in
In its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (“2020 Strategy”), the U.S. Department of Treasury (“Treasury”) has laid out its AML and money laundering enforcement priorities. Last week, we blogged about the 2020 Strategy and focused on the document’s findings and recommendations for increased transparency into beneficial ownership; strengthening international regulation and coordination, and modernization of the BSA/AML regime in regards to technological innovation.
Here, we focus on the 2020 Strategy as it relates to combating money laundering relating to real estate transactions and gatekeeper professions in general, such as lawyers, real estate professionals and other financial professionals, including broker dealers. Importantly, the 2020 Strategy also notes that the Financial Crimes Enforcement Network (“FinCEN”) is working on a proposed regulation which would extend AML obligations for banks and other financial institutions not subject to a federal functional regulator; there are an estimated 669 such institutions in the U.S.
Continue Reading Treasury Report Targets Money Laundering Risks in Real Estate and Gatekeeper Professions
First in a Two-Post SeriesThe U.S. Department of Treasury (“Treasury”) has issued its 2020 National Strategy for Combating Terrorist and Other Illicit Financing (“2020 Strategy”). This document sets forth the key priorities of the U.S. government regarding enforcement of the Bank Secretary Act (“BSA”), and the furthering of the government’s Anti-Money-Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) goals in general. It is lengthy document addressing numerous issues – albeit in a relatively high-level fashion in regards to any specific issue.
In this post, we will summarize the findings and recommendations of the 2020 Strategy, and will highlight some topics this blog has followed closely – including calls for: increased transparency into beneficial ownership; strengthening international regulation and coordination, and modernization of the AML/BSA regime. Our next post will focus on the 2020 Strategy as it relates to combating money laundering relating to real estate transactions and “gatekeeper” professions, such as lawyers, real estate professionals and other financial professionals, including broker-dealers.
The 2020 Strategy also focuses on several other important issues which we will not discuss in this limited blog series, but on which we certainly have blogged before, including the role of money laundering in international trade, casinos, money services businesses and digital assets.
Continue Reading Treasury Department’s 2020 National Illicit Finance Strategy: Aspirations for BSA/AML Modernization and the Combatting of Key Threats
Last Thursday, FinCEN Deputy Director Jamal El-Hindi appeared at the 20th annual Anti-Money Laundering (AML) and Financial Crimes Conference hosted by the Securities Industry and Financial Markets Association (SIFMA) in New York City. His prepared remarks covered three main topics at the intersection of the securities industry and FinCEN’s enforcement goals: (i) AML compliance trends and current challenges; (ii) the value of Bank Secrecy Act (BSA) filing data; and (iii) the current regulatory landscape.
El-Hindi not surprisingly stressed transparency and information sharing, the value of BSA reporting data, and the need for legislation regarding the collection of beneficial ownership at the corporate formation stage. El-Hindi also suggested – perhaps without the complete agreement of his audience – that regulators tend to under-regulate, rather than over-regulate. He stated: “But in an area such as ours where we have developed a strong partnership with industry and where we believe that you are just as vested in our mission to thwart bad actors as we are, it is important for us to use our authorities fully.”
His remarks are particularly relevant given the 2020 Examination Priorities recently issued by the SEC’s Office of Compliance Inspections and Examinations (OCIE), which states that the OCIE will prioritize examining broker-dealers and investment companies “for compliance with their AML obligations in order to assess, among other things, whether firms have established appropriate customer identification programs and whether they are satisfying their SAR filing obligations, conducting due diligence on customers, complying with beneficial ownership requirements, and conducting robust and timely independent tests of their AML programs.”
Continue Reading FinCEN Stresses Transparency, BSA Filing Data, and Perils of “Under- Regulating” to Securities Industry
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.
Earlier this month, the American Gaming Association (“AGA”) released an updated Best Practices for Anti-Money Laundering (“AML”) Compliance (“Best Practices Guidance”) reflecting a heightened focus on risk assessment as well as Know Your Customer/Customer Due Diligence measures for the gaming industry. This update amends the industry’s first set of comprehensive best practices for AML compliance, issued in 2014. At the time, the best practices were well-received by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (“FinCEN”). These updated Best Practices have drawn from recent FinCEN guidance and enforcement actions, the Treasury Department’s National Money Laundering Risk Assessment, and the Office of Foreign Assets Control’s (“OFAC”) updated compliance guidelines and provide detailed guidance regarding how the industry can continue to be “a leader in compliance.”
Continue Reading AMA Updates AML Best Practices for AML Compliance
Organization Excels at Niche Branding but Stumbles in Avoiding EnforcementThe first paragraph of the press release sums it up:
Today the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) took action against Evil Corp, the Russia-based cybercriminal organization responsible for the development and distribution of the Dridex malware. Evil Corp has used the Dridex malware to infect computers and harvest login credentials from hundreds of banks and financial institutions in over 40 countries, causing more than $100 million in theft. This malicious software has caused millions of dollars of damage to U.S. and international financial institutions and their customers. Concurrent with OFAC’s action, the Department of Justice charged two of Evil Corp’s members with criminal violations, and the Department of State announced a reward for information up to $5 million leading to the capture or conviction of Evil Corp’s leader. These U.S. actions were carried out in close coordination with the United Kingdom’s National Crime Agency (NCA). Additionally, based on information obtained by the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), the Treasury Department’s Office of Cybersecurity and Critical Infrastructure Protection (OCCIP) released previously unreported indicators of compromise associated with the Dridex malware and its use against the financial services sector.
The Department of Treasury press release is extremely detailed. Summarized very broadly, it observes that OFAC’s designation targets 17 individuals and seven entities, including Evil Corp, its “core cyber operators, multiple businesses associated with a group member, and financial facilitators utilized by the group.” The designation means that all property and interests in property of these persons subject to U.S. jurisdiction are blocked, and U.S. persons are generally prohibited in engaging in transactions with them.
As noted below, the U.S. government is alleging that these cyber criminals are working with the Russian government. FinCEN and the Cybersecurity and Infrastructure Security Agency (CISA) of the Department of Homeland Security also have issued an Alert to financial institutions regarding how to try to detect, mitigate and report the presence of the pernicious Dridex malware.
Continue Reading U.S. Treasury and DOJ Target “Evil Corp”