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Advisory is Accompanied by Related OFAC and DOJ Actions

On June 20, 2024, the Financial Crimes Enforcement Network (“FinCEN”) issued a supplemental advisory to alert U.S. financial institutions about emerging trends in the illicit fentanyl supply chain. The supplemental advisory emphasized the increasing involvement of Mexico-based transnational criminal organizations (“TCOs”) in the procurement of fentanyl precursor chemicals and manufacturing equipment from suppliers in the People’s Republic of China (“PRC”).

The detailed supplemental advisory builds upon FinCEN’s 2019 advisory (see our blog post here) by introducing new typologies and red flags for financial institutions to try to identify and report suspicious transactions.  As we discuss, the supplemental advisory was accompanied by related actions by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) and the U.S. Department of Justice (“DOJ”) as part of an apparently coordinated effort by the federal government to combat this pernicious illicit industry.

Continue Reading  FinCEN Issues Supplemental Advisory on Fentanyl Distribution and Growing Role of Transnational Criminal Organizations

The new Director of FinCEN, Andrea Gacki, addressed several key topics on October 3, 2023 at the Association of Certified Anti-Money Laundering Specialists (“ACAMS”) conference in Las Vegas, Nevada.  Specifically, Director Gacki addressed the issues of beneficial ownership under the Corporate Transparency Act (“CTA”); the real estate industry; investment advisers; fentanyl trafficking; and whistleblowers…

Opinion Offers Narrow View of “Safe Harbor” Provision for Defense Attorneys Accepting Tainted Funds from Clients

Second in Series of Two Blog Posts Pertaining to Attorneys Convicted of Money Laundering

On April 25, the U.S. Court of Appeals for the Fourth Circuit affirmed the conviction of Baltimore defense attorney Kenneth Ravenell (“Ravenell”) for money laundering conspiracy, in violation of 18 U.S.C. § 1956(h).  Ravenell had proceeded to trial and had been acquitted of six charges, including conspiracy to distribute narcotics.  However, he was convicted on the single count of money laundering conspiracy, based on his alleged assistance to two drug dealer clients, and received a sentence of 57 months of imprisonment.

The Ravenell opinion (“Opinion”) involves a splintered set of findings across the three-judge panel.  It involves findings on important technical issues pertaining to the statute of limitations and the use of the conscious avoidance/willful blindness theory of prosecution, which is often critical in cases involving third-party professionals such as lawyers, accountants, and real estate agents.  But, more importantly, it involves a discussion of when defense attorneys may accept illegally-obtained proceeds from their clients as payment for legal representation, and if such funds ever may be provided through third parties.  As we will discuss, the Fourth Circuit interpreted very narrowly a “safe harbor” provision under 18 U.S.C. § 1957(f) for defense attorneys – and did so in a case in which the evidence, if accepted, made clear that the safe harbor did not apply.  Stated otherwise, bad facts may have resulted in inappropriately broad language applicable to other cases.

As we just blogged, the U.S. Attorney’s Office for the Southern District of New York also announced on April 25 that Robert Wise (“Wise”), a New York attorney, had pled guilty to a single count of conspiring to commit money laundering, in violation of 18 U.S.C. § 371.  This case arose out of the indictment of Vladimir Voronchenko, who has been charged in connection with a scheme to make payments to maintain multiple properties in New York and Florida owned by his friend and associate, sanctioned Russian oligarch Viktor Vekselberg.  

These two cases are very different.  But they both illustrate how attorneys – either business attorneys, or criminal defense attorneys – can get caught up in the problems of their own clients, particularly given the ability of the government to pursue a theory of willful blindness.

Continue Reading  Fourth Circuit Upholds Money Laundering Conspiracy Conviction of Baltimore Defense Attorney

The U.S. Department of Justice (“DOJ”) announced on March 15, 2023 that in a coordinated effort between U.S. Federal Bureau of Investigations, Europol, and German police, the darknet cryptocurrency mixing service ChipMixer has been shut down.  The operation involved the U.S. government’s court-authorized seizure of two domains that directed users to the ChipMixer service and one Github account.  In addition, German authorities seized $46 million in cryptocurrency, as well as ChipMixer’s back-end servers used to run the site. 

Further, the U.S. Attorney’s Office for the Eastern District of Pennsylvania filed a criminal complaint against ChipMixer’s suspected founder, Vietnamese national, Minh Quoc Nguyen (“Nguyen”), alleging that Nguyen openly flouted financial regulations and instructed users how to use ChipMixer to evade reporting requirements while obscuring his true name under a series of stolen and fictitious identities. The complaint also alleges that ChipMixer, described as a popular platform for laundering illicit funds gained from unlawful activities like drug trafficking, ransomware attacks (according to Europol, ransomware actors Zeppelin, SunCrypt, Mamba, Dharma, Lockbit have used ChipMixer), and payment card fraud, was used to launder more than $3 billion in cryptocurrency since 2017.  Nguyen has been charged with money laundering, operating an unlicensed money transmitting business, and identity theft in connection with the operation of ChipMixer. 

Continue Reading  Darkweb Cryptocurrency Mixer ChipMixer Shut Down for Allegedly Laundering $3 Billion Worth of Crypto

We previously blogged on an advisory issued by FinCEN alerting financial institutions to the various financial mechanisms used by traffickers of fentanyl and synthetic opioids to launder the burgeoning proceeds of their illicit activities. In the years since, the volume of that drug trade has only increased, as tragically evidenced in part by the skyrocketing rate of fentanyl-related deaths per year – in the U.S. alone, rising from around 28,000 to almost 70,000 in the past five years.

Recognizing this as a global concern requiring transnational solutions to address it, on November 30 the Financial Action Task Force (“FATF”), an intergovernmental organization comprised of 38 national members and two regional organizations (the EU and the Gulf Cooperation Council), released a report, coordinated by the U.S. and Canada, on money laundering stemming from trade in fentanyl and synthetic opioids, with specific recommendations for counteracting the cash flow of the groups engaged in this activity.

The report attempts to focus greater attention on the transnational aspect of the global fentanyl trade. It notes that the trade is fueled by organized crime groups which are able to utilize a high level of sophistication both in the acquisition of drugs for sale and distribution, and in the subsequent laundering of proceeds.

Continue Reading  Countering Financial Flows From the Illicit Trade in Fentanyl and Synthetic Opioids

On March 1, 2022, the U.S. Department of the Treasury (“Treasury”) published its National Risk Assessment for Money Laundering, Terrorist Financing, and Proliferation Financing (the “NMLRA”), identifying the national threats, vulnerabilities, and risks facing the U.S. financial system.  The NMLRA is 74 pages long and comprehensively covers many different perceived threats and vulnerabilities, including the misuse of legal entities, virtual assets, real estate, investment advisors, and casinos.  This post therefore selects three key issues for closer analyses.

First, cybercrime (a topic we cover frequently) in the form of ransomware received the dubious honor of representing “a larger and growing share of the overall money laundering threat in the United States.”  Second, professional money laundering organizations (“PMLOs”) continue to peddle their illicit services internationally to launder the proceeds of cybercrime, narcotics trafficking, and other schemes on behalf of organized criminal enterprises.  Third, merchants and professionals, such as lawyers, real estate professionals, and financial services employees, continue to perform – knowingly or unknowingly – critical functions in support of money laundering schemes and obfuscating the source of ill-gotten gains.
Continue Reading  U.S. Treasury Identifies Ongoing and Emergent Money Laundering Risks and Vulnerabilities

The U.S. Government Accountability Office (“GAO”) recently issued a public version of a more detailed and confidential report previously sent to Congress summarizing the GAO’s review of the use of virtual currencies to facilitate human and drug trafficking.  The GAO’s report, Additional Information Could Improve Federal Agency Efforts to Counter Human and Drug Trafficking, (“the Report”) is lengthy.  The GAO examined two issues:  (1) U.S. agencies’ collection of data on the use of virtual currencies for human and drug trafficking; and (2) the steps taken and challenges faced by U.S. agencies to counter human and drug trafficking facilitated by virtual currencies.  In this post, we will describe the Report at a high level, but will focus on the emerging trends identified in the Report and the GAO’s recommendations to counter the use of virtual currency in facilitating human and drug trafficking by amending BSA/AML regulation of virtual currency kiosks, otherwise known as virtual currency ATMs, so as to identify specific locations.
Continue Reading  GAO Publishes Report on Nexus Between Virtual Currencies and Human and Drug Trafficking Financing

Global environmental crime—the third largest illicit activity in the world, according to a report by the FATF—is estimated to generate hundreds of billions in illicit proceeds annually.  This criminal activity harms human health, the climate, and natural resources.  To help address the threat presented by environmental crimes, the Financial Crimes Enforcement Network (FinCEN) issued an environmental crimes and associated illicit financial activity notice (Notice) on November 18, 2021.  The FinCEN Notice states that environmental crime and related illicit financial activity are associated strongly with corruption and transnational criminal organizations, both of which FinCEN has identified as national anti-money laundering and countering the financing of terrorism (AML/CFT) priorities for financial institutions to detect and report.

We have blogged with increasing frequency (see here, here, here and here) on the nexus between environmental crime and illicit financial flows, and how these money laundering risks are often overlooked and are especially difficult for financial institutions to monitor.  Environmental offenses are also receiving more attention in the U.S., in part because of the growing interest by investors, companies and regulators in ESG (Environmental, Social and Governance) concerns.

The Notice includes an appendix that describes five categories of environmental crimes and the illicit financial activity related to them: wildlife trafficking, illegal logging, illegal fishing, illegal mining, and waste and hazardous substances trafficking.  The Notice also includes new suspicious activity report (SAR) filing instructions in order to enhance analysis and reporting of illicit financial flows related to environmental crime.
Continue Reading  FinCEN Issues Notice on Environmental Crimes and Illicit Financial Activity

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…

On October 6, the Department of Justice (“DOJ”) announced the creation of a National Cryptocurrency Enforcement Team (“NCET”).  The DOJ press release is set forth in part below, without further commentary, other than to observe that the NCET’s stated goals are to address issues on which we repeatedly have blogged:  crypto exchangers and their AML…