On March 30, 3023, the Financial Crimes Enforcement Network (FinCEN) issued a Financial Trend Analysis focusing on business email compromise (BEC) trends and patterns in the real estate sector (referred to as “RE BEC”). The report is required under Section 6206 of the Anti-Money Laundering Act of 2020 (AMLA). This section of AMLA requires FinCEN
Last month we blogged on an indictment in the Southern District of New York (“SDNY”) charging Vladimir Voronchenko (“Voronchenko”) with scheming to make payments to maintain multiple properties in New York and Florida owned by sanctioned Russian oligarch Viktor Vekselberg (“Vekselberg”), whom we had previously blogged about here.
Last Friday, the SDNY U.S. Attorney’s Office filed a follow-on civil forfeiture complaint (the “Forfeiture Complaint”) against the six properties at issue – one address in Southampton, NY; two units at 515 Park Avenue in Manhattan; and two addresses in Miami Beach (the “Subject Properties”). The Forfeiture Complaint seeks forfeiture of the Subject Properties on three bases: (a) as real property derived from proceeds traceable to violations of the International Emergency Economic Powers Act (“IEEPA”), various Executive Orders (13660-662 and 13685), and 31 C.F.R.§ 589.201 (which implemented those Executive Orders as part of a package of regulations promulgated by the Office of Foreign Assets Control of the Treasury Department (“OFAC”)); and (b) as real property involved in international money laundering to promote violations of the IEEPA, and (c) as assets of an entity involved in international money laundering to promote violations of the IEEPA.
Continue Reading DOJ Seeks to “KleptoCapture” Sanctioned Russian Oligarch’s NYC and Miami Properties Via Forfeiture
On February 7, 2023, the U.S. Attorney’s Office for the Southern District of New York announced the unsealing of an indictment charging Vladimir Voronchenko (“Voronchenko”) with participating in a scheme to make payments in excess of $4 million dollars to maintain four properties located in the United States that were owned by Viktor Vekselberg (“Vekselberg”), a sanctioned Russian oligarch (whose own issues we have blogged on here). Additionally, the indictment also charges Voronchenko, a citizen of the Russian Federation and legal permanent resident of the United States, with contempt of court in connection with his flight from the United States following receipt of a grand jury subpoena on May 13, 2022, which required his personal appearance and testimony. He has not returned to the United States since.
As we discuss, the indictment implicates several issues on which we blog frequently, including evasion of Russia sanctions relating to the Ukraine; the potential exposure of lawyers to money laundering risks; and the potential exposure of real estate professionals to money laundering risks.
Continue Reading Russian Citizen Indicted for Making Payments on Behalf of Sanctioned Russian Oligarch
On January 25, the Financial Crimes Enforcement Network (“FinCEN”) issued an “Alert on Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites, Oligarchs, and Their Proxies” (the “Alert”). The Alert defines “commercial real estate,” which the Alert refers to as “CRE,” as “property that is used for investment or income-generating purposes rather than as a residence by the owner.” The Alert “specifically highlights sanctions evasion-related vulnerabilities in the CRE sector and is based on a review of Bank Secrecy Act (BSA) reporting indicating that sanctioned Russian elites and their proxies may exploit them to evade sanctions.”
The Alert seeks to assist financial institutions with identifying potential sanctions evasion activity in the CRE sector by providing potential red flags and typologies related to this activity. As we discuss, the Alert also may represent a step towards BSA regulations for the CRE sector.
Continue Reading Russia Sanctions Evasion and Commercial Real Estate: An Alert
The Financial Crimes Enforcement Network (“FinCEN”) issued on December 22 a Financial Trend Analysis regarding Bank Secrecy Act (“BSA”) filings during the period of March to October 2022 (the “Report”) reflecting financial activity by Russian oligarchs the time of Russia’s unprovoked military invasion of Ukraine. This publication also refers to three prior alerts issued by FinCEN highlighting red flags on Russian oligarchs, high-ranking officials, and sanctioned individuals, on which we blogged here, here, and here. FinCEN published the Report pursuant to the Anti-Money Laundering Act’s requirement that FinCEN periodically publish threat pattern and trend information derived from BSA filings.
Overall, FinCEN found that BSA data filed on financial transactions of Russian oligarchs, high-ranking officials, sanctioned individuals, and their family members in 2022 showed transactional patterns indicative of corruption and sanctions evasion, including:
On December 7, 2022, the United States Attorney’s Office for the Eastern District of New York (“DOJ”) unsealed a seven-count indictment against Andrii Derkach. In the corresponding press release, Derkach is described as a “Kremlin-backed Ukrainian politician and oligarch” who attempted to “influence the 2020 U.S. Presidential election on behalf of the Russian Intelligence Services.” Derkach was charged with conspiracy to violate the International Emergency Economic Powers Act (“IEEPA”), bank fraud conspiracy, money laundering conspiracy, and four counts of money laundering. His wife, Oksana Terekhova, is alleged to be a co-conspirator and is referred to as “Co-Conspirator 1” in the indictment. The investigation was “coordinated through the Justice Department’s Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls, and economic countermeasures that the United States . . . has imposed in response to Russia’s unprovoked military invasion of Ukraine.”
In connection with the indictment, the DOJ is requesting both criminal forfeiture of two Beverly Hills condominiums at issue in the indictment, as well as civil forfeiture in a parallel proceeding. If successful, the DOJ would seize both the condominiums and proceeds in an investment and banking account held by Derkach’s alleged business entity. Derkach remains at large.
This appears to be another in the long line of actions and sanctions brought against alleged Russian oligarchs and Russian agents, especially those with close connections to Russian Intelligence Services, in response to Russia’s invasion of Ukraine (of which we have blogged about here and here). As long as Russia remains active in Ukraine, it is likely that federal law enforcement will continue to focus on the actions and assets of high-profile Russian oligarchs and agents in the U.S. Financial institutions should continue to remain vigilant, as we have blogged about here, in rooting out attempts to evade sanctions.
Continue Reading Russian Agent’s Beverly Hills Condominiums Subject to Forfeiture Based on Alleged Violations of Bank Fraud, Money Laundering, and U.S. Sanctions Statutes
FinCEN announced yesterday that, once again, it is extending the Geographic Targeting Order, or GTO, which requires U.S. title insurance companies to identify the natural persons behind so-called “shell companies” used in purchases of residential real estate not involving a mortgage. FinCEN also has expanded slightly the reach of the GTOs.
The new GTO is
As we have repeatedly blogged, concerns about perceived anti-money laundering (“AML”) risks in the real estate industry are rising globally. Consistent with this concern, the Financial Action Task Force (“FATF”) has updated its AML guidance for the real estate sector in a document entitled “Guidance for a Risk-Based Approach: Real Estate Sector,” (“FATF Guidance” or “the Updated Guidance”). The FATF Guidance urges a variety of players in the real estate industry to adopt a risk-based approach (“RBA”) to mitigate AML risks and sets forth some high-level recommendations. The Updated Guidance notably coincides with FinCEN’s advanced notice of proposed rulemaking to impose reporting and perhaps other requirements under the Bank Secrecy Act (“BSA”) for persons involved in real estate transactions to collect, report, and retain information, and the recent extension of Geographic Targeting Orders for U.S. title insurance companies.
The FATF Guidance appears to be driven, at least in part, by FATF assessments showing that the real estate sector has high AML risks, which industry players often fail to appreciate and/or mitigate. The Updated Guidance explains how various industry players can use an RBA to mitigate those risks. It identifies sector-specific risks, sets forth strategies for assessing and managing those risks, and describes challenges the industry faces in doing so. The FATF also offers specific guidance for “private sector players” and “supervisors” (e.g., countries and self-regulatory boards) for going forward. The Updated Guidance includes tools, case studies, and examples of both private sector and supervisory practices to show real estate supervisors and practitioners how to implement FATF standards in an adequate, risk-based and effective manner.
The FATF is an inter-governmental policymaking body dedicated to creating AML standards and promoting effective measures to combat money laundering (“ML”) and terrorist financing (“TF”). The FATF issued the Updated Guidance with input from the private sector, including from a public consultation with thirteen private-sector representatives (including from sector specific professional associations, the legal profession, FinTech providers, and non-profit organizations) in March and April 2022. This consultation urged FinCEN, among other things, to provide greater clarity in the Updated Guidance regarding its applicability to the real estate sector and related professions (such as lawyers, notaries, and financial institutions) and extend FATF recommendations to broader real estate activities (such as property development and leasing).
Continue Reading FATF Updates Risk-Based Approach Guidance for the Real Estate Sector
On April 28, 2022, the Acting Director of the Financial Crimes Enforcement Network (“FinCEN”), Himamauli Das (“Das”), appeared before the U.S. House Committee on Financial Services to provide an update on FinCEN’s implementation of the Anti-Money Laundering Act of 2020 (“AML Act”), including the Corporate Transparency Act (“CTA”). You can find his prepared statement here.
In his opening remarks, Das walked through FinCEN’s activities for the year, and applauded the AML Act for putting FinCEN in a position to address today’s challenges, such as illicit use of digital assets, corruption, and kleptocrats hiding their ill-gotten gains in the U.S. financial system. The speech focused on financial sanctions on Russia, FinCEN’s continued efforts to fight corruption, and effective AML programs. Das also indicated that FinCEN is examining whether to issue proposed AML regulations for investment advisers – an effort that stalled in 2015.
Continue Reading FinCEN Acting Director Das Focuses on Corruption and Transparency During U.S. House Committee on Financial Services Testimony
FinCEN announced yesterday that, once again, it is extending the Geographic Targeting Order, or GTO, which requires U.S. title insurance companies to identify the natural persons behind so-called “shell companies” used in purchases of residential real estate not involving a mortgage. FinCEN also has expanded slightly the reach of the GTOs.
The new GTO is