The U.S. Attorney’s Office for the Southern District of New York announced the unsealing of a superseding indictment charging Jennifer Shah and another person for conspiring to commit wire fraud and money laundering. Shah, described in promotional materials as having an “extravagant personality and sharp tongue,” is a star on the reality television series The
On December 10, 2020, Kenneth Blanco, Director of FinCEN, issued public comments at the American Bankers Association/American Bar Association Financial Crimes Enforcement Conference announcing new FinCEN guidance for covered financial institutions to utilize the voluntary information sharing provisions of section 314(b) of the USA Patriot Act (“Guidance”). The Guidance encourages information sharing under section 314(b) and emphasizes the potential breadth of the provision, which protects compliant financial institutions from civil liability.…
Continue Reading FinCEN Provides New Guidance on Section 314(b) Information Sharing
DOJ Charges a U.S. Billionaire, an Alleged International Drug Conspiracy Using Chinese Bank Accounts and a Guatemalan Casino, and a Former Top Mexican Official in the “War on Drugs”
The term “October Surprise” garnered new meaning this year among money laundering enthusiasts with the announcement of three major indictments. All three announcements came on October 15 – at the midpoint of a month of news cycles otherwise dominated by the upcoming United States presidential election. Although these three indictments are all very different from one another in many ways, they all share a core element: the cross-border transfer of allegedly dirty money.
“Largest Ever U.S. Criminal Tax Charge” Bring Money Laundering Charges as Well
The Department of Justice (“DOJ”) unsealed a 39-count indictment returned by a federal grand jury in San Francisco, California, charging billionaire Robert T. Brockman, the Chief Executive Officer of Ohio-based software company Reynolds & Reynolds, with conspiring to defraud the United States, tax evasion, wire fraud, money laundering, failing to file Reports of Foreign Bank and Financial Accounts (“FBARs”), evidence tampering and destruction of evidence. The charges involve an alleged scheme to conceal approximately $2 billion in income from the Internal Revenue Service (“IRS”), which law enforcement officials have said is the largest ever tax charge in the United States. The wire fraud charges do not attempt to “bootstrap” the false tax returns at the heart of the tax evasion scheme into a wire fraud scheme, but rather rest on an alleged scheme to defraud investors in the software company’s debt securities. Still, Brockman’s indictment is yet another example of the potentially powerful overlap of money laundering and tax fraud charges, both of which often implicate the issue of beneficial ownership and the use of shell companies.…
Continue Reading Criminal Enforcement Round Up: October Yields a Trio of High-Profile Money Laundering Charges With International Focus
Regulators’ Joint Statement Attempts to Clarify AML Expectations Regarding Potential Corrupt Actors
On August 21, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and other banking regulators – specifically the Federal Reserve, the FDIC, the National Credit Union Administration, and the OCC – issued a joint statement that provides additional guidance in applying Bank Secrecy…
High Profile Corruption, High End Real Estate, Shell Companies . . . and Fine Art
Second of Two Posts on Evolving Issues Regarding Real Estate and Money Laundering
In our last post, we blogged on a major regulatory tool to combat the use of real estate as a potential vehicle for money laundering: the real estate Geographic Targeting Orders (“GTOs”) issued by the Financial Crimes Enforcement Network. Today we explore a major enforcement tool in action: civil forfeiture of real estate by the U.S. Department of Justice (“DOJ”).
This summer, the International Unit of the DOJ’s Money Laundering and Asset Recovery Section (MLARS) filed numerous complaints for civil forfeiture for real estate and other assets. This blog post will highlight a few – but not all – of these interesting and high-profile cases. Some of these cases may have been informed by data and leads obtained through the GTOs.
We explore here a trio of civil forfeiture actions pertaining, respectively, to alleged public corruption cases arising out of Gambia, Nigeria, and Malaysia. All of these cases involve foreign public officials who allegedly obtained wealth through corruption schemes committed abroad and laundered that money through shell companies to purchase real estate and other assets – sometimes located in the U.S., but sometimes not. Although the officials’ alleged initial crimes – the “specified unlawful activity,” or SUAs, as underlying crimes are defined under the federal money laundering statutes – took place overseas, the U.S. money laundering statutes provide that foreign misappropriation, embezzlements, and theft of public funds to benefit a public official constitute SUAs, thereby allowing the U.S. government to pursue civil forfeiture claims against assets located in the U.S. or abroad which are linked to the funds from underlying crimes committed primarily or even outside of the U.S.
This is the “civil forfeiture version” of a tactic used with increasing frequency by DOJ on which we repeatedly have blogged: the use of the criminal money laundering statutes to prosecute foreign officials for spending the fruits of entirely foreign crimes, when some of the financial transfers involved in the subsequent money laundering transactions occurred in the U.S.
Finally, another theme running throughout the allegations in these civil forfeiture actions is the unfortunate connection between money laundering and corruption and human rights abuses.…
Continue Reading Civil Forfeiture of Real Estate to Fight Money Laundering: A Round-Up
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
Convictions to “Promote” Crime and “Conceal” Illegal Proceeds Vacated Due to Insufficient Evidence of Intent
A recent decision out of the United States District Court for the Eastern District of Virginia adjudicating a seemingly straight-forward alleged fraud and money laundering scheme reminds us that money laundering charges still require the government to establish elements which can be difficult to prove, including, importantly, specific intent.
United States v. Millender involved an investment fraud scheme charged against a husband and wife and their associate. Terry and Brenda Millender were, respectively, the founder and pastor, and the “First Lady” of the Victorious Life Church (“VLC”) in Alexandria, Virginia. The evidence at trial established that Mr. Millender conceived of and founded Micro-Enterprise Management Group (“MEMG”), purportedly for the purpose of helping the poor in developing countries by making small, short-term loans to entrepreneurs who wished to start or expand existing businesses. Mrs. Millender was the co-founder, registered agent, and signatory of MEMG. To fund the enterprise, MEMG solicited “loans” from VLC congregants and other private lenders. MEMG promised its investors high rates of return through profits on the entrepreneur loans and assured them that the loans were securely backed by MEMG assets. Moreover, written materials soliciting investment represented that MEMG had a successful history of making micro-loans in Africa and had established relationships with on-going projects. Later, Mr. Milliner founded a second entity, Kingdom Commodities Unlimited (“KCU”), purportedly for the purpose of brokering Nigerian oil deals, and promising investors substantial returns on what they claimed were short term loans. The defendants solicited over $600,000 from investors from 2008 until 2015.
The Millender opinion reflects the complexity of the different prongs of the money laundering statutes, and their somewhat overlapping and competing requirements. The opinion is particularly noteworthy because of its procedural posture: despite jury verdicts finding guilt, the district court nonetheless found at least as to some counts that there was insufficient evidence as a matter of law of knowledge and specific intent.…
Continue Reading Money Laundering and Specific Intent Can Be Difficult to Prove
Earlier this month, the District Court for the Central District of California imposed a prison sentence of one year and a day, with three years of supervised release, on defendant Theresa Lynn Tetley, who had pleaded guilty to: (i) the unlicensed operation of a digital currency exchange due to failure register with the Financial Crimes Enforcement Network (“FinCEN”), in violation of 18 U.S.C. § 1960(a) and (b)(1)(B), and (ii) a money laundering charge, in violation of 18 U.S.C. § 1956(a)(3)(B), arising out of an undercover “sting” operation run by the Drug Enforcement Agency and Internal Revenue Service-Criminal Investigation involving the attempt to conceal proceeds supposedly obtained by selling drugs. Tetley also was ordered to pay a $20,000 fine and forfeit 40 Bitcoin, $292,264 in cash, and 25 gold bars that were the alleged proceeds of her illegal activity.
The Court imposed a sentence significantly lower than the sentence of 30 months requested by the government, a recommendation which already was lower than the advisory sentencing range recommended by the Federal Sentencing Guidelines (“Guidelines”) of 46 to 57 months in prison, as calculated by the U.S. Probation Office.
Tetley, a 50 year old woman living in Southern California, is a former stockbroker and real estate investor. She operated her digital currency exchange under the alias “Bitcoin Maven” for over three years, running an unregistered Bitcoin for cash exchange service. According to the government, her service “fueled a black-market financial system” that “purposely and deliberately existed outside the regulated bank industry” and which catered to an alleged major darknet vendor of illegal narcotics. According to the defense, however, the defendant “departed from a lifetime of integrity and good deeds and showed terrible judgment by failing to comply with federal registration requirements and buying bitcoins from individuals who represented themselves as engaged in criminal activity.”
In this post, we will drill into this sentencing and the parties’ respective positions, which provide a window into the prosecution and sentencing of alleged crimes involving both digital currency and undercover money laundering operations — and into the process for the sentencing of federal crimes in general, and how other factors which are entirely unrelated to the facts of the specific offense can be important. Further, the Tetley case is interesting in part because it represents a sort of “hybrid” case — seen from time to time in money laundering cases involving professionals — which straddles both the typically very different realms of “pure” financial crime cases and illegal narcotics cases. The government sentencing memorandum is here; the defense sentencing memorandum is here.…
Continue Reading Unlicensed Bit Coin Exchange Operator Sentenced to One Year and a Day for Attempted Money Laundering in Undercover Sting Operation and Failure to Register with FinCEN
As forecasted in a blog post last summer, the United States Department of Justice (“DOJ”) has again used the money laundering statute to accomplish the otherwise elusive goal of prosecuting foreign officials who allegedly receive bribes. On Monday, DOJ unsealed its Indictment against five Venezuelans employed by or closely connected to Petroleos de Venezuela S.A. (“PDVSA”), the Venezuelan state-owned and state-controlled oil company.
The unsealing of the charges against these five Venezuelan individuals marks the latest development in a multi-year effort by DOJ to investigate and prosecute bribery at PDVSA. As DOJ’s press release notes, ten individuals have already pleaded guilty in the investigation thus far. Key among these individuals are Roberto Enrique Rincon Fernandez and Abraham Jose Shiera Bastidas, two American businessmen who pleaded guilty in 2016 to violating the Foreign Corrupt Practices Act of 1977 (the “FCPA”) for paying bribes to PDVSA. In connection with their pleas, the two admitted to paying PDVSA bribes in order to win lucrative energy contracts and to be given payment priority over other PDVSA vendors during a time when PDVSA faced a liquidity crisis.
Last October, more than one year after these guilty pleas, Spanish police announced the arrests of four of the five individuals named in Monday’s Indictment. The arrests were described as “part of a months-long sting ordered by the U.S. Department of Homeland Security.” Currently, three of the defendants remain in Spain pending extradition, the fourth was extradited to the United States and made his initial appearance last Friday, and the fifth remains at large.
As noted above, the Indictment is notable for using the money laundering statute to accomplish what the FCPA statute cannot—bringing charges against a foreign official. Last summer, we blogged about the conviction and sentencing of Guinea’s former Minister of Mines and Geology. There, we noted the FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business. However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it. Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA.…
Continue Reading DOJ Employs Money Laundering Statute to Prosecute Venezuelan Oilmen for Foreign Bribery
Attorney General Sessions Announces Rescission of Obama Administration Policies on Marijuana Enforcement; Financial Institutions Lose Grounds to Permit Financial Transactions with Marijuana Businesses
In a single-page memorandum issued today, Attorney General Sessions tersely rescinded a string of DOJ enforcement policies announced during the Obama Administration — chief among them the “Cole Memo,” described below — which collectively had indicated that although marijuana was still illegal under federal drug laws and the DOJ would continue its enforcement of those laws, the DOJ also would defer to state governments that had developed regulatory regimes legalizing marijuana under defined circumstances. Although Attorney General Sessions is well known for his personal distaste for marijuana-related activity, he previously had not been entirely clear as to exactly what position his DOJ would take in regards to the Cole Memo and related enforcement.
Although this policy change has many potential implications, its primary relevance to Anti-Money Laundering (“AML”), the Bank Secrecy Act (“BSA”), and money laundering issues is that the Cole Memo had provided the support for the federal government to issue guidance that, under very defined circumstances, financial institutions could provide services to state-licensed marijuana businesses.…
Continue Reading Marijuana Enforcement: DOJ Cole Memo Up in Smoke