On March 24, 2023, the Financial Crimes Enforcement Network (FinCEN) issued a press release and published initial guidance to assist the public in understanding the beneficial ownership information (BOI) reporting requirements under the Corporate Transparency Act (CTA). The guidance comprised Answers to Frequently Asked Questions (FAQs), a one-pager informative graphic explaining the applicable reporting filing dates, and a one-pager Answers to Key Questions on beneficial owner reporting. Additionally, FinCEN published a one-minute Introductory Video and a more detailed four-and-a-half minute Information Video about the BOI reporting requirement.

In the press release, FinCEN Acting Director Himamauli Das stated that the agency was committed to ensuring the implementation of the CTA’s BOI reporting obligations was “as simple as possible, particularly for small businesses who may have never heard of or interacted with FinCEN before.”

We have blogged extensively on the CTA and FinCEN’s final and proposed regulations (here, here, here, and here), and will not repeat our analysis of these regulations – other than to note that the stated primary goal of the CTA was to enable law enforcement and regulators to obtain information on the “real” beneficial owners of so-called “shell companies,” including foreign entities registered in the United States, in order to “crack down” on the misuse of such companies for potential money laundering, tax evasion and other offenses.

As we will discuss, these publications from FinCEN appear to be designed to assist the general public in understanding the basic rules regarding the CTA and its implementing regulations.  To that extent, they succeed on their own terms.  But, they do not address more difficult or more nuanced issues presented by the statute and the regulations.  Meanwhile, and as we will discuss, FinCEN has been subject to pressure and criticism from both the U.S. Senate and industry groups regarding many of these same difficult and nuanced issues, including (i) whether FinCEN will or can verify the BOI information reported to it under the CTA, and (ii) revising the CTA reporting form currently proposed by FinCEN, which, as we have blogged, invites bad actors to not answer key questions.

Continue Reading FinCEN Publishes Initial Guidance and FAQs on BOI Reporting Under CTA While Facing Backlash Over Proposed Access Rules and Reporting Form

On March 15, 2023, the United States Attorney for the Southern District of New York unsealed a twelve-count Indictment that charges Ho Wan Kwok (“Kwok”) and his financier, Kin Ming Je (“Je”), with various sprawling schemes – including one involving cryptocurrency – in which the defendants solicited investments in several entities and other programs via fraudulent misrepresentations to hundreds of thousands of Kwok’s online followers. Moreover, the Indictment alleges that Kwok and Je misappropriated hundreds of millions of dollars in fraudulently obtained funds during the conspiracy.

Specifically, the Indictment charges Kwok with conspiracy to commit wire fraud, securities fraud, bank fraud, and money laundering. He was also charged with the underlying acts of wire fraud, securities fraud, international “promotional” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(A)), international “concealment” money laundering (in violation of 18 U.S.C. § 1956(a)(2)(B)(i)), and “spending” money laundering (in violation of 18 U.S.C. § 1957), with the last charge resting on a single $100 million wire transfer. Je was also charged with these crimes, in addition to obstruction of justice.

In regards to the money laundering schemes, the Indictment alleges that the defendants attempted to conceal the source of their illicit proceeds by transferring “money into and through more than approximately 500 accounts held in the names of at least 80 different entities or individuals[,]” through bank accounts in the U.S., the Bahamas, and the United Arab Emirates (“UAE”).  Further, the Indictment alleges that the defendants used over $300 million of fraudulent proceeds for the benefit of themselves and their family members.  The Indictment therefore contains a detailed notice of forfeiture, listing numerous assets that allegedly constituted or were derived from proceeds traceable to the charged offenses.  These assets include numerous bank account balances collectively amounting to hundreds of millions of dollars, as well as a luxurious mansion in New Jersey, several extremely high-end automobiles, and a 46-meter “superyacht.”  The government’s press release includes photos of some of these assets, included in the visual above.

Continue Reading Indictment Alleges Investor Fraud of Over $1 Billion – And Elaborate Money Laundering and Lavish Spending

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

On February 27, 2023, the Financial Crimes Enforcement Network (FinCEN) in conjunction with the United States Postal Service (USPS) issued a press release and alert concerning the “national surge in check fraud schemes targeting the U.S. Mail.”  In what FinCEN Acting Director Himamauli Das called a “disturbing trend,” criminals are increasingly stealing checks from the U.S. Mail and USPS mail carriers—sometimes by force—and using the personal information contained therein to commit identity theft or other crimes.

Continue Reading FinCEN and USPS Issue Alert on Mail-Theft Check Fraud and SAR Filing Instructions

A group of five Democratic Senators have sent a letter to the Federal Reserve, OCC, FDIC, and NCUA asking them to take several steps to protect consumers from scams when using Zelle to transfer money.

The Senators ask the four agencies “to closely review and examine the customer reimbursement and anti-money laundering (AML) practices of depository institutions that participate in the Zelle network.” They also ask the Federal Reserve and OCC “to examine Early Warning Services, Inc. (EWS), which operates the Zelle network, on an ongoing basis and for the four agencies “to coordinate their supervisory approach with the Consumer Financial Protection Bureau.”  The Senators note that the agencies have authority to supervise the banks that own and operate Zelle and the participating depository institutions for compliance “with key consumer protection and AML laws, including the Electronic Fund Transfer Act (EFTA) and the Bank Secrecy Act (BSA).”

Continue Reading Democratic Senators Send Letter to Federal Banking Agencies Raising Concerns About Fraudulent Transactions

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

The Financial Action Task Force (“FATF”) Plenary was held on February 22-24, bringing together delegates from around the world to meet in Paris and discuss a variety of global financial crimes and ongoing risk areas. In a historic move, FATF decided to suspend the Russian Federation from membership in the intergovernmental organization, based upon its actions in Ukraine over the past year. We will discuss that decision, as well as the other major outcomes of the Plenary, which involve beneficial ownership, virtual assets, ransomware, the art and antiquities market, and changes to FATF’s so-called “grey list.”

Continue Reading FATF Plenary Suspends Membership of Russian Federation and Reiterates Other Strategic Initiatives

On February 14, 2023, both the American Bankers Association (“ABA”) and the Bank Policy Institute (“BPI”) submitted comments to the Financial Crimes Enforcement Network (“FinCEN”) on FinCEN’s notice of proposed rulemaking (“NPRM”) relating to access to beneficial ownership information (“BOI”) reported to FinCEN under the Corporate Transparency Act (“CTA”). While both organizations had similar comments, mainly being that the proposed limits on FIs’ ability to use BOI retrieved from the database contradicts the CTA’s objective, the ABA recommended that FinCEN entirely withdraw the NPRM. Below, we break down each organization’s comments and strong critiques regarding the NPRM.

Continue Reading Bank Industry Groups Heavily Criticize FinCEN’s Proposed Rule on Access to Beneficial Ownership Information

Alleged Evasion Through a Law Firm Account and High-End Real Estate

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

The U.S. Attorney’s Office for the Southern District of New York recently unsealed an indictment of Charles McGonigal (“McGonigal”), a former high-ranking FBI official, who has been accused of helping Russian oligarch Oleg Deripaska (“Deripaska”) avoid U.S. sanctions. Last Thursday, Chairmen of the Senate and House Judiciary Committees wrote letters to U.S. Attorney General, Merrick Garland, and FBI Director, Christopher Wray demanding information.

We discuss here the letters, which are extremely pointed.  But first, it’s worth examining the allegations in the indictment, which paint a dramatic tale of abuse of office, concealment through shell companies, and a former high-level law enforcement officer allegedly engaging in the same of behavior that, until very recently, he was sworn to detect, investigate and prevent.

Continue Reading Senate and House Judiciary Committees Demand Answers Regarding Indictment of Former High-Ranking FBI Official for Sanctions Conspiracy