International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, May 23, 2017

Banamex USA Agrees to Forfeit $97 Million in Connection with Bank Secrecy Act Violations

Today Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division announced that Banamex USA (BUSA), a financial institution based in Los Justice logoAngeles, California, and a subsidiary of Citigroup Inc., agreed to forfeit $97.44 million and entered into a non-prosecution agreement (NPA) to resolve an investigation into BUSA’s Bank Secrecy Act (BSA) violations. In its agreement with the Justice Department, BUSA admitted to criminal violations by willfully failing to maintain an effective anti-money laundering (AML) compliance program with appropriate policies, procedures, and controls to guard against money laundering and willfully failing to file Suspicious Activity Reports (SARs).

According to admissions contained in the NPA and the accompanying statement of facts, from at least 2007 until at least 2012, BUSA processed more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion. During the same period, BUSA’s monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions. BUSA, however, conducted fewer than 10 investigations and filed only nine SARs in connection with these 18,000-plus alerts, filing no SARs on remittance transactions between 2010 and 2012.

BUSA also admitted that, for several years, BUSA recognized that it should have improved its monitoring of MSB remittances but failed to do so. BUSA employed a limited and manual transaction monitoring system, running only two scenarios to identify suspicious activity on the millions of remittance transactions it processed. These two scenarios produced paper reports that were intended to be reviewed by hand by the two employees assigned to perform the BSA functions of the bank, in addition to time-consuming non-BSA responsibilities. As BUSA began to expand its remittance processing business in 2006, BUSA understood the need to enhance its anti-money laundering efforts, yet failed to make necessary improvements to its transaction monitoring controls or to add staffing resources.

In July 2015, in a related matter, the Federal Deposit Insurance Corporation (FDIC) and California Department of Business Oversight ordered BUSA to pay a $140 million civil money penalty to resolve separate BSA regulatory investigations. Thus, the combined penalties paid by BUSA associated with the criminal and regulatory investigations of its BSA compliance violations amount to approximately $237.44 million. In March 2017, the FDIC also announced related enforcement actions against four former senior BUSA executives relating to BUSA’s violations of the BSA. As part of those actions, two executives were fined and prohibited from working at financial institutions in the future, one was fined, and one was prohibited from working at financial institutions in the future.

As explained in the Non-Prosecution Agreement, the Justice Department reached this resolution based on a number of factors. In particular, BUSA engaged in extensive remedial actions, including devoting significant resources to remediation of the BSA and AML deficiencies, exiting BUSA’s MSB business entirely, and ultimately ceasing all banking operations at BUSA. BUSA received partial credit for its cooperation with the Justice Department’s criminal investigation, including making factual presentations, voluntarily making foreign-based employees available for interviews in the United States, producing documents from foreign countries in ways that did not implicate foreign data privacy laws, and collecting, analyzing and organizing voluminous evidence and information for the Justice Department, including identifying and providing documents relating to certain individuals and topics. In addition, pursuant to the NPA, BUSA and Citigroup agreed to cooperate fully in this and any other Justice Department investigation relating to violations of the BSA and federal money laundering statutes and, for a period of one year, to report to the Justice Department any evidence or allegation of violations of the BSA or money laundering laws. Citigroup further agreed to report to the Justice Department regarding implementation of compliance measures to improve oversight of its subsidiaries’ BSA compliance.

This case was investigated by the Drug Enforcement Administration’s New England Field Division, the Internal Revenue Service’s Criminal Investigation Boston Field Office and the FDIC’s Office of Inspector General. Senior Trial Attorney Jennifer E. Ambuehl and Trial Attorney J. Randall Warden of the Criminal Division’s Money Laundering and Asset Recovery Section, Bank Integrity Unit, prosecuted the case. Assistant U.S. Attorneys David J. D’Addio and James E. Arnold of the U.S. Attorney’s Office for the District of Massachusetts provided significant assistance in this investigation.

The Justice Department wishes to thank the FDIC – both the San Francisco Office and FDIC Headquarters for its cooperation in this investigation.

Banamex USA NPA

May 23, 2017 in AML | Permalink | Comments (0)

Thursday, May 18, 2017

FinCEN and Manhattan U.S. Attorney Announce Settlement with Former MoneyGram Executive Thomas E. Haider

The Financial Crimes Enforcement Network (FinCEN) and the U.S. Attorney’s Office for the Southern District of New York announced today the settlement of claims under the Bank FINCENSecrecy Act (BSA) against Thomas E. Haider, the former Chief Compliance Officer of MoneyGram International, Inc. Mr. Haider has agreed to a three-year injunction barring him from performing a compliance function for any money transmitter and has agreed to pay a $250,000 penalty. He also has admitted, acknowledged, and accepted responsibility for the following, among other things:  (1) failing to terminate specific MoneyGram outlets after being presented with information that strongly indicated that the outlets were complicit in consumer fraud schemes; (2) failing to implement a policy for terminating outlets that posed a high risk of fraud; and (3) structuring MoneyGram’s anti-money laundering (AML) program such that information that MoneyGram’s Fraud Department had aggregated about outlets, including the number of reports of consumer fraud that particular outlets had accumulated over specific time periods, was not generally provided to the MoneyGram analysts who were responsible for filing suspicious activity reports with FinCEN. 

Acting FinCEN Director Jamal El-Hindi recognized the efforts of FinCEN’s Enforcement Division’s Office of Special Investigations, and its Office of Compliance and Enforcement in this matter. He also expressed his appreciation to Joon H. Kim, the Acting U.S. Attorney for the Southern District of New York, and his Office, for their extensive contributions to the case and outstanding partnership with FinCEN.

“FinCEN relies on compliance professionals from every corner of the financial industry,” said Acting FinCEN Director Jamal El-Hindi. “FinCEN and our law enforcement partners need their judgment and their skills to effectively fight money laundering, fraud, and terrorist financing. Compliance professionals occupy unique positions of trust in our financial system. When that trust is broken, it is important that we take action so that the reputations of thousands of talented compliance officers are not diminished by any one individual’s outlying egregious actions. We have repeatedly said that when we take an action against an individual, the record will clearly reflect the basis for that action. Here, despite being presented with various ways to address clearly illicit use of the financial institution, the individual failed to take required actions designed to guard the very system he was charged with protecting, undermining the purposes of the BSA. Holding him personally accountable strengthens the compliance profession by demonstrating that behavior like this is not tolerated within the ranks of compliance professionals.”

Acting U.S. Attorney Joon H. Kim said:  “Compliance officers perform an essential function, serving as the first line of defense in the fight against fraud and money laundering.  Unfortunately, as today’s settlement shows, Thomas Haider violated his obligations as MoneyGram's chief compliance officer. By failing to terminate MoneyGram outlets that presented a high risk for fraud and to take other actions clearly required of him, Haider allowed criminals to use MoneyGram to defraud innocent consumers. We are committed to working with FinCEN to enforce the requirements of the Bank Secrecy Act and to hold individuals like Haider accountable.”

In December 2014, FinCEN issued a $1 million civil money penalty against Mr. Haider for failing to ensure that his company abided by the AML provisions of the BSA. The U.S. Attorney’s Office for the Southern District of New York then filed a complaint in U.S. District Court that sought to enforce the penalty and to enjoin Mr. Haider from employment in the financial industry. This settlement concludes those actions and was approved by U.S. District Judge David S. Doty of the U.S. District Court for the District of Minnesota.

From 2003 to 2008, Mr. Haider was the Chief Compliance Officer for MoneyGram International Inc. Mr. Haider oversaw MoneyGram’s Fraud Department, which collected thousands of complaints from consumers who were victims of fraudulent schemes. Mr. Haider also headed MoneyGram’s AML Compliance Department, which was charged with ensuring compliance with requirements under the BSA designed to protect the financial system against money laundering and terrorist finance.

FinCEN seeks to protect the U.S. financial system from being exploited by illicit actors. Its efforts are focused on compromised financial institutions and their employees; significant fraud; third-party money launderers; transnational organized crime and security threats; and cyber threats. FinCEN has a broad array of enforcement authorities to target both domestic and foreign actors affecting the U.S. financial system.

May 18, 2017 in AML | Permalink | Comments (0)

Wednesday, May 17, 2017

Administrative Law Judge Pleads Guilty for Role in $550 Million Social Security Disability Fraud Scheme

A former administrative law judge for the Social Security Administration (SSA) pleaded guilty in federal court today for his SSArole in a scheme to fraudulently obtain more than $550 million in federal disability payments from the SSA for thousands of claimants.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division; Special Agent in Charge Michael McGill of the Social Security Administration-Office of Inspector General’s (SSA-OIG) Philadelphia Field Division; Special Agent in Charge Amy S. Hess of the FBI’s Louisville, Kentucky, Field Division; Special Agent in Charge Tracey D. Montaño of the Internal Revenue Service-Criminal Investigation (IRS-CI) Nashville, Tennessee, Field Office; and Special Agent in Charge Derrick L. Jackson of the U.S. Department of Health and Human Services-Office of the Inspector General’s (HHS-OIG) Atlanta Regional Office made the announcement.

David Black Daugherty, 81, of Myrtle Beach, South Carolina, pleaded guilty before U.S. District Judge Danny C. Reeves of the Eastern District of Kentucky to an information charging him with two counts of receiving illegal gratuities. Sentencing is set for Aug. 25, 2017.

Daugherty was an administrative law judge at the Social Security hearing office in Huntington, West Virginia (Huntington Hearing Office) for more than 20 years, where his primary responsibility was to adjudicate disability claims on behalf of the SSA. According to admissions made as part of his guilty plea, from November 2004 to April 2011, Daugherty accepted more than $609,000 in cash payments, total, in more than approximately 3,100 cases from Social Security disability lawyer, Eric Christopher Conn, of Pikeville, Kentucky, for awarding disability benefits to claimants represented by Conn. Furthermore, in an effort to conceal the source of these cash payments, Daugherty divided cash deposits into various bank branches and accounts, he admitted.

Daugherty admitted that he sought out Conn’s cases pending with the Huntington Hearing Office, contacted Conn and told him what type of medical evidence to submit in support of disability findings and then awarded benefits to claimants represented by Conn without holding hearings. As a result, Conn ultimately received at least $7.1 million in representative fees from the SSA, and Daugherty further obligated the SSA to pay more than $550 million in lifetime benefits to claimants, according to the plea.

Daugherty was indicted on April 1, 2016, along with Conn and Alfred Bradley Adkins, a clinical psychologist of Pikeville. They were charged with conspiracy, fraud, false statements, money laundering and other related offenses in connection with the scheme. Conn pleaded guilty to the fraud scheme earlier this year. As to Adkins, who is awaiting trial, the indictment is merely an allegation as all defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

May 17, 2017 in AML | Permalink | Comments (0)

Update Regarding Imposition of Fifth Special Measure against FBME Bank, Ltd.

In its April 14, 2017 order granting FinCEN's motion for summary judgment, the U.S. District Court for the District of Columbia lifted the stay blocking the implementation of the March FinCEN-logo-shield31, 2016 Final Rule imposing a prohibition on opening or maintaining correspondent accounts for, or on behalf of, FBME Bank, Ltd. pursuant to Section 311 of the USA PATRIOT Act.  On April 28, 2017, the U.S. Court of Appeals for the District of Columbia Circuit denied FBME's motion for stay pending appeal.  Accordingly, the Final Rule is in effect.  FBME is appealing the district court's decision. 

I have been following this case for quite some time and intend to write a law review article about it as time allows.  See my previous post: 

Is FinCEN Becoming a Star Chamber? The Curious FBME case (2015)

FBME Bank Obtains Preliminary Injunction Against FinCEN (2015) 

FinCEN Cuts FBME Bank from Access to U.S. Financial System (2015)

FinCEN Re-Issues Order Against FBME Bank Ltd. Setting the Stage for the Court to Sort it Out (2016)

May 17, 2017 in AML | Permalink | Comments (0)

Tuesday, May 16, 2017

FinCEN Awards Recognize Law Enforcement Success Stories Supported by Bank Secrecy Act Reporting

The Financial Crimes Enforcement Network (FinCEN) held its third annual Law Enforcement Awards ceremony today at the U.S. Department of the Treasury.  FinCEN presented FINCENawards to law enforcement agencies that use Bank Secrecy Act reporting provided by financial institutions in their criminal investigations.  The goals of the program are to recognize law enforcement agencies that made effective use of financial institution reporting to obtain a successful prosecution, and to demonstrate to the financial industry the value of its reporting to law enforcement.  The program emphasizes that prompt and accurate reporting by the financial industry is vital to the successful partnership with law enforcement to fight financial crime.

“The scope and quality of the data that we are collecting through Bank Secrecy Act reporting is constantly improving, and FinCEN has made great advancements to provide law enforcement and stakeholders faster and easier access to financial intelligence that will assist with investigations and prosecutions,” said Treasury Secretary Steven T. Mnuchin, who congratulated award recipients at the opening of the awards ceremony.  “These success stories highlight the value of our ongoing efforts to strengthen partnerships to combat money laundering, fraud, corruption, criminal trafficking, and other illicit activities.”

The program includes six award categories recognizing achievements in combatting significant threats to the integrity of the financial system and the safety of our communities.  The program is open to all Federal, state, local, and tribal law enforcement agencies.  The 2017 award recipients are listed below. 

SAR Review Task Force: New York State Police

The New York State Police Special Investigations Unit at the Financial Crimes Unit (FCU) identified suspicious transactions occurring in the Hudson Valley Region indicative of money laundering as part of Suspicious Activity Report (SAR) review initiatives.  The impetus of the investigation was a single financial institution reporting an unusual pattern of cash deposits.  The reporting bank indicated that it believed much of the cash was derived from the illegal sale of marijuana.  The funds were rapidly withdrawn from ATM locations across the United States.  Investigators identified many additional reports containing sensitive financial information, dating back another year, indicating similar activity in this account.

Further investigation demonstrated that these individuals were connected to a larger criminal organization than originally believed, allowing the organization to be considered an “enterprise” and eligible to be charged under the Racketeer Influenced and Corrupt Organizations Act.

Investigators discovered extensive criminal histories for many of the individuals associated with this organization, including narcotics and firearms possession charges on several individuals.  The Special Investigations Unit initiated a criminal investigation, and the two parallel investigations led to the identification of expansive criminal organizations responsible for bringing large quantities of narcotics into the region, operating business fronts used to launder funds, weapons trafficking, bulk cash smuggling, and extensive gang activity, including murder.  Over 100 individuals belonging to several different street and prison gangs were identified, ranging from leadership to low-level associates, along with residences and vehicles belonging to these individuals.

As a result of this multi-agency investigation, law enforcement successfully seized 16 firearms, 14 kilos of cocaine, 12 pounds of marijuana, 90 grams of crack cocaine, 153 grams of heroin, 75 oxycodone pills, $200,000 in cash, and several vehicles.  Coordinated efforts resulted in the arrest and indictment of 55 individuals in the Northern and Southern Districts of New York.

Transnational Organized Crime: Federal Bureau of Investigation (FBI)

The FBI initiated an investigation after receiving a referral from local law enforcement regarding an individual suspected of carrying out various fraud and money laundering schemes.  A review of sensitive financial information identified a high volume of data enabling investigators to identify 80 accounts controlled by the primary target and identify funds that appeared to be derived from criminal activity.  The individual was arrested and charged with money laundering, which subsequently led to his cooperation with law enforcement.

Based on information this individual provided after agreeing to cooperate with the FBI, investigators uncovered a network of criminal actors located in the United States and Canada.  Investigators then used this information to identify additional accounts and transactions involving these newly identified targets at financial institutions located throughout the United States.  These financial institutions described suspected money laundering activity though a series of businesses and trust accounts located in several countries.  Investigators also identified additional ongoing criminal investigations by other agencies targeting this same network of individuals.

Investigators began working closely with the other agencies to identify the full scope of this criminal organization.  The information obtained during this coordination led the FBI to consider this criminal organization one of its highest priority transnational organized crime targets.  Working closely with foreign and domestic law enforcement partners, investigators identified members of this criminal organization operating from all over the world.  Analysis of financial activity indicated that this organization was bringing in $100-$300 million in annual criminal proceeds in North America alone.

Authorities arrested and indicted the targets on various money laundering, fraud, and conspiracy charges.  Several suspects pled guilty before their cases went to trial.  Several targets went to trial, where all defendants were convicted on all counts.

Transnational Security Threats: Federal Bureau of Investigation (FBI)

The FBI used a high volume of sensitive financial information over several years during the course of its investigation into a criminal organization moving hundreds of millions of U.S. dollars to support foreign nuclear and ballistic missile programs.

This investigation identified two families engaged in criminal activities.  These families each operated a network of exchange houses, precious metals companies, trading companies, and front companies throughout the Middle East to carry out financial activity for the benefit of multiple OFAC-sanctioned entities, as well as several entities with close ties to foreign military organizations. 

This investigation utilized information gleaned from financial data to confirm information necessary to issue search warrants and subpoenas to multiple U.S. financial institutions.  Piecing together many pieces of financial data, they determined that the targets were operating one particular exchange house for foreign remittances.  This information enabled a grand jury to issue more than 100 subpoenas to U.S. financial institutions relating to more than 300 targets.  These subpoenas identified millions of transactions totaling over $200 billion.

During the FBI investigation, foreign authorities took legal action against several of the targets, who were arrested on a range of charges, including billions of dollars in bribery, corruption, and embezzlement.  While most of these charges were ultimately dropped, the FBI was able to compare data about the foreign law enforcement investigation with evidence it had obtained through its own investigation and determined that many significant elements of the foreign investigation supported conclusions the FBI had drawn based on email, bank, and other data.  As a result of the publicity generated by the foreign investigation, law enforcement gathered additional and previously unknown details on the identified individual targets and their hundreds of associated shell companies.  This allowed the FBI to expand its search and more completely map out the criminal network and its funding mechanisms.

The investigation ultimately led to criminal charges of conspiracy to commit money laundering, bank fraud, and sanctions violations through two separate indictments against nine individuals, including an officer of a foreign bank.  Prosecution of these individuals is still pending. Criminal forfeiture totals are expected to reach hundreds of millions of dollars.

Cyber Threats: Internal Revenue Service-Criminal Investigation (IRS-CI)

A multi-year, multi-agency investigation, led by IRS-CI focused on several targets selling narcotics on the dark web and distributing them throughout the United States through the U.S. Postal Service.  The primary targets of this investigation conducted their online activity through The Onion Router (TOR), which provided them with encryption and decryption of peer-to-peer connections.  This method provided the targets with access to several dark web sites, on which they sold methamphetamine and marijuana.

The targets disguised their shipments of narcotics through the Postal Service inside packages filled with markers and drawing paper.  Despite the targets’ use of multiple return addresses and sender names, Postal inspectors were able to determine that the suspected narcotics mailings were originating from the same individuals based on several telling packaging characteristics.

Investigators intercepted multiple packages as a result of search warrants.  Investigators were then able to determine through internet service provider records that the username associated with several undercover purchases on the dark web belonged to the same individual sending the narcotics through the Postal Service.  Investigators determined that over a 6-month period, this individual sent 435 suspicious packages on at least 50 different occasions.

Sensitive financial information identified during the course of this investigation detailed specific information that corroborated the financial and personal information of the subjects of the investigation.  The data also indicated that the subjects were using Bitcoins in an effort to conceal their illicit proceeds.  The information identified in the financial data and from subpoenas issued to numerous financial institutions and Bitcoin exchangers helped clarify the convoluted series of transactions conducted to launder the funds.

The targets only accepted payment for the narcotics in the form of Bitcoin.  The Bitcoins were then sent through a Bitcoin “blender” to conceal their source.  The Bitcoins would then be redistributed back to the targets through several Bitcoin exchangers before being converted into U.S. dollars and deposited into several bank accounts.

The targets of this investigation were arrested on various drug charges, at which point several search warrants were issued on several locations where methamphetamine, marijuana, and numerous firearms were discovered.  The targets were subsequently indicted and pled guilty to various drug and money laundering charges.  This is notable since this is the first case in this particular Midwest district where money laundering charges were approved based on Bitcoin transactions.

Significant Fraud: Defense Criminal Investigative Service (DCIS)

DCIS initiated a long-term investigation based on structuring and excessive credit card charges identified by multiple financial institutions on a single individual.  Two different working groups identified the transaction data and referred it for further investigation.  Investigators determined that one of the subjects was transferring funds to a company providing subcontractor support for a military contract in Afghanistan.  Further investigation determined that the company receiving the funds was a shell company owned by a U.S. military official to conceal bribery payments he was receiving in exchange for helping the primary target win contracts.

Further financial analysis identified $24 million in transactions in the personal accounts of the primary target.  The majority of the transactions were multi-million dollar deposits from his employer, which was a DOD prime contractor providing logistical support and training to foreign military units.  These deposits were followed immediately by transfers to several bank accounts and structured cash withdrawals.

A detailed analysis of sensitive financial information and contract documents revealed that the U.S. military official received bribes from the primary target in exchange for sensitive bidding data, including bid amounts of competitors and actual government estimates.  The official was also responsible for establishing those estimates and assembling the team responsible for reviewing bids.  In return for his assistance in winning $54 million in bids, the primary target paid the official over $9 million through an extensive network of shell companies and bank accounts. 

The targets of this investigation eventually pled guilty to various conspiracy, money laundering, obstruction, and fraud charges.  Investigators seized $12.3 million in assets from the primary target and his employer and the military official, including real property, vehicles, boats, aircrafts, firearms, gold coins, and bank accounts.

Third-Party Money Launderers:  Immigration and Customs Enforcement Homeland Security Investigations (HSI)

Over the course of 18 months, HSI investigators utilized an extensive volume of sensitive financial information to assist in their investigation into a large-scale illegal third-party money laundering organization.  The investigation began based largely on information gleaned from a FinCEN-issued Geographic Targeting Order (GTO).  This GTO required armored car services importing or exporting funds through two specific geographies in the southwest border region to acquire additional identifying information on certain transactions.

The information that investigators discovered as a result of the GTO led them to focus on one particular armored car company that appeared to be facilitating a money laundering scheme outside southern California.  Investigators discovered that the company was importing U.S. dollars and Mexican pesos from casas de cambio in Mexico and depositing them into shell company bank accounts that were opened and operated by the two individuals who owned and operated the company.

Law enforcement was able to identify and connect an address for the armored car company that was shared by several other companies owned by the same individuals.  Two of these newly identified companies were registered as money services businesses (MSB).  Further investigation and a detailed analysis of financial data indicated that these additional companies were simply shell companies that the two individuals used to funnel millions of U.S. dollars back into Mexico.

Subpoenas were issued to the banks used by each of these companies, as well as to all of the people known to be involved with the companies.  Transaction records identified cash deposits of $45 million over a 15-month period, which were then transferred in and out of the accounts of the various companies owned by the individuals before ultimately being wired to Mexico.

As a result of the investigation and discovery of the money laundering scheme, both individuals pled guilty to violations regarding failures to maintain an effective anti-money laundering program.  They also lost all licenses necessary to operate as an MSB and forfeited hundreds of thousands of U.S. dollars and Mexican pesos.

May 16, 2017 in AML | Permalink | Comments (0)

Monday, May 15, 2017

Third Indian National Pleads Guilty for Role in Multimillion Dollar India-Based Call Center Scam Targeting U.S. Victims

An Indian national pleaded guilty today to one count of conspiracy to commit money laundering for his role in liquidating and laundering victim payments generated through various telephone fraud and money laundering schemes via India-based call centers.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Abe Martinez of the Southern District of Texas, Executive DHS InvestigationsAssociate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Inspector General J. Russell George of the U.S. Treasury Inspector General for Tax Administration (TIGTA) and Inspector General John Roth of the U.S. Department of Homeland Security Office of Inspector General (DHS OIG) made the announcement.

Harsh Patel, 28, an Indian national who most recently resided in Piscataway, New Jersey, pleaded guilty before U.S. District Court Judge David Hittner of the Southern District of Texas. Sentencing is set for Aug. 7, 2017.

According to admissions made in connection with the plea, Patel and his co-conspirators perpetrated a complex scheme in which individuals from call centers located in Ahmedabad, India, impersonated officials from the IRS or U.S. Citizenship and Immigration Services (USCIS) in a ruse designed to defraud victims located throughout the United States. Using information obtained from data brokers and other sources, call center operators targeted U.S. victims who were threatened with arrest, imprisonment, fines or deportation if they did not pay alleged monies owed to the government. Victims who agreed to pay the scammers were instructed how to provide payment, including by purchasing stored value cards or wiring money. Upon payment, the call centers would immediately turn to a network of “runners” based in the U.S. to liquidate and launder the fraudulently-obtained funds.

According to his plea, since around January 2015, Patel worked as a runner operating primarily in New Jersey, California and Illinois. At the direction of India-based co-conspirators, often via electronic WhatsApp text communications, Patel admitted to purchasing reloadable cards registered with misappropriated personal identifying information of U.S. citizens. Once victim scam proceeds were loaded onto those cards, Patel admitted that he liquidated the proceeds on the cards and transferred the funds into money orders for deposit into various bank accounts while keeping a percentage of the victim funds for himself. Patel also admitted to receiving fake identification documents from an India-based co-conspirator and other sources and using those documents to receive victim scam payments via wire transfers.

To date, Patel, 55 other individuals, and five India-based call centers have been charged for their roles in the fraud and money laundering scheme in an indictment returned by a federal grand jury in the Southern District of Texas on Oct. 19, 2016. Patel is the third defendant thus far to plead guilty in this case. Co-defendants Bharatkumar Patel, aka Bharat Patel, 43, and Ashvinbhai Chaudhari, 28, pleaded guilty on April 13, 2017, and April 26, 2017, respectively.

The remaining defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

HSI, DHS OIG and TIGTA led the investigation of this case. Also providing significant support was the Criminal Division’s Office of International Affairs; Ft. Bend County, Texas, Sheriff’s Office; police departments in Hoffman Estates and Naperville, Illinois, and Leonia, New Jersey; San Diego County District Attorney’s Office Family Protection/Elder Abuse Unit; U.S. Secret Service; U.S. Small Business Administration - Office of Inspector General; IOC-2; INTERPOL Washington; U.S. Citizenship and Immigration Services USCIS; U.S. State Department’s Diplomatic Security Service; and U.S. Attorney’s Offices in Northern District of Alabama, District of Arizona, Central District of California, Northern District of California, District of Colorado, Northern District of Florida, Middle District of Florida, Northern District of Illinois, Northern District of Indiana, District of Nevada and District of New Jersey. The Federal Communications Commission’s Enforcement Bureau also provided assistance in TIGTA’s investigation.

Senior Trial Attorney Michael Sheckels and Trial Attorney Mona Sahaf of the Criminal Division’s Human Rights and Special Prosecutions Section, Trial Attorney Robert Stapleton of the Criminal Division’s Money Laundering and Asset Recovery Section and Assistant U.S. Attorneys S. Mark McIntyre and Craig M. Feazel of the Southern District of Texas are prosecuting the case.

A Department of Justice website(link is external) has been established to provide information about the case to already identified and potential victims and the public. Anyone who believes they may be a victim of fraud or identity theft in relation to this investigation or other telefraud scam phone calls may contact the Federal Trade Commission (FTC) via this website.

May 15, 2017 in AML | Permalink | Comments (0)

Sunday, May 14, 2017

Former U.S. Congresswoman Corrine Brown Guilty of Fraud Scheme Involving Bogus Non-Profit Scholarship Entity

Former U.S. Congresswoman Corrine Brown was convicted by a federal jury in Jacksonville, Florida, today for her role in a conspiracy and fraud scheme involving a fraudulent scholarship charity.

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney W. Stephen Muldrow of the Middle District of Florida, FBISealSpecial Agent in Charge Charles P. Spencer of the FBI’s Jacksonville, Florida, Division and Chief Richard Weber of the of Internal Revenue Service-Criminal Investigation (IRS-CI) made the announcement.

“Former Congresswoman Corrine Brown violated the public trust, the honor of her position, and the integrity of the American system of government when she abused one of the most powerful positions in the nation for her own personal gain. She shamefully deprived needy children of hundreds of thousands of dollars that could have helped with their education and improved their opportunities for advancement, and she lied to the IRS and the American public about secret cash deposits into her personal bank accounts,” said Acting Assistant Attorney General Blanco. “The Department of Justice is committed to fighting corruption and fraud wherever we find it, at all levels of government, regardless of their power and influence.”

“Former Congresswoman Brown chose greed and personal gain over the sacred trust given to her by the community that she served for many years,” said Acting U.S. Attorney Muldrow. “These guilty verdicts underscore our Office's resolve in holding public officials at all levels of government accountable for their actions. In this case, former Congresswoman Brown stole money that was donated on the false promise of helping further the educational goals of underprivileged children.”

“Former Congresswoman Brown took an oath year after year to serve others, but instead she exploited the needs of children and deceived her constituents to advance her own personal and political agendas,” said Special Agent in Charge Spencer. “Corrupt public officials undermine the integrity of our government and violate the public’s trust, and that is why investigating public corruption remains the FBI’s top criminal priority. I am proud of our special agents, analysts and support personnel who spent countless hours following the money trail in this case, and thank our law enforcement partners at the IRS-CI and U.S. Attorney’s Office for their efforts to hold Brown and her associates accountable for their inexcusable actions.”

“Former Congresswoman Corrine Brown failed to deliver and uphold her duty to file true and correct tax returns by lying about her income and charitable contributions to feed her greed. No one is above the law, including those in a position of public trust, and there isn’t a separate standard when it comes to paying taxes, said Chief Weber. “IRS CI, along with our law enforcement partners, will hold accountable those who violate the tax laws and cheat the taxpayers.”

Brown, 70, of Jacksonville, was convicted on 18 counts of an indictment charging her with participating in a conspiracy involving a fraudulent education charity, concealing material facts on required financial disclosure forms, obstructing the due administration of the internal revenue laws and filing false tax returns. The jury also found Brown guilty of violating the Ethics in Government Act by concealing certain income on the required annual financial disclosure forms she submitted to the U.S. House of Representatives.

Judge Timothy J. Corrigan of the Middle District of Florida noted that he would schedule Brown’s sentencing for a later date.

Brown’s co-conspirators, Elias “Ronnie” Simmons, Brown’s long-time Chief of Staff, and Carla Wiley, the president of the fraudulent charity, previously pleaded guilty to their roles in the education charity scheme on Feb. 8, 2017, and March 3, 2016, respectively.

Evidence at trial showed that between late 2012 and early 2016, Brown participated in a conspiracy and fraud scheme involving One Door for Education – Amy Anderson Scholarship Fund (One Door) in which the Brown, Simmons, Wiley and others acting on their behalf solicited more than $800,000 in charitable donations based on false representations that the donations would be used for college scholarships and school computer drives, among other charitable causes. Testimony by One Door donors showed that Brown and her coconspirators solicited donations from individuals and corporate entities that Brown knew by virtue of her position in the U.S. House of Representatives. Many of the donors were led to believe that One Door was a properly registered 501(c)(3) non-profit organization, when, in fact, it was not.

Contrary to Brown’s representations, Brown, Simmons, Wiley and others used the vast majority of One Door donations for their personal and professional benefit, including tens of thousands of dollars in cash deposits that Simmons made to Brown’s personal bank accounts, according to trial evidence. In one instance, Simmons deposited $2,100 of One Door funds into Brown’s personal bank account the same day that Brown paid $2,057 to the IRS for taxes she owed. Likewise, trial evidence showed Brown and Simmons used the outside consulting company of one of Brown’s employees to funnel One Door funds to Brown and others for their personal use.

Trial evidence also showed that more than $300,000 in One Door funds were used to pay for events hosted by Brown or held in her honor, including a golf tournament in Ponte Vedra Beach, Florida; lavish receptions during an annual conference in Washington, D.C.; the use of a luxury box during a concert in Washington, D.C.; and the use of a luxury box during an NFL game in the Washington, D.C., area. According to trial evidence, despite raising over $800,000 in donations, One Door granted only two scholarships totaling $1,200 that were awarded to students to cover expenses related to attending a college or university.

Additionally, trial evidence demonstrated that Brown failed to disclose, among other things, the reportable income she received from One Door and claimed deductions on her tax returns based on false statements that she made certain donations to One Door, as well as to local churches and non-profit organizations in the Jacksonville area.

The FBI and IRS-CI investigated the case. Deputy Chief Eric G. Olshan of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorneys A. Tysen Duva and Michael J. Coolican of the Middle District of Florida prosecuted the case.

May 14, 2017 in AML | Permalink | Comments (0)

Saturday, May 13, 2017

Panama National Assembly set to approve new AML Law (LAW 412, 23 of 2015)

Law 412 proposes the establishment of a legal platform for the consolidation of Panama as an international fiduciary center and place it at the forefront of international transparency FATF logo standards. Read here official publication in Spanish.

Draft Law 412, which amends Law 1 of 1984 on the business of trust and updates Law 23 of 2015 on prevention of money laundering, financing of terrorism and financing of proliferation of mass destruction weapons was approved in the third debate in the National Assembly.

The project establishes new parameters for compliance companies, strengthening the Administration Office for Supervision and Regulation of Non-Financial Subjects, granting the Superintendence of Banks of Panama supervisory responsibilities of other financial subjects, among other aspects contemplated in the initiative.

In addition, Draft Law 412 proposes the establishment of a legal platform to promote the local market as a necessary step for the consolidation of Panama as an international trust center and place it at the forefront of international transparency standards.

The fiduciary business in Panama is one of the most important of the financial sector, the rule that governs it dates back to 1984, so it was necessary to update it, in order to improve the supervision and regulation of this market whose trust fund reaches 22 thousand million dollars.

The approval of Draft Law 412 is part of Panama's actions to strengthen its legal framework and promote transparency, and will be evaluated in May by the Latin American Financial Action Task Force (GAFILAT).

See US 2016 INCSR Report

See arrest by Panama police of Mossack and Fonseca founding partners because of their alleged involvement with money laundering for Brazil's Petrobras corruption scandal.

May 13, 2017 in AML | Permalink | Comments (0)

Thursday, May 11, 2017

New FTC Website Helps Small Businesses Avoid Scams and Cyber Attacks

Attacks can be especially devastating to small businesses; Agency provides information on how they can protect themselves

At the direction of Acting Chairman Maureen Ohlhausen, the Federal Trade Commission has launched a new website – – with articles, videos, and other 1024px-US-FederalTradeCommission-Seal.svginformation aimed at helping small business owners avoid scams and protect their computers and networks from cyberattacks and other threats.

“Small businesses are critical to our economic strength, building America's future, and helping the United States compete in today's global marketplace,” Acting Chairman Ohlhausen said. “This innovative new website is a one-stop shop where small businesses can find information to protect themselves from scammers and hackers, as well as resources they can use if they are hit with a cyberattack.”

According to the U.S.Small Business Administration (SBA), there are more than 28 million small businesses nationwide, employing nearly 57 million people. Scammers frequently target small businesses with deceptive tactics designed to get them to pay for supplies they didn’t order, donate to fake charities or trick them into giving access to their network or downloading malware that can corrupt their business’s computers.

Cyberattacks can be particularly devastating to small businesses, and many of them lack the resources that larger companies have to devote to cybersecurity. Symantec Corp.’s 2016 Internet Security Threat Report indicates the percentage of spear-phishing attacks targeting small business rose dramatically from 18 percent to 43 percent between 2011 and 2015.

The FTC’s new web page offers specific information to help small businesses protect their networks and their customer data. This includes a new Small Business Computer Security Basics guide, which shares computer security basics to help companies protect their files and devices, train employees to think twice before sharing the business’s account information, and keep their wireless network protected, as well as how to respond to a data breach. It also has information on other cyber threats such as ransomware and phishing schemes targeting small businesses. The FTC is continuing to work with the SBA on additional ways to help small businesses.

May 11, 2017 in AML | Permalink | Comments (0)

Wednesday, May 10, 2017

Former Military Sealift Command Contractor Charged with Bribery and Fraud

A former contractor at the Military Sealift Command (MSC) was indicted for his role in a bribery and fraud conspiracy from approximately 1999 to 2014, in which he allegedly received FBISeal almost $3 million dollars in bribes. Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and U.S. Attorney Dana J. Boente of the Eastern District of Virginia made the announcement.

Scott B. Miserendino Sr., 58, formerly of Stafford, Virginia, was charged in a five-count indictment with one count of conspiracy to commit bribery and honest services mail fraud, one count of bribery and three counts of honest services mail fraud. Miserendino’s arraignment will be scheduled at a later date.

According to allegations in the indictment, Miserendino was a government contractor at MSC, an entity of the U.S. Department of the Navy that provided support and specialized services to the Navy and other U.S. military forces. The indictment alleges that Miserendino and Joseph P. Allen, the owner of a government contracting company, conspired to use Miserendino’s position at MSC to enrich themselves through bribery.

Specifically, beginning in 1999, Miserendino allegedly used his position and influence at MSC to assist Allen and his company in obtaining and expanding a commission agreement with a telecommunications company, which sold maritime satellite services to MSC, according to the indictment. For more than a decade, Miserendino allegedly used his influence at MSC to take official acts to benefit the telecommunications company, which through the commission agreement, also benefited Allen and his company. Among his actions, the indictment alleges that Miserendino: advised officials at MSC and on their ships about using the telecommunications company’s services; authorized Allen and his employees to perform services on MSC ships and ensure that the equipment on those ships defaulted to the telecommunications company’s services rather than that of an alternative provider; and facilitated payment to the telecommunications company for the services it rendered to MSC. Unknown to MSC or the telecommunications company, throughout the scheme, Allen paid half of the commissions he received from the telecommunications company to Miserendino as bribes, according to allegations in the indictment.

For his role in the scheme, Allen, 56, of Panama City, Florida, pleaded guilty to one count of conspiracy to commit bribery on April 19, 2017, before U.S. Magistrate Judge Lawrence R. Leonard, in Norfolk, Virginia. Sentencing is scheduled for July 28, 2017, before U.S. District Judge Arenda L. Wright Allen, in Norfolk.

The charges and allegations contained in an indictment are merely accusations. The defendant is presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

The Norfolk offices of the FBI, the Defense Criminal Investigative Service and the Naval Criminal Investigative Service investigated the case. Trial Attorneys Sean F. Mulryne and Molly Gaston of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Stephen W. Haynie of the Eastern District of Virginia are prosecuting the case.

May 10, 2017 in AML | Permalink | Comments (0)

Tuesday, May 9, 2017

Former Tennessee Sheriff Sentenced on Federal Corruption Charges

A former Rutherford County Sheriff was sentenced today to 50 months in prison for operating a private electronic cigarette company in the county jail for personal gain and the FBISealconcealment and misrepresentation of their involvement with the business, announced Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division and Acting U.S. Attorney Jack Smith of the Middle District of Tennessee.

Robert F. Arnold, 41, of Murfreesboro, Tennessee, was sentenced today by Senior U.S. District Judge Marvin E. Aspen of the Northern District of Illinois (sitting by designation in the Middle District of Tennessee) who also ordered Arnold to pay $52,500 in restitution and to forfeit $66,790, an amount equal to all proceeds he received from sales at the Rutherford County jail. Arnold previously pleaded guilty on Jan. 30, 2017 before Chief U.S. District Judge Kevin H. Sharp of the Middle District of Tennessee.

According to his plea, Arnold admitted to using his official position as Sheriff of Rutherford County to benefit JailCigs by allowing the company’s electronic cigarettes to come into the Rutherford County jail as non-contraband and be distributed by county employees; taking steps to disguise their involvement in the company; and misrepresenting the benefits that Rutherford County was supposedly receiving from JailCigs. Additionally, Arnold admitted that he personally received over $66,000 from the company, and that he lied about his income from – and knowledge of – JailCigs when he was confronted by local media in April 2015.

Co-defendants former Chief Administrative Deputy Joe L. Russell II, of Rutherford County, Tennessee, and John Vanderveer, of Marietta, Georgia, pleaded guilty on Jan. 20, 2017, and Jan. 30, 2017, respectively. Vanderveer is set to be sentenced on Sept. 6, 2017, and Russell is set to be sentenced on Sept. 8, 2017.

The FBI and Tennessee Bureau of Investigation investigated the case. Trial Attorney Mark J. Cipolletti of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Cecil W. VanDevender of the Middle District of Tennessee prosecuted the case.

May 9, 2017 in AML | Permalink | Comments (0)

Monday, May 8, 2017

Former Guinean Minister of Mines Convicted of Receiving and Laundering $8.5 Million in Bribes from China International Fund and China Sonangol

A former Minister of Mines and Geology of the Republic of Guinea, has been convicted by a federal jury for his role in a scheme to launder bribes paid to him by executives of China DOJ-U-S-ATTORNEYS-OFFICE Sonangol International Ltd. (China Sonangol) and China International Fund, SA (CIF). The jury reached its verdict yesterday after five hours of deliberations, following a seven-day trial.  Previous news coverage here: 

Acting Assistant Attorney General Kenneth Blanco of the Justice Department’s Criminal Division, Acting U.S. Attorney Joon Kim for the Southern District of New York, Assistant Director Stephen Richardson of the FBI’s Criminal Investigative Division and Assistant Director in Charge William F. Sweeney Jr. of the FBI’s New York Field Office announced the conviction.

Mahmoud Thiam, 50, of New York, was convicted of one count of transacting in criminally derived property and one count of money laundering. According to the charges, the funds that were laundered were proceeds derived through violations of Guinean bribery laws.

“As a high-level Minister in Guinea, Thiam sold out his country and then used U.S. banks and real estate to hide millions in bribes paid to him by a Chinese conglomerate,” said Acting Assistant Attorney General Blanco. “Corruption is a global disease that undermines the rule of law everywhere. The Justice Department is committed to investigating and prosecuting those who commit these crimes and use the U.S. financial system and free marketplace to conceal and benefit from their crimes.”

“As a New York federal jury has now found, Thiam abused his official government position to enrich himself at the expense of one of Africa’s poorest countries,” said Acting U.S. Attorney Kim. “Thiam laundered the proceeds of his bribery scheme into the United States to fund his lavish lifestyle, buying a multi-million dollar estate in Dutchess County, and paying for private schools for his children. Thanks to the work of the FBI, Thiam’s scheme was exposed and he was swiftly convicted.”

“This conviction showcases the FBI’s commitment to combatting corruption domestically and abroad,” said Assistant Director Stephen Richardson. “Thiam’s misuse of his official position for personal gain violated federal law and the trust of the Guinean people. I applaud the excellent work that our employees put into this case and thank all of our partners who helped bring Thiam to justice.”

“The conviction of Thiam demonstrates that no one who violates public office is above the law when they are involved in corruption,” said Assistant Director in Charge Sweeney. “The FBI’s International Corruption Squads were established to take on foreign corruption cases like this that use money laundering and lies to deceive the trust in public office.”

According to evidence presented at trial, China Sonangol, CIF and their subsidiaries signed a series of agreements with Guinea that gave them lucrative mining rights in Guinea, and Thiam influenced the Guinean government’s decision to enter into those agreements while serving as Guinea’s Minister of Mines and Geology from 2009 to 2010.

The evidence showed that Thiam participated in a scheme to launder money from 2009 to 2011, during which time China Sonangol and CIF paid him $8,500,000 to a bank account in Hong Kong. Thiam then transferred approximately $3,900,000 to the United States through bank accounts and other means, and used the money to pay for luxury goods and other expenses, according to trial evidence. To conceal the bribe payments, Thiam falsely claimed to banks in Hong Kong and the United States that he was employed as a consultant and that the money was income from the sale of land which he earned before he was a minister, according to the evidence.

The purpose of the bribes, according to the evidence presented at trial, was to obtain substantial rights and interests in natural resources in Guinea, including the right to be the first and strategic shareholder with Guinea of a national mining company into which Guinea had to, among other things, transfer all of its stakes in various mining projects and future mining permits or concessions that the government decided to develop on its own. China Sonangol and CIF, through their subsidiaries, also obtained exclusive and valuable rights to conduct business operations in a broad range of sectors of the Guinean economy, including mining, according to the trial evidence.

Thiam was detained pending trial and is still in the custody of the U.S. Marshals. Sentencing is scheduled for Aug. 11, 2017.

Trial Attorney Lorinda Laryea of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Elisha Kobre and Christopher DiMase of the Southern District of New York are prosecuting the case. Fraud Section Assistant Chief Tarek Helou, Senior Trial Attorney Jason Linder, Trial Attorney Sarah Edwards, and Money Laundering and Asset Recovery Section Senior Trial Attorney Stephen Parker and Trial Attorney Alexis Loeb previously investigated the case. The Criminal Division’s Office of International Affairs also provided substantial assistance in this matter. The department is grateful to the government of Guinea for providing substantial assistance in gathering evidence during this investigation. The department also thanks Israel and Switzerland for their assistance in the department’s investigation.

The FBI’s International Corruption Squads in New York City and Los Angeles are investigating the case. In 2015, the FBI formed International Corruption Squads across the country to address national and international implications of foreign corruption.

The Fraud Section is responsible for investigating and prosecuting all FCPA matters. Additional information about the Justice Department’s FCPA enforcement efforts can be found at

May 8, 2017 in AML | Permalink | Comments (0)

Wednesday, May 3, 2017

Prof. William Byrnes to speak at Cambridge's Economic Crimes Congress "Preventing and Controlling Economic Crime in the Modern World – whose responsibility and are they really up to it?"

Professor William Byrnes will present at the 35th annual Cambridge Economic Crimes Symposium on Friday September 8th on the topic of the uses by governments of Cambridge
 disclosures of wealth by residents. See 
Prof William Byrnes' previous presentation at the 16th Annual National Security Conference and his powerpoint.

The dates of the 35th Cambridge International Symposium on Economic Crime are Sunday 3rd September to Sunday 10th September 2017.  Full program is now available  Download 2017 Programme

Jesuscollege1Strong relationships built among 1,800 participants who over seven days eat all meals together in the dining hall and reside in the dormitories of Jesus College, Cambridge.  High-level government and professional advisors from over 100 countries discussing cutting edge AML, risk, and compliance challenges on more than 20 panels a day.

Texas A&M University School of Law is a sponsoring academic institution of the symposium and will host many academics and a group of students attending.   Panels with Texas A&M experts include:  Economic Penalties & the Sentencing Guidelines; Beneficial Ownership of Entities; and Tax Compliance and Tax Privacy; Disclosing Wealth.  Texas A&M University School of Law Dean Dr. Andrew Morriss will provide a closing address for the annual week-long symposium. 

Texas A&M panelists Lisa A. Rich, Texas A&M University School of Law, former Director, Legislative & Public Affairs, U.S. Sentencing Commission; Caroline Lynch, former Chief Counsel, U.S. House of Representative, Subcommittee on Crime, Terrorism, & Homeland Security; The Honorable Ricardo H. Hinojosa, Chief Judge, U.S. District Court for the Southern District of Texas and former Chair, U.S. Sentencing Commission; Michael F. Zeldin, Special Counsel, Buckley Sandler LLP, and former global leader of the anti-money laundering/economic and trade sanctions practice at a Big Four accounting firm; William Henning, Professor of Law, Texas A&M University School of Law; Bill Clark, Drinker Biddle and Reath LLP, a Philadelphia law firm. He is a Uniform Law Commissioner, a member of the ALI, and a leader in the ABA Business Law Section’s Committee on Corporate Laws. He served as the Reporter for the Uniform Law Enforcement Access to Entity Information Act; Representative from National Association of Secretaries of State (invited); Gary Lucas, Professor of Law, Texas A&M University School of Law; Michael Hatfield, Professor of Law, Univ. of Washington School of Law; Kathleen Delaney Thomas, Associate Professor of Law, University of North Carolina School of Law; and Adam Thimmesch, Assistant Professor of Law, University of Nebraska College of Law.

May 3, 2017 in AML | Permalink | Comments (0)

Saturday, April 22, 2017

Foreign National Extradited and Pleads Guilty to Human Smuggling Conspiracy

A Pakistani citizen pleaded guilty today for his role in a scheme to smuggle undocumented migrants from Pakistan into the United States. 

Acting Assistant Attorney General Kenneth A. Blanco of the Justice Department’s Criminal Division, U.S. Attorney Channing D. Phillips of the District of Columbia and Special Agent in DHS Investigations Charge Angel M. Melendez of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) in New York made the announcement.

Sharafat Ali Khan, 32, a Pakistani citizen and former resident of Brazil, pleaded guilty to one count of conspiracy to smuggle undocumented migrants into the United States for profit before U.S. District Judge Reggie B. Walton of the District of Columbia.  Khan was extradited to the United States from Qatar on July 13, 2016.  Judge Walton scheduled Khan’s sentencing hearing for July 6, 2017. 

According to admissions in the plea agreement, between March 2014 and May 2016, Khan and other co-conspirators organized and arranged the unlawful smuggling of large numbers of undocumented migrants to the United States.  For their smuggling operation, Khan admitted that he and his co-conspirators used a network of facilitators to transport undocumented migrants from Pakistan and elsewhere through Brazil and Central America and then into the United States by land, air or sea travel.  Khan further admitted that he was responsible for managing safe houses for the migrants and arranging a network of associates in other countries to serve as escorts during different legs of the smuggling route.  Khan also admitted that voyage included harsh conditions that caused a substantial risk of serious bodily injury or death – including lengthy foot hikes with little food and water through the Darien Gap, a dangerous tropical forest area in Panama.

The investigation was conducted under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department’s Criminal Division and HSI. The ECT program focuses on human smuggling networks that may present particular national security or public safety risks, or present grave humanitarian concerns. ECT has dedicated investigative, intelligence and prosecutorial resources. ECT coordinates and receives assistance from other U.S. government agencies and foreign law enforcement authorities.

HSI New York investigated this case, with assistance from HSI Brazil, Mexico, Panama and Washington, D.C. field offices, the South Florida Joint Terrorism Task Force, FBI-Miami, the Human Smuggling Cell, the Diplomatic Security Service-Brazil, the Brazilian Federal Police and the U.S. Customs and Border Protection’s National Targeting Center.  The Criminal Division’s Office of International Affairs provided significant support with the defendant’s extradition and foreign legal assistance requests.   The Justice Department thanks the Government of Qatar for their assistance with the extradition in this case.  Senior Trial Attorney Michael Sheckels of the Criminal Division’s Human Rights and Special Prosecutions Section and Assistant U.S. Attorney Richard DiZinno of the District of Columbia are prosecuting the case.  

April 22, 2017 in AML | Permalink | Comments (0)

Thursday, April 20, 2017

Cyber Crime Causes 1.8% Permanent Drop in Corporation's Share Price


CITY A.M. (London) reports that: Severe cyber attacks have cost global investors at least £42bn in recent years according to a new in-depth study published this morning.

Security breaches directly correlate with lower share prices, according to a report from CGI Group and Oxford Economics.  It reveals that share prices fall by an average of 1.8 per cent on a permanent basis following a severe breach.

April 20, 2017 in AML | Permalink | Comments (0)

Wednesday, April 19, 2017

Prof William Byrnes speaks at 16th Annual Security Conference (Las Vegas April 18-20)

On May 19th 10.30 AM – 12.00 PM Professor William Byrnes of Texas A&M University School of Law is a featured speaker of the 16th Annual Security Conference.  Featured speakers of the 16th Annual conference include national security government experts such as: 

  • Noël Richards, National Security Agency (NSA)
  • Preston Ackerman, Federal Bureau of Investigation (FBI)
  • Pamela Sydelco, Global Security Sciences Division, Argonne National Laboratory

2 cropSession Chairs – Dr. Spiro Samonas & Dr. Dionysis Demetis
Featured Speaker: William Byrnes, Texas A&M University Law
Topic: Incentivizing Good Tax Administrations among the World of Black Hat and Grey Hat Governments: A Carrot & Stick Policy Proposal

Paper Published by the Emory International Law Review, Vol. 31, No. 1, 2017. Available at SSRN:

PowerPoint Presentation:  Download Byrnes Security Vegas 4-19-2017

April 19, 2017 in AML | Permalink | Comments (0)

Sunday, April 16, 2017

California Twice Convicted Felon Sentenced to Prison for Operating Fake Law Firms That Promised to Help Struggling Homeowners

An Orange County, California man was sentenced today in U.S. District Court in Santa Ana, California to serve 109 months in prison including the last 12 months in a halfway house for FBI DOJ logo his role as the owner and operator of a multi-million dollar fraudulent mortgage modification scheme that posed as a successful law firm, the Justice Department announced.

Bryan D’Antonio, 50, of Brea, California, pleaded guilty to conspiracy to commit mail and wire fraud on Aug. 9, 2016. In addition to the term of prison imposed by U.S. District Judge David O. Carter, Judge Carter ordered D’Antonio to pay $3,826,977.95 in restitution.

D’Antonio admitted that, between October 2008 and June 2009, he participated in a scheme with Ronald Rodis, Charles Wayne Farris, and others to induce homeowners to pay between $3,500 and $5,500 for the services of Rodis Law Group (RLG) and its successor entity, America’s Law Group (ALG). RLG and ALG advertised on radio stations nationwide, urging struggling homeowners to call a toll-free number and stating that the companies consisted of “a team of experienced attorneys” who were “highly skilled in negotiating lower interest rates and even lowering your principal balance.” In fact, RLG and ALG were telemarketing operations that never had teams of experienced attorneys, and that collected these payments from distressed homeowners, without providing anything of value to the overwhelming majority of them. During much of the scheme, Ronald Rodis was the only attorney at RLG.

“This defendant – a repeat telemarketing fraudster - took advantage of vulnerable homeowners facing foreclosure during the mortgage crisis,” said Acting Assistant Attorney General Chad A. Readler of the Justice Department’s Civil Division. “His two fake law firms promised homeowners assistance saving their homes and modifying their mortgages. The sad reality is both firms were nothing more than telemarketing scams.”

“While still under court supervision after serving a prison term in another telemarketing case, D’Antonio oversaw what was essentially a boiler room operation that preyed upon struggling homeowners,” said Acting U.S. Attorney Sandra R. Brown. “Hundreds of victims lost millions of dollars after D’Antonio’s employees told a series of lies that misrepresented nearly every aspect of the business. Today’s lengthy sentence will ensure that he will not have the opportunity to defraud unsuspecting victims for many years.”

D’Antonio was previously convicted of mail and wire fraud and sentenced to four years in federal prison for his participation in a medical billing scheme. He was also subject to a permanent injunction prohibiting him from having any involvement with any business that engaged in telemarketing or misrepresented the services it would provide. D’Antonio admitted that he started RLG while he was still on supervised release from his prior conviction. In violation of D’Antonio’s permanent injunction, RLG and ALG sold their services through an extensive telemarketing operation in which employees routinely misrepresented the services RLG and ALG would provide.

RLG and ALG telemarketers working for D’Antonio made numerous misrepresentations regarding the companies’ ability to negotiate loan modifications for homeowners. For example, the telemarketers stated that RLG and ALG had been in business for 11 years when in fact the company had only opened in October 2008. They falsely stated that RLG and ALG routinely obtained positive results for homeowners, including lower monthly payments, reductions in principal balance and lower interest rates. In fact, positive results were rarely achieved for any RLG or ALG clients. Telemarketers also falsely reiterated that homeowners would have a team of attorneys and real estate professionals assigned to their case. The telemarketers did not disclose to homeowners that RLG and ALG were owned and operated by Bryan D’Antonio, a convicted felon who was prohibited from engaging in telemarketing.

In connection with his guilty plea, D’Antonio admitted that the RLG and ALG schemes fraudulently obtained approximately $9 million from more than 1,500 victims.

“Mr. D’Antonio preyed upon victims who were already experiencing difficult circumstances and robbed them of their remaining financial resources,” said Assistant Director in Charge Deirdre L. Fike of the FBI’s Los Angeles Field Office. “Homeowners seeking financial assistance should thoroughly investigate businesses before investing their money in advance of receiving services.”

D’Antonio’s co-defendants, Charles Wayne Farris and Ronald Rodis, both previously pleaded guilty to one count of conspiracy to commit mail and wire fraud. Farris and Rodis are scheduled to be sentenced on May 1.

April 16, 2017 in AML | Permalink | Comments (0)

Saturday, April 15, 2017

Justice Department Announces Actions to Dismantle Kelihos Botnet

The Justice Department announced an extensive effort to disrupt and dismantle the Kelihos botnet – a global network of tens of thousands of infected computers under the Fbi-cybercontrol of a cybercriminal that was used to facilitate malicious activities including harvesting login credentials, distributing hundreds of millions of spam e-mails, and installing ransomware and other malicious software. 

“The operation announced today targeted an ongoing international scheme that was distributing hundreds of millions of fraudulent e-mails per year, intercepting the credentials to online and financial accounts belonging to thousands of Americans, and spreading ransomware throughout our networks.   The ability of botnets like Kelihos to be weaponized quickly for vast and varied types of harms is a dangerous and deep threat to all Americans, driving at the core of how we communicate, network, earn a living, and live our everyday lives,” said Acting Assistant Attorney General Blanco.  “Our success in disrupting the Kelihos botnet was the result of strong cooperation between private industry experts and law enforcement, and the use of innovative legal and technical tactics. The Department of Justice is committed to combatting cybercrime, no matter the size or sophistication of the scheme, and to punish those who are engaged in such crimes.”

“Cybercrime is a worldwide problem, but one that infects its victims directly through the computers and personal electronic devices that we use every day,” said Acting U.S. Attorney Bryan Schroder for the District of Alaska.  “Protecting the American people from such a worldwide threat requires a broad-reaching response, and the dismantling of the Kelihos botnet was such an operation.  We are lucky that we have talented FBI agents and federal prosecutors with the skillsets to help protect Americans from this pervasive cybercrime.”

“On April 8, 2017, we started the extraordinary task of blocking malicious domains associated with the Khelios botnet to prohibit further infections,” said FBI Special Agent in Charge Ritzman. “This case demonstrates the FBI’s commitment to finding and eradicating cyber threats no matter where they are in the world.”

Kelihos malware targeted computers running the Microsoft Windows operating system.  Infected computers became part of a network of compromised computers known as a botnet and were controlled remotely through a decentralized command and control system.  According to the civil complaint, Peter Yuryevich Levashov allegedly operated the Kelihos botnet since approximately 2010.  The Kelihos malware harvested user credentials by searching infected computers for usernames and passwords and by intercepting network traffic.  Levashov allegedly used the information gained from this credential harvesting operation to further his illegal spamming operation which he advertised on various online criminal forums.  The Kelihos botnet generated and distributed enormous volumes of unsolicited spam e-mails advertising counterfeit drugs, deceptively promoting stocks in order to fraudulently increase their price (so-called “pump-and-dump” stock fraud schemes), work-at-home scams, and other frauds.  Kelihos was also responsible for directly installing additional malware onto victims’ computers, including ransomware and malware that intercepts users’ bank account passwords.
As with other botnets, Kelihos is designed to operate automatically and undetected on victims’ computers, with the malicious code secretly sending requests for instructions to the botnet operator. In order to liberate the victim computers from the botnet, the United States obtained civil and criminal court orders in the District of Alaska.  These orders authorized measures to neutralize the Kelihos botnet by (1) establishing substitute servers that receive the automated requests for instructions so that infected computers no longer communicate with the criminal operator and (2) blocking any commands sent from the criminal operator attempting to regain control of the infected computers.

In seeking authorization to disrupt and dismantle the Kelihos botnet, law enforcement obtained a warrant pursuant to recent amendments to Rule 41 of the Federal Rules of Criminal Procedure.  A copy of this warrant along with the other court orders are produced below.   The warrant obtained by the government authorizes law enforcement to redirect Kelihos-infected computers to a substitute server and to record the Internet Protocol addresses of those computers as they connect to the server.  This will enable the government to provide the IP addresses of Kelihos victims to those who can assist with removing the Kelihos malware including internet service providers.  

The efforts to disrupt and dismantle the Kelihos botnet were led by the FBI’s Anchorage Office and New Haven Office; Senior Counsel Ethan Arenson and Harold Chun, and Trial Attorney Frank Lin of the Computer Crime and Intellectual Property Section; and Assistant U.S. Attorneys Yvonne Lamoureux and Adam Alexander of the District of Alaska.  Critical assistance was also provided by foreign partners, and invaluable technical assistance was provided by Crowd Strike and The Shadow server Foundation in executing this operation.

The details contained in the civil complaint and related pleadings are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

The Government has and will continue to share samples of the Kelihos malware with the internet security community so that antivirus vendors can update their programs to detect and remove Kelihos.  A number of free and paid antivirus programs are already capable of detecting and removing Kelihos, including the Microsoft Safety Scanner(link is external), a free product.

The documents filed by the Government as well as the court orders entered in this case are available online at the following web address:

April 15, 2017 in AML | Permalink | Comments (0)

Thursday, April 13, 2017

William Byrnes featured speaker at 16th Annual Cyber Security Conference

Professor William Byrnes of Texas A&M University School of Law is a featured speaker of the 16th Annual Security Conference  

The nature and scope of the Information Security field is evolving. We are no longer are we just concerned with protecting the technical edifice. Our emphasis has become more holistic, USCYBERCOM_Logoand we tend to consider both the organizational and technical aspects of information protection to be equally important. The Annual Security Conference provides a forum for discourses related to cyber security.

The conference is scheduled for April 18-20, 2017, in Las Vegas, NV, USA. 


April 13, 2017 in AML | Permalink | Comments (0)

Tuesday, April 11, 2017

Cayman Islands Introduces Beneficial Ownership Register Regime

Maples & Calder analyses the new Cayman Islands beneficial ownership law: Under recently passed legislation, certain Cayman Islands companies and Cayman Islands limited liability Caymanfinance_logo-1companies ("LLCs") will be required to maintain a beneficial ownership register that records details of the individuals who ultimately own or control more than 25% of the equity interests, voting rights or have rights to appoint or remove a majority of the company directors, or LLC managers, together with details of certain intermediate holding companies through which such interests are held (the "Regime").    

  • Download Cayman law ben owners  (A Bill For A Law To Amend The Companies Law (2016 Revision) In Order To Require Companies Incorporated In The Islands To Establish And Maintain Beneficial Ownership Registers Which May Be Searched By The Competent Authority; And For Incidental And Connected Matters)

The new Regime codifies a commitment agreed with the UK Government by way of an Exchange of Notes in April 2016 by the Cayman Islands, together with other Crown dependencies and overseas territories, to enhance existing robust arrangements on the exchange of beneficial ownership information to assist law enforcement agencies combat tax evasion and money laundering.

Each company or LLC that falls within the Regime's ambit (an "In-Scope Entity") will be required to complete and maintain a beneficial ownership register at its Cayman Islands registered office with a licensed corporate service provider. 

There are specified exceptions that will exempt certain types of companies and LLCs from the requirement to maintain a beneficial ownership register (notably those that are listed or subject to direct or indirect regulatory oversight). 

The register will not be public and the information will be accessible only by a specified Cayman Islands competent authority, principally on proper and lawful request made by UK law enforcement agencies.

The Maples & Calder update provides a general overview of the Regime and summarises the obligations and actions that In-Scope Entities need to take to comply with the Regime.

Cayman Finance writes: The proposals were first published in a consultation last year. A more detailed outline was issued on 2 December 2016, in a second consultation that closed on 9 December. The relevant draft legislation, the Companies (Amendment) Bill 2016, was published the following week, and the opportunity for public comment ended on 6 January 2017.

Historically, Cayman licenced corporate service providers (CSPs) have been required to collect and maintain beneficial ownership information only locally. The UK wanted Cayman (as well as other British overseas territories and crown dependencies) to develop fully public registers of ownership, but most overseas territories were reluctant to implement this. Instead, Cayman and other jurisdictions are developing a means of centralising this information so that it can be delivered to foreign authorities, especially London, rapidly in response to a request. The UK has stated that this is acceptable.

Accessing the register

Regulated entities incorporated in Cayman under the Companies Law and Limited Liability Company Law will still be obliged to maintain their local register at the company’s registered office address, and the register must be updated within one month of any changes. However, it will not have to be submitted immediately to the government. Instead, the separate registers will be accessed from a central point within the Cayman government when the need arises. They will not be open to the public unless and until that becomes an accepted and implemented international standard.

Harneys approves of this solution. The firm says it ‘strikes a sensible balance by enabling law enforcement authorities to have access to the information they need in cases where people abuse the corporate veil while continuing to protect the privacy of legitimate commercial interests and individuals’.

Exempted companies

Several types of company will be exempted from having to maintain a beneficial ownership register. These include stock exchange listed companies, regulated funds under the Mutual Funds Law, and special purpose companies, private equity or collective investment schemes or investment funds administered by a regulated firm based in an approved jurisdiction. There are also no proposals to extend the registers to cover beneficial ownership of limited partners in Cayman exempted limited partnerships.

‘The new regime should allow Cayman to reach closure with the United Kingdom on the beneficial ownership issue’, said Harneys. ‘It also reflects similar international initiatives, including the EU’s Fourth Anti-Money Laundering Directive, which is to be implemented by EU member states by June 2017.’

‘Challenging’ timetable

The Cayman government plans to introduce the registers and platform by 30 June 2017 in line with Cayman’s agreement with the UK. However, this timetable could be ‘challenging’ given the technical difficulties, says Harneys.

  • The move is the result of several years of pressure from the UK government, starting in 2013.

April 11, 2017 in AML | Permalink | Comments (0)