International Financial Law Prof Blog

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

Friday, December 13, 2019

Texas Businessman Convicted of Making Illegal Campaign Contributions to Political Candidates

A Houston, Texas, businessman has pleaded guilty to making illegal political contributions in the names of others to campaign committees for U.S. Senate and House of Representatives in 2017, announced Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney Ryan K. Patrick of the Southern District of Texas.

James D. Dannenbaum, 80, pleaded guilty today to violating the Federal Election Campaign Act. 

On Nov. 22, Dannenbaum Engineering Corporation (DEC) and its parent company, Engineering Holding Corporation, entered into a deferred prosecution agreement (DPA) and agreed to pay a $1.6 million criminal fine for its involvement in a multi-year conduit contribution scheme. Dannenbaum is DEC’s former CEO.

As part of the plea, Dannenbaum admitted that from 2015 through 2017, he and DEC made $323,300 in illegal conduit contributions through various employees and their family members to federal candidates and their committees. DEC corporate funds were used to advance or reimburse employee monies for these contributions. Dannenbaum did not reveal to any of the federal candidates that the corporation was the true source of the contributions. The object of the scheme was for DEC, Dannenbaum and a former employee to gain access to, and potentially influence, various candidates for federal office, including candidates for the presidency as well as the Senate and House of Representatives.

December 13, 2019 in AML | Permalink | Comments (0)

Thursday, December 12, 2019

Former COO and CFO of Publicly Traded Transportation Company Charged with Securities Fraud, Bank Fraud and Lying to Auditors

The former chief operating officer (COO) and chief financial officer (CFO) of Celadon Group Inc. (Celadon), a publicly traded transportation and trucking company headquartered in Indianapolis, Indiana, were charged in an indictment for their alleged role in a complex securities and accounting fraud scheme that resulted in a loss of more than $60 million in shareholder value. 

William Eric Meek, 39, and Bobby Lee Peavler, 40, both of Indianapolis were each charged in an indictment filed in the Southern District of Indiana with one count of conspiracy to commit wire fraud, bank fraud, and securities fraud; five counts of wire fraud; two counts of securities fraud; one count of conspiracy to make false statements to a public company’s accountants and to falsify books, records, and accounts of a public company; and one count of making false statements to a public company’s accountants. Peavler was charged with two additional counts of making false statements to a public company’s accountants. 

Meek and Peavler were arrested this morning and appeared before U.S. Magistrate Judge Mark J. Dinsmore of the Southern District of Indiana. Both Meek and Peavler were released on bail. The case is assigned to Chief Judge Jane E. Magnus-Stinson for U.S. District Court of the Southern District of Indiana.

“These senior corporate executives at Celadon allegedly orchestrated a securities and accounting fraud scheme that misled shareholders, banks, accountants, and the investing public,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division. “The Department of Justice and our law-enforcement partners will continue to safeguard market integrity by holding executives who violate the law responsible for their misconduct.”

“Through their scheme of lies, fraud and misrepresentations as alleged in the Indictment, Meek and Peavler damaged the integrity of the market, the corporation, its shareholders and public investors,” said U.S. Attorney Josh J. Minkler of the Southern District of Indiana. “The U.S. Attorney’s Office is committed to prosecuting those individuals in corporate America, who choose to commit corporate fraud, in violation of federal law, and have blatant disregard for those with a financial interest in the corporation.”

“This sends a clear message that those who commit financial fraud will be held accountable. Investors should expect nothing less than complete candor and truth from companies and their executives,” said Special Agent in Charge Grant Mendenhall of the FBI’s Indianapolis Field Office. “The FBI and our agency partners will continue to identify, investigate and pursue those who perpetrate criminal schemes for their own profit.”

“The U.S. Postal Inspection Service has an extensive history of investigating complex financial fraud schemes. A goal of the Postal Inspection Service is to protect investors, as well as the integrity of the financial marketplace from fraudulent activities by trusted insiders who abuse their positions,” said Inspector in Charge Delany De Leon-Colon of the U.S. Postal Inspection Service’s (USPIS) Criminal Investigations Group at National Headquarters. “Anyone who engages in this type of financial fraud scheme should know they will be found and held accountable for their dishonest practices.”

According to the indictment, by approximately 2016, Meek, Peavler, and others at Celadon knew the value of a substantial portion of Celadon’s trucks declined in value in part to a slowdown in the trucking market. In addition, many of those trucks, which were owned by Quality Companies (Quality), one of Celadon’s divisions, had serious mechanical issues that made them unattractive to drivers, further depressing their value. Instead of accounting for this decline in truck values, Meek, Peavler and others allegedly devised a scheme that caused Celadon to conceal tens of millions of dollars in losses to its shareholders, banks and the investing public.

Their scheme involved Quality trading away hundreds of its older and unused trucks to a large truck dealer in exchange for newer used trucks. During the trades, they intentionally inflated the prices on invoices associated with those trades so Celadon’s books would not reflect the fact that Celadon’s trucks were worth significantly less than reported to investors, the indictment alleges. Although they were actually trades, Meek, Peavler, and others allegedly sought to portray the transactions as independent “purchases” and “sales” of trucks in order to avoid heightened scrutiny. 

Meek and Peavler also allegedly structured one of the trades in an effort to artificially improve one of Celadon’s quarterly financial statements..  Quality received approximately $25 million from the truck dealer just before the end of Celadon’s fiscal quarter, which Celadon used to pay down its debt and appear to be in compliance with certain lending agreements. Meek, Peavler, and others allegedly failed to disclose, however, that as part of this deal, Quality had agreed to pay a similar amount of money back to the truck dealer three days after quarter-end. Celadon’s quarterly financial statements made no mention of this secret agreement, the indictment alleges.

In late 2016 and early 2017, Celadon’s independent auditors began to ask questions about the truck trades that Meek, Peavler, and others had used to hide the drop in truck values.  In response, Meek, Peavler and others allegedly made false and misleading statements to the auditors about the nature of the trade transactions, falsely denying they were trades and concealing the terms of these trades, including Quality’s agreement to pay money back to the truck dealer shortly after quarter-end. Peavler also directed a senior executive and co-conspirator to delete certain emails after the auditor had make a request for relevant documents. 

In May 2017, Celadon announced that its financial statements issued for fiscal year 2016, which ended June 30, 2016, as well as the quarters ending in September and December 2016 could no longer be relied on, not could the related reports of the independent auditor for those three time periods.  Following this announcement, Celadon’s share price dropped significantly, causing a one-day loss in Celadon’s market value of approximately $62.3 million.

An indictment is merely an allegation and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

Previously, Danny Williams, 36, of New Palestine, Indiana, the former head of a Celadon subsidiary, pled guilty in April 2019 to conspiracy to commit securities fraud, make false statements to a public company’s accountants, and falsify books, records, and accounts of a public company.  Also in April 2019, Celadon itself entered a Deferred Prosecution Agreement with the government, under which it is obligated to pay restitution of $42.2 million.

The FBI’s Indianapolis Field Office and USPIS are investigating the case. The U.S. Securities and Exchange Commission provided assistance and has also filed a civil complaint against the defendants for related conduct. Trial Attorney Kyle W. Maurer and Assistant Chief L. Rush Atkinson of the Criminal Division’s Fraud Section, and Deputy Chief Steven D. DeBrota and Assistant U.S. Attorney Nicholas J. Linder of the Southern District of Indiana are prosecuting the case. 

December 12, 2019 in AML | Permalink | Comments (0)

Tuesday, December 10, 2019

Apple Self Discloses and Pays Small Fine for Business Relationship with Narcotics Kingpin Company

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today announced a $466,912 settlement with Apple, Inc. (“Apple”).  Apple, a corporation based in Cupertino, California, has agreed to settle its potential civil liability for apparent violations of the Foreign Narcotics Kingpin Sanctions Regulations, 31 C.F.R. part 598 (FNKSR). 

Apple appears to have violated § 598.203 of the FNKSR by dealing in the property or interests in property of SIS, d.o.o. (“SIS”), a Slovenian software company previously identified on OFAC’s List of Specially Designated Nationals and Blocked Persons as a significant foreign narcotics trafficker.  Specifically, from on or about February 24, 2015 to on or about May 9, 2017, Apple hosted, sold, and facilitated the transfer of SIS’s software applications and associated content.  OFAC determined that Apple voluntarily disclosed the apparent violations, and that the apparent violations constitute a non-egregious case.

On July 18, 2008, Apple entered into an app development agreement with SIS, a software company located at 19 Spruha, Trzin 1236, Slovenia. On February 24, 2015, OFAC designated SIS and Savo Stjepanovic (“Stjepanovic”), a director and majority owner of SIS, pursuant to the Foreign Narcotics Kingpin Designation Act, 21 U.S.C. §§ 1901-1908, and added them to the SDN List. OFAC’s public announcement of the designation included SIS’s address, registration number, and tax identification number, and further noted that SIS was linked to Stjepanovic. The SDN List provided the following identifying information for SIS:

SIS D.O.O., 19 Spruha, Trzin 1236, Slovenia; Registration ID 5919070 (Slovenia); Tax ID No. SI91729181 (Slovenia) [SDNTK].

OFAC also published a diagram titled “KARNER Steroid Trafficking Network,” which included a photograph of Stjepanovic, SIS, and a SIS logo.

On the same day that OFAC designated SIS and Stjepanovic, Apple, in accordance with its standard compliance procedures, screened the newly designated SDNTKs against its app developer account holder names using its sanctions screening tool. During this screening, Apple failed to identify that SIS, an App Store developer, was added to the SDN List and was therefore blocked. Apple later attributed this failure to its sanctions screening tool’s failure to match the upper case name “SIS DOO” in Apple’s system with the lower case name “SIS d.o.o.” as written on the SDN List. The term “d.o.o.” is a standard corporate suffix in Slovenia identifying a limited liability company. In addition, even though the  address for SIS collected by Apple matched the address for SIS identified and published by OFAC, Apple failed to identify SIS as an SDNTK for over two years after the designation.

On the day of designation, Apple was in possession of Stjepanovic’s full name in its records since he was listed as an “account administrator” in its App Store developer account, though he was not listed as a “developer.” At the time, Apple’s compliance process screened individuals identified as “developers,” but did not screen all of the individual users identified in an App Store account against the SDN List. Apple therefore failed to identify Stjepanovic as an SDNTK.

On the day of designation, any property in which SIS or Stjepanovic had an interest became blocked, and any transactions or dealings in such property by Apple, a U.S. person, were prohibited. Nonetheless, Apple continued to host software applications and associated content (“apps”) owned by SIS on the App Store, allowed downloads and sales of the blocked SIS apps, received payments from App Store users downloading the blocked SIS apps, permitted SIS to transfer and sell its apps to two other developers, and remitted funds on a monthly basis to SIS for the sales of the blocked SIS apps.

On or about April 17, 2015 — approximately two months after the designations — Apple facilitated the transfer of a portion of SIS’s apps to a second software company (the “Second Company”). The Second Company was incorporated several days after OFAC’s designation of SIS. Separately, on or about September 14, 2015, SIS entered into an agreement with a third software company (the “Third Company”) and transferred the ownership of SIS’s remaining apps to the Third Company. The owner of the Third Company took over the administration of SIS’s App Store account and replaced SIS’s App Store banking information with his own banking information. These actions were all conducted without personnel oversight or additional
screening by Apple. After enhancing its sanctions screening tool and related processes, Apple identified SIS as a potential SDNTK in February 2017. Apple’s finance team immediately suspended further payments associated with the SIS account, which was being administered by the Third Company,
and whose owner was receiving payments from Apple. However, Apple continued to make payments to the Second Company for the blocked SIS apps that had been transferred to the Second Company in April 2015, after OFAC’s designation of SIS as a SDNTK.

Apple made 47 payments associated with the blocked apps, including payments directly to SIS, during the period of time that SIS was listed on the SDN List. In total, over 54 months, Apple collected $1,152,868 from customers who downloaded SIS apps.

The statutory maximum civil monetary penalty applicable in this matter is $74,331,860. OFAC determined, however, that Apple voluntarily self-disclosed. Accordingly, under OFAC’s Economic Sanctions Enforcement Guidelines (“Enforcement Guidelines”), the base civil monetary penalty
amount applicable in this matter is $576,434.

The settlement amount of $466,912 also reflects OFAC’s consideration of the General Factors under the Enforcement Guidelines. Specifically, OFAC determined the following to be aggravating factors:

(1) Based on the number of Apparent Violations, the length of time over which the Apparent Violations occurred, and the multiple points of failure within the company’s sanctions compliance program, policies, and procedures, the conduct demonstrated reckless disregard for U.S. sanctions requirements;
(2) Apple’s payments to SIS and for the blocked apps conferred significant economic benefit to SIS and its owner, as Apple’s App Store appears to have been the main business for SIS around the time it was designated; and

(3) Apple is a large and sophisticated organization operating globally with experience and expertise in international transactions.

OFAC found the following to be an aggravating factor with respect to three Apparent Violations that occurred after Apple identified SIS as an SDNTK in February 2017:

(4) Apple failed to take corrective actions in a timely manner after identifying SIS as an SDNTK, and continued to make payments for the download of blocked apps for multiple months.

OFAC determined the following to be mitigating factors:

(1) The volume and total amount of payments underlying the Apparent Violations was not significant compared to the total volume of transactions undertaken by Apple on an annual basis;
(2) Apple has not received a penalty notice or Finding of Violation from OFAC in the five years preceding the date of the transaction giving rise to the Apparent Violations; and
(3) Apple responded to numerous requests for information in a prompt manner.

Additionally, Apple has confirmed that it has terminated the conduct that led to the Apparent Violations and has undertaken the following measures as part of its compliance commitments to minimize the risk of recurrence of similar conduct in the future:

• Increased the role of the Global Export and Sanctions Compliance Senior Manager in the escalation and review process;
• Reconfigured the primary sanctions screening tool to fully capture spelling and capitalization variations and to account for country-specific business suffixes, and implemented an annual review of the tool’s logic and configuration;

• Expanded sanctions screening to include not only app developers, but also their designated payment beneficiaries and associated banks;
• Updated the instructions for employees to review potential SDN List matches flagged by the primary sanctions screening tool; and
• Implemented mandatory training for all employees on export and sanctions regulations.


December 10, 2019 in AML | Permalink | Comments (0)

Sunday, December 8, 2019

Prepared Remarks of FinCEN Director Kenneth A. Blanco at Chainalysis Blockchain Symposium

Good morning, everyone. Thank you for that wonderful introduction.

It is great to be here with you today to discuss FinCEN, our mission, and how together – working with all of you – our collective focus on convertible virtual currency (CVC) and responsible innovation protects our national security and our communities and families from harm.

Having a clear and frank dialogue between the public and private sectors is important in creating financial transparency and inclusion, and is also important in the development of the future of payment systems, but also in methods to identify, track, and stop criminals and other bad actors including terrorists from coopting innovation and technology in order to use and abuse our financial system and powerful economy to further their criminal activities and bad acts.

Before I begin with my remarks today, let me remind you what is at stake here. We use the information you provide to save lives and protect people and our national security.

These are not just rules that we are requiring you to comply with — there is a good reason for them, and they have an important purpose.  They protect people and save lives; this is a national security issue.

As we talk about these things today, I want you to ask yourself to whom is it important, whom it affects. It is important to the lives of millions of people, the innocent and the most vulnerable, victims or potential victims of crime.

It is important to the elderly who would lose their life savings to a fraud scheme or cybercrime. 

It is important to the child who is deprived of food or medical attention because a kleptocrat, public official, or other bad actor has siphoned off the money that was to be used for that purpose.

It is important to the person who lost a loved one to an act of terror, a parent who has lost their child to an opioid addiction, or an orphan child who lost a parent to the same. 

I urge you to remember how compliance—by financial institutions in particular—plays a critical role in preventing these tragedies from occurring. In many instances, they are the first line of defense. 

Today, I would like to share with you our recent work in this space and use this as an opportunity to provide you with some observations and to clarify some common misconceptions.

As you all are aware, FinCEN is a global leader in both regulating convertible virtual currency activity and taking action against its illicit use.

Today I will address:

  1. The issue of ‘regulatory clarity’;
  2. The value of Bank Secrecy Act (BSA) data;
  3. FinCEN’s Funds Travel Rule;[1]
  4. Stablecoins and Anonymity-Enhanced Cryptocurrencies (AECs); and,
  5. Opportunities for private sector engagement with FinCEN.

Regulatory Clarity

First, let me talk about regulatory clarity itself. FinCEN has put in place rules covering virtual currency and money transmission since 2011.

Two important concepts are worth noting today:

First — FinCEN applies the same technology-neutral regulatory framework to any activity that provides the same functionality at the same level of risk, regardless of its label. It is not what you label it; it is the activity you actually do that counts.

Second — Money transmission denominated in convertible virtual currency is money transmission pure and simple. Therefore, every regulatory requirement, piece of guidance, administrative ruling, or enforcement action ever conducted in the money transmission space has a bearing on transmittals of value denominated in convertible virtual currency.

In May 2019, FinCEN issued a significant piece of guidance summarizing over twenty years of rule text and rule interpretation into a single document. The guidance also provides examples of how rules are applied to the latest developments in financial innovation. Finally, we list all the resources available to those who still have questions, to include information on the FinCEN Resource Center (FRC), or requesting your own administrative ruling. Together with that guidance, we issued a FinCEN Advisory identifying risks and red flags that financial institutions need to be aware of in the CVC space.

Also, we work closely with our fellow regulators to provide clarity. In October of this year, we issued joint guidance with CFTC and SEC. Our staffs work very closely together in this space.

Value of BSA Data

Let me take a moment and talk about the value of the BSA data that financial institutions provide to FinCEN.

FinCEN’s BSA database includes nearly 300 million records — 55,000 new documents are added each day. The reporting contributes critical information that is routinely analyzed, resulting in the identification of suspected criminal and terrorist activity and the initiation of investigations.

FinCEN grants more than 12,000 agents, analysts, and investigative personnel from over 350 unique federal, state, and local agencies across the United States with direct access to this critical reporting by financial institutions. There are approximately 30,000 searches of the BSA data taking place each day. Further, there are more than 100 Suspicious Activity Report (SAR) review teams and financial crimes task forces across the country, which bring together prosecutors and investigators from different agencies to review BSA reports. Collectively, these teams reviewed approximately 60% of all SARs filed.

Each day, law enforcement, FinCEN, regulators, and others are querying this data:  7.4 million queries per year on average. Those queries identify an average of 18.2 million filings that are responsive or useful to ongoing investigations, examinations, victim identification, analysis and network development, sanctions development, and U.S. national security activities, among many, many other uses that protect our nation from harm, help deter crime, and save lives.

With respect to today’s conversation, we have seen significant reporting that discusses convertible virtual currency. Since FinCEN issued its convertible virtual currency advisory and guidance in May of this year, we have received over 10,000 SARs related to convertible virtual currency. Of these 10,000 approximately 6,600 — two-thirds of them — are from convertible virtual currency entities including kiosks, exchanges, and peer-to-peer exchangers. I point this out because before our May advisory, reports from convertible virtual currency entities only made up approximately half of our convertible virtual currency-related filings. But as of November 2019, over 1,900 unique filers have directly referenced the advisory key terms. It is encouraging that convertible virtual currency entities, dozens of whom had never filed a SAR report prior to the May advisory, are using the red flags and reporting back to us.

I think it is important for all financial institutions to ask themselves whether they are one of the reporting institutions on potential cryptocurrency suspicious activity. If the answer is no, they need to reevaluate whether they are sure that their institutions do not have exposure to cryptocurrency.

Those are a few statistics, but let me also share some trends we are seeing in SAR reporting in response to many of the red flags in the advisory. FinCEN is seeing an increase in filings from exchanges identifying potential unregistered, foreign-located money services businesses (MSBs), specifically, Venezuela-based P2P exchangers. Convertible virtual currency kiosk operators have also increased their reporting on activity indicative of scam victims upon identification of new customers who have limited knowledge of convertible virtual currencies, particularly those in vulnerable populations, including the elderly.

One last note on this matter — later today you will hear from a number of experts in this field, including Sean Evans of FinCEN’s Intelligence Division, who are some of the most experienced convertible virtual currency investigative experts in the world. They use the BSA data provided by financial institutions to identify illicit finance trends, methodologies, and typologies to inform law enforcement agents, prosecutors, regulators, and others about how convertible virtual currency is used by criminals including terrorists, rogue states, and other bad actors. This allows them to think about how to fill the gaps and vulnerabilities that put our nation and its people at risk, while also preventing crime before it happens or preventing it from spreading once it has occurred.

Earlier this year, FinCEN began the BSA Value Project, a study and analysis of the value of the BSA information we receive. We are working to provide comprehensive and quantitative understanding of the broad value of BSA reporting and other BSA information in order to make it more effective and its collection more efficient. We already know that BSA data plays a critical role in keeping our country strong, our financial system secure, and our families safe from harm — that is clear. But FinCEN is using the BSA Value Project to improve how we communicate the way BSA information is valued and used, and to develop metrics to track and measure the value of its use on an ongoing basis.

And on that point, I want to make very clear that the value of BSA data is not just confined to law enforcement, FinCEN, or the government:  industry also benefits. The study has confirmed there is extensive and extremely varied uses of BSA information across all stakeholders (including financial institutions and other reporting entities). Financial institutions and other reporting entities derive important value from their BSA compliance and reporting activities. Throughout the study, industry consistently has confirmed that their BSA obligations, while incurring costs, also help them to:

  • Identify and remove bad actors from among their customers to avoid reputational and financial risks;
  • Manage their risks more effectively to permit greater responsible revenue generation;
  • Secure partnerships and investment opportunities domestically and internationally in a responsible, risk-sensitive manner; and, of course,
  • Avoid financial, operational, and reputational stains from non-compliance. 

Funds Travel Rule

I also want to take a minute to quickly provide my thoughts on the funds travel rule. It applies to CVC, and we expect you to comply, period.

And, by the way, the Financial Action Task Force (FATF) as well expects that jurisdictions will make sure it applies as can be seen through their publication of their interpretive note to Recommendation 15, which urges countries to require money services businesses that handle convertible virtual currency to implement robust AML/CFT programs, including those related to recordkeeping.[2]

This idea is nothing new. Indeed, FinCEN, through our delegated examiners at the Internal Revenue Service (IRS), has been conducting examinations that include compliance with the Funds Travel Rule since 2014. In fact, to date it is the most commonly cited violation by the IRS against MSBs engaged in CVC money transmission.

Stablecoins and AECs

The same 2011 rulemaking that brought convertible virtual currency money transmission activity under the BSA also helped emphasize a key point about the BSA:  it is technology neutral. We have been very clear that we regulate the activity of money transmission. This is particularly important as the public increasingly turns its attention to different types of convertible virtual currencies like stablecoins and AECs.

Despite recent reporting, stablecoins are not a new concept in this space. FinCEN has been looking at stablecoins since the earliest experiments into virtual currency in the early 2000s. FinCEN published its first piece of public guidance in this space in 2008, dealing precisely with the issues that underlie the type of convertible virtual currency we now refer to as a “stablecoin.” And, because we are technology neutral, we can say with complete clarity that for AML/CFT purposes, it should be understood that transactions in stablecoins, like any other value that substitutes for currency, are covered by our definition of “money transmission services.” This means that accepting and transmitting activity denominated in stablecoins makes you a money transmitter under the BSA. It does not matter if the stablecoin is backed by a currency, a commodity, or even an algorithm — the rules are the same. To that point, administrators of stablecoins have to register as MSBs with FinCEN.

FinCEN’s technology neutral approach also means that other types of activity in convertible virtual currency are already covered by our money transmitter requirements. As our May 2019 guidance highlights, this includes AECs such as monero, zcash, grin, dash, and others. In practice, this means that whether you are a money transmitter offering bitcoin, ether, or AECs, — your obligations under the BSA are the same. Furthermore, our expectation is that you understand the differences that exist in these different products and services. You should be able to tell your examiner, and/or your regulator like FinCEN, how you mitigate risks associated with AECs, including how you identify potentially suspicious activity and comply with reporting and recordkeeping requirements — including the Funds Travel Rule. You can count on being asked about this during an examination.



Finally, I would like to discuss our commitment to continue to stay engaged with you outside of this conference. Just yesterday, FinCEN concluded two days of Innovation Hours here in New York. Through this ongoing program, we have had the opportunity to talk with 12 fintech and regtech companies about emerging products and services. Our goal remains to provide an environment in which FinCEN can better understand innovation as it happens and provide insight or other regulatory action to ensure compliance with FinCEN’s regulations. FinCEN welcomes the opportunity to hear from you if you have innovations that can advance our AML/CFT mission – how to keep us safer and be more effective and efficient in doing so. I encourage you to apply for one of our future Innovation Hours events. Visit for more information.

But this is only one avenue to contact FinCEN. I would like to also highlight our regulatory helpline, which has been operating for years to provide assistance to financial institutions that have compliance questions. If you have a question or are uncertain about a requirement, you have the ability to directly contact FinCEN and ask those questions. FinCEN began to receive inquiries related to convertible virtual currency in 2012, but has only received slightly over 1,000 questions since that time. This is a relatively small number when you consider we received over 16,000 calls each year. This is important — if we hear from many financial institutions about similar issues, it may result in the publication of future guidance or help focus future outreach efforts. However, we cannot know the questions you have if you do not ask them. You can contact FinCEN by phone (800-767-2825) or email ( and have our experts help clarify any questions you may have.

For larger, policy-oriented questions, we also offer opportunities to look more closely at regulatory questions, on a case-by-case basis, through our administrative ruling process. You can write to our Office of Regulatory Policy for an interpretation of our regulations. When significant issues are discussed, we frequently publish these administrative rulings to provide additional clarity to the industry. To date, we have issued six administrative rulings that discuss convertible virtual currency. Again, this program is only successful if we hear the regulatory questions from you. I encourage you to think about the issues where industry would benefit from hearing from FinCEN and submitting requests when you think it is appropriate.


As I conclude, I want to thank you all again for having me today, and I would also like to reiterate something. At FinCEN, we remain committed to building our capabilities and understanding of convertible virtual currencies and look forward to continuing our efforts to keep our country safe and secure with you. FinCEN will continue to be a global leader in responsible innovation through our continued engagement with partners like all of you. Please remember what is at stake here.

[1] 31 C.F.R. 1010.410(f).


December 8, 2019 in AML | Permalink | Comments (0)

Saturday, December 7, 2019

Ericsson Pleads Guilty and Pays Over $1 Billion to Resolve Bribery Case

Telefonaktiebolaget LM Ericsson (Ericsson or the Company), a multinational telecommunications company headquartered in Stockholm, Sweden, has agreed to pay total penalties of more than $1 billion to resolve the government’s investigation into violations of the Foreign Corrupt Practices Act (FCPA) arising out of the Company’s scheme to make and improperly record tens of millions of dollars in improper payments around the world.  This includes a criminal penalty of over $520 million and approximately $540 million to be paid to the U.S. Securities and Exchange Commission (SEC) in a related matter.  An Ericsson subsidiary pleaded guilty today for its role in the scheme. 

Ericsson entered into a deferred prosecution agreement with the department in connection with a criminal information filed today in the Southern District of New York charging the Company with conspiracies to violate the anti-bribery, books and records, and internal controls provisions of the FCPA.  The Ericsson subsidiary, Ericsson Egypt Ltd, pleaded guilty today in the Southern District of New York to a one-count criminal information charging it with conspiracy to violate the anti-bribery provisions of the FCPA.  The case is assigned to U.S. District Judge Alison J. Nathan of the Southern District of New York.  Pursuant to its agreement with the department, Ericsson has committed to pay a total criminal penalty of $520,650,432 within 10 business days of the sentencing hearing, and has agreed to the imposition of an independent compliance monitor. 

“Ericsson’s corrupt conduct involved high-level executives and spanned 17 years and at least five countries, all in a misguided effort to increase profits,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “Such wrongdoing called for a strong response from law enforcement, and through a tenacious effort with our partners in the Southern District of New York, the SEC, and the IRS, today’s action not only holds Ericsson accountable for these schemes, but should deter other companies from engaging in similar criminal conduct.”

“Today, Swedish telecom giant Ericsson has admitted to a years-long campaign of corruption in five countries to solidify its grip on telecommunications business,” said U.S. Attorney Geoffrey S. Berman of the Southern District of New York.  “Through slush funds, bribes, gifts, and graft, Ericsson conducted telecom business with the guiding principle that ‘money talks.’  Today’s guilty plea and surrender of over a billion dollars in combined penalties should communicate clearly to all corporate actors that doing business this way will not be tolerated.”

“Implementing strong compliance systems and internal controls are basic principles that international companies must follow to steer clear of illegal activity,” said Don Fort, Chief, IRS Criminal Investigation.  “Ericsson’s shortcomings in these areas made it easier for its executives and employees to pay bribes and falsify its books and records.  We will continue to pursue cases such as these in order to preserve a global commerce system free of corruption.”

According to admissions by Ericsson, beginning in 2000 and continuing until 2016, the Company conspired with others to violate the FCPA by engaging in a longstanding scheme to pay bribes, to falsify books and records and to fail to implement reasonable internal accounting controls.  Ericsson used third party agents and consultants to make bribe payments to government officials and/or to manage off-the-books slush funds.  These agents were often engaged through sham contracts and paid pursuant to false invoices, and the payments to them were improperly accounted for in Ericsson’s books and records.  The resolutions cover the Company’s criminal conduct in Djibouti, China, Vietnam, Indonesia and Kuwait. 

Between 2010 and 2014, Ericsson, via a subsidiary, made approximately $2.1 million in bribe payments to high-ranking government officials in Djibouti in order to obtain a contract with the state-owned telecommunications company valued at approximately €20.3 million to modernize the mobile networks system in Djibouti.  In order to effectuate the scheme, an Ericsson subsidiary entered into a sham contract with a consulting company and approved fake invoices to conceal the bribe payments.  Ericsson employees also completed a draft due diligence report that failed to disclose the spousal relationship between the owner of the consulting company and one of the high-ranking government officials.

In China, between 2000 and 2016, Ericsson subsidiaries caused tens of millions of dollars to be paid to various agents, consultants and service providers, a portion of which was used to fund a travel expense account in China that covered gifts, travel and entertainment for foreign officials, including customers from state-owned telecommunications companies.  Ericsson used the travel expense account to win business with Chinese state-owned customers.  In addition, between 2013 and 2016, Ericsson subsidiaries made payments of approximately $31.5 million to third party service providers pursuant to sham contracts for services that were never performed.  The purpose of these payments was to allow Ericsson’s subsidiaries in China to continue to use and pay third party agents in China in contravention of Ericsson’s policies and procedures.  Ericsson knowingly mischaracterized these payments and improperly recorded them in its books and records.

In Vietnam, between 2012 and 2015, Ericsson subsidiaries made approximately $4.8 million in payments to a consulting company in order to create off-the-books slush funds, associated with Ericsson’s customers in Vietnam, that were used to make payments to third parties who would not be able to pass Ericsson’s due diligence processes.  Ericsson knowingly mischaracterized these payments and improperly recorded them in Ericsson’s books and records.  Similarly, in Indonesia, between 2012 and 2015, an Ericsson subsidiary made approximately $45 million in payments to a consulting company in order to create off-the-books slush funds, and concealed the payments on Ericsson’s books and records.

In Kuwait, between 2011 and 2013, an Ericsson subsidiary promised a payment of approximately $450,000 to a consulting company at the request of a sales agent, and then entered into a sham contract with the consulting company and approved a fake invoice for services that were never performed in order to conceal the payment.  The sales agent provided an Ericsson employee with inside information about a tender for the modernization of a state-owned telecommunications company’s radio access network in Kuwait.  An Ericsson subsidiary was awarded the contract valued at approximately $182 million; Ericsson subsequently made the $450,000 payment to the consulting company and improperly recorded it in its books.

As part of the deferred prosecution agreement, Ericsson has agreed to continue to cooperate with the department in any ongoing investigations and prosecutions relating to the conduct, including of individuals; to enhance its compliance program; and to retain an independent compliance monitor for three years.

The department reached this resolution with Ericsson based on a number of factors, including the Company’s failure to voluntarily disclose the conduct to the department and the nature and seriousness of the offense, which included FCPA violations in five countries and the involvement of high-level executives at the Company.  Ericsson received partial credit for its cooperation with the department’s investigation, which included conducting a thorough internal investigation, making regular factual presentations to the department, voluntarily making foreign-based employees available for interviews in the United States, producing extensive documentation and disclosing some conduct of which the department was previously unaware. 

Ericsson did not receive full credit for cooperation and remediation because it did not disclose allegations of corruption with respect to two relevant matters; it produced certain materials in an untimely manner; and it did not fully remediate, including by failing to take adequate disciplinary measures with respect to certain employees involved in the misconduct.  The Company has been enhancing and committed to further enhance its compliance program and internal accounting controls.  Accordingly, the total criminal penalty reflects a 15 percent reduction off the bottom of the applicable United States Sentencing Guidelines fine range.

In the related matter, Ericsson agreed to pay to the SEC disgorgement and prejudgment interest totaling approximately $540 million.

The case is being investigated by IRS-CI.  Acting Assistant Chief Andrew Gentin and Trial Attorney Michael Culhane Harper of the Criminal Division’s Fraud Section and Assistant U.S. Attorney David Abramowicz of the Southern District of New York are prosecuting the case.  The Criminal Division’s Office of International Affairs provided assistance.

December 7, 2019 in AML | Permalink | Comments (0)

Friday, December 6, 2019

Former Trader for Major Multinational Bank Convicted for Price Fixing and Bid Rigging in FX Market

A former currency trader was convicted in New York for his participation in an antitrust conspiracy to manipulate prices for emerging market currencies in the global foreign currency exchange (FX) market, the Justice Department announced today.

Following a three-week trial in the U.S. District Court for the Southern District of New York, a jury convicted Akshay Aiyer (former Executive Director at a major multinational bank) of conspiring to fix prices and rig bids in Central and Eastern European, Middle Eastern and African (CEEMEA) currencies, which were generally traded against the U.S. dollar and the euro, from at least October 2010 through at least January 2013.

“Today, a jury of citizens held the defendant accountable for fixing prices and rigging bids for emerging market currencies traded in the United States and elsewhere,” said Assistant Attorney General Makan Delrahim of the Department of Justice’s Antitrust Division.  “This conviction serves as a reminder of our commitment to hold individuals responsible for their involvement in complex financial schemes which violate the integrity of the global financial markets.”

According to evidence presented at trial, the defendant engaged in near-daily communications with his co-conspirators by phone, text and through an exclusive electronic chat room to coordinate their trades of the CEEMEA currencies in the FX spot market.  The jury heard evidence that the defendant and his co-conspirators manipulated exchange rates by agreeing to withhold bids or offers to avoid moving the exchange rate in a direction adverse to open positions held by co-conspirators and by coordinating their trading to manipulate the rates in an effort to increase their profits.  By agreeing not to buy or sell at certain times, the conspiring traders protected each other’s trading positions by withholding supply of or demand for currency and suppressing competition in the FX spot market for emerging market currencies.  They also heard evidence that the defendant and his co-conspirators took steps to conceal their actions by, among other steps, using code names, communicating on personal cell phones during work hours and meeting in person to discuss particular customers and trading strategies.

The Antitrust Division has charged five companies and six individuals in its investigation of collusion in the FX spot market. On May 20, 2015, four major banks – Citicorp, JPMorgan Chase & Co., Barclays PLC and The Royal Bank of Scotland plc – pleaded guilty and agreed to pay collectively more than $2.5 billion in criminal fines for their participation in an antitrust conspiracy in the euro-U.S. dollar FX spot market.  On Jan. 25, 2018, BNP Paribas USA, Inc. pleaded guilty and agreed to pay a $90 million criminal fine for its participation in an antitrust conspiracy involving emerging market FX prices.  On Jan. 4, 2017 and Jan. 12, 2017, plea agreements were announced for two former traders in connection with an antitrust conspiracy involving emerging market FX prices.

The Antitrust Division’s investigation of collusion in the financial markets is ongoing.  The investigation in today’s case is being conducted by the FBI’s Washington Field Office, and the prosecution is being handled by the Antitrust Division’s New York Office.  The Criminal Division’s Fraud Section also provided substantial assistance in this matter.  Anyone with information on price fixing, bid rigging or other anticompetitive conduct in the financial markets should contact the Antitrust Division’s New York Office at 212-335-8000 or visit

December 6, 2019 in AML | Permalink | Comments (0)

Wednesday, December 4, 2019

Singapore's progress in strengthening measures to tackle money laundering and terrorist financing

Since the 2016 assessment of Singapore’s measures to tackle money laundering and terrorist financing, the country has taken a number of actions to strengthen its framework.

Singapore has been in an enhanced follow-up process following the adoption of its mutual evaluation in 2016. In line with the FATF Procedures for mutual evaluations, the country has reported back to the FATF on the action it has taken since then.

To reflect Singapore’s progress, the FATF has now re-rated the country on the following Recommendations:

3 – Money laundering offence from largely compliant to compliant

23 – DNFBPs: Other measures from partially compliant to largely compliant

24 – Transparency and beneficial ownership of legal persons from partially compliant to largely compliant

25 – Transparency and beneficial ownership of legal arrangements from partially compliant to compliant

The report also looks at whether Singapore’s measures meet the requirements of FATF Recommendations that have changed since the 2016 mutual evaluation. The FATF agreed to maintain the rating of compliant for Recommendation 2 (National cooperation and coordination), Recommendation 18 (Internal controls and foreign branches and subsidiaries) and Recommendation 21 (Tipping-off and confidentiality).  The FATF also maintained the rating of largely compliant for Recommendation 5 (Terrorist financing offence), Recommendation 7 (Targeted financial sanctions related to proliferation) and Recommendation 8 (Non-profit organisations).

Singapore is now compliant on 20 of the 40 Recommendations and largely compliant on 17 of them. It remains partially compliant on 3 of the 40 Recommendations. 

Follow Up Report Singapore 2019 Download pdf ( 3,114kb)

Mutual Evaluation Report of Singapore - 2016

December 4, 2019 in AML | Permalink | Comments (0)

Chinese National Who Worked at Monsanto Indicted on Economic Espionage Charges

Haitao Xiang, 42, formerly of Chesterfield, Missouri, was indicted today by a federal grand jury on one count of conspiracy to commit economic espionage, three counts of economic espionage, one count of conspiracy to commit theft of trade secrets and three counts of theft of trade secrets. 

According to the indictment, Xiang was employed by Monsanto and its subsidiary, The Climate Corporation, from 2008 to 2017, where he worked as an imaging scientist.  Monsanto and The Climate Corporation developed a digital, on-line farming software platform that was used by farmers to collect, store, and visualize critical agricultural field data and increase and improve agricultural productivity for farmers.  A critical component to the platform was a proprietary predictive algorithm referred to as the Nutrient Optimizer.  Monsanto and The Climate Corporation considered the Nutrient Optimizer a valuable trade secret and their intellectual property.

“The indictment alleges another example of the Chinese government using Talent Plans to encourage employees to steal intellectual property from their U.S. employers,” said Assistant Attorney General for National Security John C. Demers.  “Xiang promoted himself to the Chinese government based on his experience at Monsanto.  Within a year of being selected as a Talent Plan recruit, he quit his job, bought a one-way ticket to China, and was caught at the airport with a copy of the company's proprietary algorithm before he could spirit it away.” 

“The revolutionary technology at the core of this case represents both the best of American ingenuity and why the Chinese government is so desperate to steal it for themselves,” said Assistant Director John Brown.  “The FBI is committed to working with a host of partners to stop individuals, like the defendant in this case, from engaging in economic espionage to acquire information and technology for a foreign government that is either unable or unwilling to compete on a level playing field.  Our country’s economic security is our national security, and the FBI will always do everything in our power to protect it.”

“Stealing trade secrets can destroy a business,” said Special Agent in Charge Richard Quinn of the FBI St. Louis Division.  “When done at the behest of a foreign government, it threatens our nation’s economic security because it robs our companies of their market share and competitive advantage.”

In June 2017, the day after leaving employment with Monsanto and The Climate Corporation, Xiang bought a one-way plane ticket to China.  Before he could board his flight, Xiang was intercepted at the airport by federal officials who seized copies of the Nutrient Optimizer. 

If convicted, each espionage charge carries up to 15 years in prison and a $5,000,000 fine.  Each theft of trade secrets charges carries up to 10 years in prison and a $250,000 fine.

The FBI is investigating this case.  Assistant U.S. Attorney Matthew Drake and Trial Attorneys Heather Schmidt and Heather Alpino in the Counterintelligence and Export Control Section of the National Security Division are handling this case. 

December 4, 2019 in AML | Permalink | Comments (0)

Tuesday, December 3, 2019

Former U.S. Army Range Director Pleads Guilty in Bribery Scheme

A former senior U.S. Army civilian employee pleaded guilty yesterday to conspiracy to accept over $100,000 in bribes while serving as the director of the range at Hawaii’s Schofield Barracks and to a related firearms offense. 

Victor Garo, 67, of Mililani, Hawaii, pleaded guilty before Chief Judge J. Michael Seabright of the District of Hawaii to a two-count information charging him with one count of conspiracy to commit bribery and one count of illegally transporting firearms across state lines.  Sentencing is scheduled for March 2020 before Chief Judge Seabright.

According to admissions in his plea agreement, from 2011 through 2018, while employed as the range director at Schofield Barracks in Oahu, Garo accepted over $100,000 worth of bribes—including in cash, automobiles and firearms—from an employee of a federal contractor that sought and received business from the U.S. Army.  In return, Garo used his position to benefit the contractor in securing U.S. Army contracts, he admitted. 

Garo is the second public official and third individual to plead guilty as a result of an ongoing investigation into fraud and bribery at Schofield Barracks.

December 3, 2019 in AML | Permalink | Comments (0)

Friday, November 29, 2019

Two Former Executives of the China Subsidiary of a Multi-Level Marketing Company Charged for Scheme to Pay Foreign Bribes and Circumvent Internal Accounting Controls

The former head of the China subsidiary of a publicly traded international multi-level marketing company (Company-1) and the former head of the external affairs department of the China subsidiary of the same company were charged today for their roles in a scheme to violate the anti-bribery and the internal control provisions of the Foreign Corrupt Practices Act (FCPA).    Download Yanliang Li et al Indictment

Yanliang Li, aka “Jerry Li,” 51, a citizen of China, the former head and managing director of the China subsidiary of Company-1, was charged with one count of conspiracy to violate the FCPA, one count of perjury and one count of destruction of records in federal investigations.  Hongwei Yang, aka “Mary Yang,” 51, also a citizen of China, the former head of the external affairs department of the China subsidiary of Company-1, was charged with one count of conspiracy to violate the FCPA.

“Li and Yang allegedly led a brazen, decade-long corruption scheme, bribing foreign Chinese officials and then covering it up by providing false sworn testimony to the SEC and wiping clean computer files,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “The Department of Justice will continue to hold individuals accountable who undermine the integrity of our financial markets by participating in these corrupt bribery schemes.”

“Li and Yang, both former top executives of a global multi-level marketing company headquartered in Los Angeles, allegedly approved the extensive and systematic payments of bribes to Chinese government officials over a 10-year period to promote and expand the company’s business in China and to avoid regulatory scrutiny in China,” said U.S. Attorney Geoffrey S. Berman of the Southern District of New York.  “Moreover, in an effort to obstruct the government’s investigation into this widespread corruption scheme, Li lied under oath about the bribe payments when interviewed by the SEC and also destroyed evidence.  This case signifies this office’s commitment to ensuring that companies operating in the U.S. do not gain an unfair advantage through corruption and illegal bribes of foreign officials.”

According to the allegations in the indictment, from approximately 2007 through February 2017, Li, Yang and others agreed to pay, and paid bribes to Chinese officials for the purpose of obtaining and retaining licenses for Company-1 to operate as a direct-selling enterprise in provinces throughout China.  The conspirators also are alleged to have paid bribes to corruptly influence Chinese governmental investigations into Company-1’s compliance with Chinese laws and to corruptly influence Chinese state-owned and state-controlled media for the purpose of suppressing negative media reports about the company. 

In order to carry out the scheme, Li, Yang and others allegedly obtained reimbursement for the bribes they paid to Chinese officials by submitting false and fraudulent expense claims designed to conceal the true nature of the expenditures at issue, thereby circumventing Company-1’s internal accounting controls.  In addition, Li made false statements under oath in sworn investigative testimony before the U.S. Securities and Exchange Commission in New York, New York. Additionally, the indictment alleges that during the course of the federal SEC and DOJ investigations Li, with knowledge of these investigations, installed a “Wiping Application” onto his Company-1 issued laptop, which enabled him to erase 200 files from the laptop in a manner that would render the deleted files unrecoverable.   

November 29, 2019 in AML | Permalink | Comments (0)

Wednesday, November 27, 2019

Last Defendant in Stanford Investment Fraud Scheme Extradited to U.S.

The former chief of Antigua’s Financial Services Regulatory Commission has been extradited from Antigua to face charges for his alleged role in connection with the Stanford International Bank (SIB) $7 billion investment fraud scheme. Download Stanford et al Indictment

Leroy King, 74, of Dickerson Bay, Antigua, is the last remaining defendant in the SIB Ponzi scheme. He has been a fugitive since 2009.

King was charged in June 2009 along with R. Allen Stanford, of Houston, and others. The indictment charges King with one count of conspiracy to commit mail, wire and securities fraud; seven counts of wire fraud, 10 counts of mail fraud, one counts each of conspiracy to obstruct and obstruction of a Securities and Exchange Commission (SEC) investigation; and conspiracy to commit money laundering.

The indictment alleges King accepted more than $100,000 in bribes from Stanford in exchange for ignoring the actual value of SIB’s assets. He also allegedly assisted Stanford and others in obstructing the SEC’s investigation into the bank.

A federal jury found Stanford guilty in June 2012 for his role in orchestrating a 20-year investment fraud scheme in which he misappropriated $7 billion from SIB to finance his personal businesses. He is serving a 110-year prison sentence. Five others were also convicted for their roles in the scheme and received sentences ranging from three to 20 years in federal prison.

November 27, 2019 in AML | Permalink | Comments (0)

Tuesday, November 26, 2019

Jose Carlos Grubisich, Former Chief Executive Officer of a Brazilian Petrochemical Company Charged for in Brazil's Ongoing Bribery Car Wash Scandal

An indictment was unsealed charging a former chief executive officer (CEO) of Braskem S.A. (Braskem), a publicly traded Brazilian petrochemical company, for his role in a massive bribery and money laundering scheme involving Braskem and its parent company, Odebrecht S.A. (Odebrecht), that resulted in the diversion of hundreds of millions of dollars from Braskem into a secret slush fund that was used, in part, to pay bribes to government officials, political parties and others in Brazil to obtain and retain business. Download Grubisich Indictment

Jose Carlos Grubisich, 62, a citizen of Brazil who served as the CEO and a member of the board of directors of Braskem, as well as in various capacities for Odebrecht, was charged with one count of conspiracy to violate the anti-bribery provision of the Foreign Corrupt Practices Act (FCPA), one count of conspiracy to violate the books and records provision of the FCPA and to fail as a corporate officer to certify financial reports and one count of conspiracy to commit international money laundering.  Grubisich was arrested this morning, and is scheduled to be arraigned this afternoon before U.S. District Judge Raymond J. Dearie of the Eastern District of New York.

“Grubisich and other senior executives at Braskem and Odebrecht allegedly engaged in a massive and sophisticated international bribery and money laundering scheme, employing secret slush funds, shell companies, and false accounting,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “As demonstrated by the charges unsealed today, the Department continues to work closely with our domestic and international partners to root out and prosecute corporate fraud and corruption at the highest levels.”

“As alleged in the indictment, Jose Carlos Grubisich used his position as CEO of a major publicly-traded petrochemical company to funnel hundreds of millions of dollars through offshore accounts to bribe power brokers and serve the interests of his company,” said U.S. Attorney Richard P. Donoghue for the Eastern District of New York.  “Today’s indictment once again demonstrates the commitment of the U.S. Department of Justice to investigate and prosecute those who take advantage of the United States financial system to further their financial crimes.”                                     

As alleged in the indictment, between approximately 2002 and 2014, Grubisich, together with other co-conspirators, including certain former Braskem and Odebrecht employees, engaged in a widespread bribery and money laundering scheme that resulted in the diversion of approximately $250 million of Braskem’s funds into a secret slush fund, which was used, in part, to pay bribes to government officials, political parties and others in Brazil to obtain and retain business and certain business advantages for Braskem.  The slush fund was allegedly generated by payments from Braskem’s bank accounts in Brazil, New York and Florida pursuant to fraudulent contracts with offshore shell companies that were secretly controlled by Braskem.  These shell companies funneled the slush funds to a department within Odebrecht responsible for making bribe payments, which ultimately made corrupt payments on Braskem’s behalf, the indictment alleges.

Additionally, as alleged in the indictment, while CEO of Braskem, Grubisich was involved in negotiating and approving bribes to government officials using money from the slush fund.  These included alleged payments made to ensure that Braskem could retain a contract for a significant petrochemical project in Brazil, and to ensure that Braskem could obtain favorable pricing in contract negotiations with Petroleo Brasileiro S.A. – Petrobras, Brazil’s state-owned and state-controlled oil company.  Grubisich regularly discussed the bribe payments with other co-conspirators, and was kept informed about bribe payments made on behalf of Braskem, the indictment alleges.  Certain of the bribe payments that were allegedly negotiated and authorized by Grubisich were ultimately paid after Grubisich left his position as CEO of Braskem in 2008, but while he continued to serve in other capacities at Odebrecht and Braskem, and while he was a stockholder of Braskem.

Furthermore, as alleged in the indictment, while CEO of Braskem, Grubisich agreed to falsify Braskem’s books and records by causing Braskem to falsely record the payments to the offshore shell companies controlled by Braskem as “commissions.”  Grubisich also signed false certifications submitted to the SEC that, among other things, attested that Braskem’s annual reports fairly and accurately represented Braskem’s financial condition, and that Grubisich, as Braskem’s principal officer, had disclosed all fraudulent conduct by Braskem’s management and other employees with control over Braskem’s financial reporting, the indictment alleges.

The charges in the indictment are allegations, and the defendant is presumed innocent unless and until proven guilty.

Braskem and Odebrecht have each pleaded guilty in the Eastern District of New York to one-count criminal informations separately charging each with conspiracy to violate the anti-bribery provisions of the FCPA for their involvement in the widespread bribery and money laundering scheme.  The cases are also assigned to Judge Dearie.

November 26, 2019 in AML | Permalink | Comments (0)

Monday, November 25, 2019

Public consultation on FATF draft guidance on digital identity

The Financial Action Task Force (FATF) is developing guidance to clarify how digital identity (digital ID) systems can be used for customer due diligence (CDD). The draft guidance intends to help governments, financial institutions and other relevant entities apply a risk-based approach to the use of digital ID for CDD.

The FATF is consulting private sector stakeholders before finalising the guidance. We welcome your views on the areas of focus below, in addition to specific proposals to the text of the guidance. We primarily seek views from banks, virtual asset service providers and other regulated entities, but also welcome views from authorities.

The FATF will revise the text of the guidance and particular sections (for example – Appendix B that contains case studies) in parallel to the public consultation.



Areas of focus

  1. Are there any specific money laundering / terrorist financing risks, that arise from the use of digital identity systems for CDD, other than those already mentioned in Section IV of the guidance?
    If so, how can they be addressed and by whom? Are there specific opportunities for combatting money laundering / terrorist financing that are not already mentioned in the guidance?

  2. What is the role of digital ID systems in ongoing due diligence or transaction monitoring?
    a. What information do you capture under authentication at on-boarding and during authorisation for account access? Who captures this data?
    b. Is the authentication data you capture relevant to ongoing anti-money laundering and counter terrorist financing due diligence and/or transaction monitoring? If yes, how?

  3. How can digital ID systems support financial inclusion?
    a. How can digital ID systems with different assurance levels for identity proofing/enrolment and/or authentication be used to implement tiered CDD, allowing clients a range of account functionalities depending on the extent of CDD performed, and particularly in situations of lower risk? Please provide any practical examples.
    b. Have you adopted lower assurance levels for identity proofing to support financial inclusion? What additional measures do you apply to mitigate risks? Please provide any practical examples.
    c. How can progressive CDD via digital ID systems aid financial inclusion (i.e. establishing greater confidence in a customer’s identity over time)?

  4. Does the use of digital ID systems for CDD raise distinct issues for implementing the FATF record-keeping requirements?
    a. What records do you keep when you use digital ID systems for CDD?
    b. What are the challenges in meeting record-keeping requirements when you use digital ID systems for CDD?
    c. If you keep different records when using digital ID systems for on-boarding, does this impact other anti-money laundering and counter-terrorist financing measures (for example ongoing due diligence or transaction monitoring)?

Please provide your response to with subject-line “Comments of [author] on the draft Digital ID Guidance”, by 29 November 2019 (18:00 UTC). 


While submitting your response, please indicate the name of your organisation, the nature of your business (financial institution or designated non-financial business and profession, digital ID service provider, certification or assurance body, industry group, others), and your contact details. You may insert any specific drafting proposals directly in the attached text of the draft guidance in tracked changes. The contact information you provide will be used for the purpose of this public consultation only. The FATF will not share this information with third parties without your consent. 

At this stage, the FATF has not approved he current draft of the guidance. The FATF will make further amendments at its February 2020 meetings.

November 25, 2019 in AML | Permalink | Comments (0)

Sunday, November 24, 2019

Former Beaufort Securities Investment Manager Pleads Guilty to Conspiracies to Commit Securities Fraud and to Defraud the United States by Failing to Comply With Foreign Account Tax Compliance Act

Panayiotis Kyriacou, a former investment manager at Beaufort Securities Limited, a brokerage firm in London, pleaded guilty to conspiring to commit securities fraud and to defraud the United States by failing to comply with the Foreign Account Tax Compliance Act (FATCA).  FATCA is a federal law that requires foreign financial institutions to identify their U.S. customers and report information about financial accounts held by U.S. taxpayers, either directly or through a foreign entity (FATCA Information).  FATCA’s primary aim is to prevent U.S. taxpayers from using foreign accounts to facilitate the commission of federal tax offenses.  TWhen he is sentenced, Kyriacou faces a maximum of 10 years’ imprisonment.

Richard P. Donoghue, United States Attorney for the Eastern District of New York; Richard E. Zuckerman, Principal Deputy Assistant Attorney General of the Justice Department’s Tax Division; William F. Sweeney, Jr., Assistant Director-in-Charge, Federal Bureau of Investigation, New York Field Office (FBI); and Jonathan D. Larsen, Special Agent-in-Charge, Internal Revenue Service Criminal Investigation, New York (IRS-CI), announced the guilty plea.  

In announcing the guilty plea, Mr. Donoghue thanked the U.S. Securities and Exchange Commission’s (SEC) New York Regional Office and the Washington, D.C. Office, the City of London Police, the U.K.’s Financial Conduct Authority and the Hungarian National Bureau of Investigation for their significant cooperation and assistance during the investigation.

In the fall of 2016, an Undercover Agent contacted Kyriacou and stated that he was a U.S. citizen interested in opening brokerage accounts at Beaufort Securities to execute trades in several multi-million dollar stock manipulation deals in stocks traded on U.S. over-the-counter markets.  In furtherance of the scheme, Kyriacou and Beaufort Securities opened six brokerage accounts.  Notwithstanding that a U.S. citizen would be the beneficial owner of each of the accounts, at no time did Kyriacou request FATCA Information from the Undercover Agent.  The brokerage accounts were opened for the Undercover Agent in the names of various international business corporations based in Belize, with Belizean nominees listed as the beneficial owners. 

In January 2018, Kyriacou facilitated the manipulation of trading in the stock of HD View 360, Inc., a publicly traded U.S. company that traded under the ticker symbol HDVW, by executing a match trade of HDVW stock.  In addition, Kyriacou agreed to launder what the Undercover Agent represented to be the proceeds of securities fraud through the purchase and sale of artworks.

The case is being handled by the Office’s Business and Securities Fraud Section.  Assistant United States Attorneys Jacquelyn M. Kasulis, David Gopstein and Michael T. Keilty are in charge of the prosecution. 

The DefendantPETER KYRIACOU Age: 28 London, England

November 24, 2019 in AML | Permalink | Comments (0)

Friday, November 22, 2019

FinCEN Reissues Real Estate Geographic Targeting Orders for 12 Metropolitan Areas

The Financial Crimes Enforcement Network (FinCEN) announced the renewal of its Geographic Targeting Orders (GTOs) that require U.S. title insurance companies to identify the natural persons behind shell companies used in all-cash purchases of residential real estate.  The purchase amount threshold remains $300,000 for each covered metropolitan area.

These renewed GTOs will be identical to the May 2019 GTOs with one modification: the new GTOs will not require reporting for purchases made by legal entities that are U.S. publicly-traded companies.  Real estate purchases by such entities are identifiable through other business filings.

The terms of this Order are effective beginning November 12, 2019 and ending on May 9, 2020.  GTOs continue to provide valuable data on the purchase of residential real estate by persons possibly involved in various illicit enterprises.  Reissuing the GTOs will further assist in tracking illicit funds and other criminal or illicit activity, as well as inform FinCEN’s future regulatory efforts in this sector.

Today’s GTOs cover certain counties within the following major U.S. metropolitan areas:  Boston; Chicago; Dallas-Fort Worth; Honolulu; Las Vegas; Los Angeles; Miami; New York City; San Antonio; San Diego; San Francisco; and Seattle. 

FinCEN appreciates the continued assistance and cooperation of the title insurance companies and the American Land Title Association in protecting the real estate markets from abuse by illicit actors.

Any questions about the Orders should be directed to the FinCEN Resource Center at

A copy of the GTO is available here.

Frequently asked questions regarding these GTOs are available here.

November 22, 2019 in AML | Permalink | Comments (0)

Wednesday, November 13, 2019

Italy Implements EU Directive AML5 (aka AMLD5) Expanding PEP Definition and Dealing with Digital Currency

LEGISLATIVE DECREE 4 October 2019, n. 125 

Changes and additions to legislative decrees 25 May 2017, n. 90 and n. 92, implementing directive (EU) 2015/849, as well as implementing directive (EU) 2018/843 amending directive (EU) 2015/849 concerning the prevention of the use of the financial system for money laundering or financing of terrorism and amending directives 2009/138 / EC and 2013/36 / EU. (19G00131) (General GU Series n.252 dated 10-26-2019)

note: Entry into force of the provision: 10/11/2019

Example (using Google Translate on the legislation)

Art. 50 (Ban on accounts or savings accounts in anonymous form or with fictitious header and products of anonymous electronic money). 
1. Opening in any f
orm of accounts or savings books anonymously or with fictitious header as well as the issue of products of anonymous electronic money is prohibited. 2. The use, in any form, of accounts or booklets of savings in anonymous form or with fictitious header as well as the use of electronic money products anonymous, open or issued in foreign countries, is forbidden. 2-bis. The prohibition of issuing and using products of anonymous electronic money, provided by paragraphs 1 and 2, starts from 10 June 2020.

November 13, 2019 in AML | Permalink | Comments (0)

Tuesday, November 12, 2019

Two Former Twitter Employees and a Saudi National Charged as Acting as Illegal Agents of Saudi Arabia

Defendants Allegedly Acted as Illegal Agents of a Foreign Government by Providing Information About Twitter Users to Representatives of the Kingdom of Saudi Arabia

Ali Alzabarah, Ahmad Abouammo, and Ahmed Almutairi, aka Ahmed Aljbreen, were charged for their respective roles in accessing private information in the accounts of certain Twitter users and providing that information to officials of the Kingdom of Saudi Arabia.  Abouammo was arrested in Seattle, Washington, on Nov. 5, 2019.  All three defendants are charged with acting as illegal agents of a foreign government; and Abouammo also is charged with destroying, altering, or falsifying records in a federal investigation.

“Acting in the United States under the direction and control of Saudi officials, the defendants are alleged to have obtained private, identifying information about users of Twitter who were critical of the Saudi government,” said Assistant Attorney General for National Security John C. Demers.  “Two of the defendants – Alzabarah and Abouammo – are former Twitter employees who violated their terms of employment to access this information in exchange for money and other benefits.  Aside from being criminal, their conduct was contrary to the free speech principles on which this country was founded.”  

“These charges make clear that the FBI will diligently pursue those who show a blatant disregard for the laws and democratic principles that define us as a country," said Executive Assistant Director Jay Tabb of the FBI’s National Security Branch. “We will continue to use all of the tools at our disposal to carry out our mission. I would like to thank the men and women of the FBI's San Francisco and Seattle Field Offices as well as the Counterintelligence Division for their tireless commitment to bring these individuals to justice.”

“The FBI will not stand by and allow foreign governments to illegally exploit private user information from U.S. companies.  These individuals are charged with targeting and obtaining private data from dissidents and known critics, under the direction and control of the government of Saudi Arabia,” said FBI Special Agent in Charge John F. Bennett.  “Insider threats pose a critical threat to American businesses and our national security.”

Alzabarah, 35, of Saudi Arabia, and Abouammo, 41, of Seattle, Washington, were Twitter employees.  According to the complaint, between November of 2014 and May of 2015, Almutairi, 30, of Saudi Arabia, and foreign officials of the Kingdom of Saudi Arabia convinced Abouammo and Alzabarah to use their employee credentials to gain access without authorization to certain nonpublic information about the individuals behind certain Twitter accounts.  Specifically, representatives of the Kingdom of Saudi Arabia and the Saudi Royal Family sought the private information of Twitter users who had been critical of the regime.  Such private user information included their email addresses, phone numbers, IP addresses, and dates of birth.  This information could have been used to identify and locate the Twitter users who published these posts.  The complaint alleges that Abouammo was compensated for his illicit conduct, including through the provision of a luxury watch and cash.  Almutairi is alleged to have arranged meetings, acted as a go-between, and facilitated communications between the Saudi government and the other defendants.

The complaint also contains allegations regarding the reaction of Alzabarah upon being confronted by Twitter about his violations of Twitter policy.  According to the complaint, when Alzabarah was confronted by Twitter’s management about accessing users’ information, he sought assistance from Almutairi and others to flee the United States.  Alzabarah left the country the next day and submitted his resignation from Twitter by email while en route.  Shortly after his return to Saudi Arabia, Alzabarah obtained employment through which he continued to work on behalf the Kingdom.  With respect to Abouammo, the complaint alleges FBI agents confronted him in October 2018 about his activities on behalf of officials of the Kingdom of Saudi Arabia.  In response, Abouammo allegedly lied to the agents and provided them with a falsified invoice in an effort to obstruct the investigation.

Abouammo was arrested in Seattle, Washington, on Nov. 5, 2019, and made his initial federal court appearance in Seattle at 2:00 p.m.on Nov. 6, 2019.  Alzabarah and Almutairi are believed to be in Saudi Arabia.  Federal warrants have been issued for their arrest.  

November 12, 2019 in AML | Permalink | Comments (0)

Monday, November 11, 2019

FTC Releases Results of 2017 Mass-Market Consumer Fraud Survey

The Federal Trade Commission has released the results of a comprehensive survey conducted in 2017 that examined the prevalence of mass-market consumer fraud, how it is perpetrated, and what factors are associated with a greater likelihood that a consumer may fall victim to fraud. The FTC conducted similar surveys in 2003, 2005, and 2011.  Download Massmarketconsumerfraud2017report

The survey results show that 15.9 percent of the respondents were victims of fraud in 2017, which represents approximately 40 million U.S. adults.

The most common types of fraud reported by the survey respondents were fraudulent weight-loss products, fraudulent computer repairs, and being falsely told that they owed money to the government. Other commonly reported types of fraud included unauthorized billing for buying club memberships, unauthorized billing for an item for a cell phone, and fraudulent prize promotions. The survey results indicate that each of these types of fraud had more than two million U.S. adult victims.

Internet transactions, which continue to grow, accounted for a substantial share of fraudulent incidents. According to the survey, 54 percent of all incidents of fraud involved Internet promotion of products and services, up from 33 percent in the 2011 survey.

The survey results indicate that consumers aged 35 to 54 were more likely to be victims of fraud compared to consumers in other age categories. According to the survey, 22 percent of respondents between 35 and 44, and 20 percent of respondents between 45 and 54, were victims of fraud. The survey also found that women were more likely to be fraud victims than men, with 19 percent of women reporting that they were victims of fraud, compared to 13 percent for men.

The survey results indicate that people who were more willing to take risks, and those who had recently experienced a negative life event (such as a severe illness or the death of a loved one), were more likely to have been fraud victims. Those experiencing high levels of debt and those who predicted that their incomes would rise substantially in the next few years were also more likely to have been fraud victims.

Download P105502massmarketconsumerfraud2017reportappendices

November 11, 2019 in AML | Permalink | Comments (0)

Friday, November 8, 2019

Human Smuggler Indicted On U.S. Charges and Arrested as Part of Brazilian Takedown of Significant Alien Smugglers

Extensive coordination and cooperation efforts between United States and Brazilian law enforcement authorities culminated in the Brazil Federal Police (DPF) conducting a significant enforcement operation to disrupt and dismantle a transnational alien smuggling organization, including the arrest on Brazilian charges of an alleged alien smuggler who has also been indicted in the United States.  The alien smugglers targeted in this operation are alleged to be responsible for the illicit smuggling of scores of individuals from South Asia and elsewhere, into Brazil, and ultimately to the United States.

Saifullah Al-Mamun aka Saiful Al-Mamun, 32, was arrested in Brazil.  Al-Mamun is charged in a superseding indictment unsealed today in the U.S. District Court for the Southern District of Texas – Laredo Division, charging him with eight conspiracy and alien smuggling counts.  The enforcement operation included the execution of multiple search warrants and the additional arrests of seven Brazil-based human smugglers on Brazilian charges: Saifullah Al-Mamun, 32; Saiful Islam, 32; Tamoor Khalid, 31; Nazrul Islam, 41; Mohammad Ifran Chaudhary, 39; Mohammad Nizam Uddin, 28; and Md Bulbul Hossain, 36.

According to the indictment, Al-Mamun is alleged to have housed the aliens in São Paulo, Brazil and arranged for their travel through a network of smugglers operating out of Brazil, Peru, Ecuador, Colombia, Panama, Costa Rica, Nicaragua, Honduras, Guatemala, and Mexico to the United States. In return for smuggling the aliens into the United States, Al-Mumun and his two co-conspirators, are alleged to have arranged to be paid in Mexico, Central America, South America, Bangladesh, and elsewhere.

“Today’s indictment shows our commitment to prosecute here in the United States those alien smugglers who put our country’s public safety at risk by attempting to thwart our system of legal immigration,” said Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division.  “We will continue to collaborate with our foreign law enforcement partners to hold international human smugglers accountable for the threat they pose to the national security of Brazil, the United States, and other nations.”

“Transnational human smuggling organizations threaten the security of the United States,” said Special Agent in Charge Scott Brown of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Phoenix.  “Through a significant joint effort with our domestic and international law enforcement partners, these arrests signify another victory as we continue to investigate and dismantle those who conspire to undermine our nation’s immigration laws for their own profit.”

Milon Miah, a Bangladeshi national who was residing in Tapachula, Mexico, was arrested Aug. 31 on arrival at George Bush Intercontinental Airport in Houston, Texas, to face charges in the superseding indictment for his role in the scheme to smuggle aliens into the United States.  Moktar Hossain, 31, a Bangladeshi national formerly residing in Monterrey, Mexico, pleaded guilty on Aug. 27 for his role in the scheme to smuggle aliens to the United States for the purpose of commercial advantage or private financial gain.

Both the indictment against Al-Mamun and assistance provided by U.S. authorities to Brazilian law enforcement were coordinated under the Extraterritorial Criminal Travel Strike Force (ECT) program, a joint partnership between the Justice Department Criminal Division’s Human Rights and Special Prosecutions Section (HRSP) 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 Phoenix led U.S. investigative efforts, working in concert with HSI Brasilia, HSI Laredo, the HSI Human Smuggling Unit ECT program, ICE’s Enforcement and Removal Operations, U.S. Customs and Border Protection National Targeting Center, the International Organized Crime Intelligence and Operations Center, the HSI Liaison to the U.S. Department of Defense, U.S. Southern Command, Operation CITADEL, BITMAP, and the National Targeting Center. The Justice Department, both Criminal Division’s HRSP and the Office of International Affairs, provided significant assistance in this matter.

Trial Attorneys James Hepburn, Erin Cox, and Mona Sahaf of the Criminal Division’s Human Rights and Special Prosecutions Section are handling the U.S. investigation, with assistance from the U.S. Attorney’s Office for the Southern District of Texas.

November 8, 2019 in AML | Permalink | Comments (0)

Thursday, November 7, 2019

U.S. Navy Officer, His Wife, and Two Chinese Nationals Charged with Conspiring to Smuggle Military Style Inflatable Boats and Evinrude Military Outboard Motors to China

Assistant Attorney General John C. Demers and U.S. Attorney Maria Chapa Lopez for the Middle District of Florida announces the return of an indictment of four individuals, including two Chinese nationals, an active-duty United States Navy officer, and his wife, on charges relating to a conspiracy to unlawfully smuggle military-style inflatable boats, with Evinrude MFE military outboard motors, to the People’s Republic of China.  The Navy officer and two other defendants have also been charged with conspiring to violate firearms law, and the Navy officer has been charged with an additional firearms-related offense and with making false official statements. Download yang_indictment.pdf

The four defendants charged in the indictment are:

Fan Yang, 34, a naturalized citizen of the United States and Lieutenant in the United States Navy residing in Jacksonville, Florida; Yang Yang, 33, wife of Fan Yang, and a naturalized citizen of the United States residing in Jacksonville, Florida; Ge Songtao, 49, a citizen and resident of the People’s Republic of China; and Zheng Yan, 27, a citizen and resident of the People’s Republic of China.

The defendants were arrested on Oct. 17, 2019, and are currently detained.

All four defendants have been charged with conspiring to submit false export information and to fraudulently attempt to export articles from the United States.  Additionally, Yang Yang, Ge Songtao, and Zheng Yan have been charged with causing the submission of false and misleading information into the U.S. Automated Export System, and fraudulently attempting to export seven vessels and eight engines.  If convicted for conspiracy or for the submission of false export information, the charged defendants each face a maximum penalty of five years in federal prison.  If convicted on the attempted-smuggling charge, the defendants each face a maximum sentence of 10 years in federal prison.

Fan Yang, Yang Yang, and Ge Songtao are charged with other offenses as well.  All three have been charged with conspiring to violate laws prohibiting an alien admitted under a nonimmigrant visa from possessing a firearm and prohibiting the transfer of a firearm to a nonresident.  Fan Yang has also been charged with making a false statement to a firearms dealer, which carries a maximum penalty of 10 years’ imprisonment, and with making false official statements in his application for a security clearance, which carries a maximum penalty of five years’ imprisonment. 

November 7, 2019 in AML | Permalink | Comments (0)