International Financial Law Prof Blog

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

Thursday, November 15, 2018

EU mutual recognition of freezing and confiscation orders

The European Union Council adopted a regulation on the mutual recognition of freezing and confiscation orders. The aim of the new rules is to ensure the effective freezing and confiscation of criminal assets across the EU. This will help make  the EU more secure by tackling the financing of criminal activities, including acts of terrorism.

The regulation will come into effect 24 months after its publication in the EU official journal.

The main features of the new rules include:

  • A single regulation covering freezing and confiscation orders, directly applicable in the EU. This will resolve issues linked to implementation of the existing instruments, which have resulted in insufficient mutual recognition.
  • The general principle of mutual recognition, meaning that all judicial decisions in criminal matters taken in one EU country will normally be directly recognised, and enforced, by another member state. The regulation provides only a limited number of grounds for non-recognition and non-execution.
  • A wide range of types of confiscation in criminal matters such as value based confiscation and non-conviction based confiscation, including some systems of preventive confiscation, provided that there is a link to a criminal offence.
  • Standard certificates and procedures to allow for speedy and efficient freezing and confiscation actions.
  • A deadline of 45 days for the recognition of a confiscation order and in urgent cases a deadline of 48 hours for the recognition and 48 hours for the execution of freezing orders. Those limits can only be extended under strict conditions.
  • Provisions to ensure that victims' rights to compensation and restitution are respected in cross-border cases.

Background

The new regulation replaces the framework decisions on mutual recognition of freezing orders and on mutual recognition of confiscation orders dating back to 2003 and 2006 These  were considered outdated and no longer in line with the latest national and EU rules on freezing and confiscation, and therefore gave rise to loopholes which were exploited by criminals.

Confiscating assets generated by criminal activities is a very efficient tool to fight crime and terrorism. At the moment, it is estimated that 98.9% of profits from criminal activities are not confiscated and remain at the disposal of criminals.

November 15, 2018 in AML | Permalink | Comments (0)

Wednesday, November 14, 2018

MoneyGram Agrees to Pay $125 Million to Settle Allegations that the Company Violated the FTC’s 2009 Order and Breached a 2012 DOJ Deferred Prosecution Agreement

MoneyGram International, Inc. has agreed to pay $125 million to settle allegations that the company failed to take steps required under a 2009 Federal Trade Commission order to crack down on fraudulent money transfers that cost U.S. consumers millions of dollars.

The $125 million payment is part of a global settlement that resolves allegations that MoneyGram also violated a separate 2012 deferred prosecution agreement with the Department of Justice.

“The FTC’s 2009 order required MoneyGram to protect consumers from fraud through its money transfer system, and today we are holding MoneyGram accountable for its failure to do so,” said FTC Chairman Joe Simons. “MoneyGram’s alleged failure to implement key provisions of the order allowed scammers to continue to use its money transfer system to rip off consumers.”

Money transfers are a preferred method of payment for fraudsters because money sent through money transfer systems can be picked up quickly at locations all over the world, and once the money is paid out, it is all but impossible for consumers to get their money back. The systems also often allow scam artists to remain anonymous when receiving money from their victims.

In its new filing addressing violations of the 2009 order, the FTC alleges that MoneyGram failed to implement the comprehensive fraud prevention program mandated by the 2009 order, which requires the company to promptly investigate, restrict, suspend, and terminate high-fraud agents.

The 2009 order required MoneyGram to conduct timely fraud investigations of any agent location that has received two or more fraud complaints within 30 days; has fraud complaints totaling 5 percent or more of the location’s total monthly received transactions; or has displayed any unusual or suspicious money transfer activity. It also must terminate locations that may be complicit in fraud-induced money transfers.

The FTC alleges that MoneyGram was aware for years of the high levels of fraud and suspicious activities involving certain agents, including large chain agents. For example, the standards MoneyGram established for taking disciplinary actions did not comply with the 2009 order, because those standards required agents to have unreasonably high fraud rates before they could be suspended or terminated, according to the FTC. At the same time, MoneyGram also often failed to promptly conduct the required reviews or to suspend or terminate agents, particularly those from larger locations with high levels of fraud.

The FTC alleges, for example, that MoneyGram did not place any restrictions on one large chain agent until approximately mid-2013, even though the chain was the subject of more fraud complaints than any other MoneyGram agent worldwide. Some of the chain’s locations had fraud rates as high as 50 percent of the money transfer activity. When it did take disciplinary action, MoneyGram focused on lower-volume, “mom and pop” agents with high levels of fraud, while treating large chain agents differently, according to the FTC.

The FTC also alleges that MoneyGram’s computerized monitoring system, aimed at blocking known fraudsters from using its service, malfunctioned for an 18-month period in 2015 and 2016. During that time, MoneyGram failed to block individuals that the company knew or should have known were using its service for fraud or to obtain fraud-induced money transfers.

MoneyGram also allegedly violated the order by failing to properly vet its agents and by not providing appropriate training on how to detect and prevent consumer fraud for all its agents, including locations with high fraud rates.

Under the 2009 order, MoneyGram also was required to record the complaints it receives about fraud-induced money transfers and to share that information with the Commission. Between January 1, 2013 and April 30, 2018, MoneyGram received at least 295,775 complaints about fraud-induced money transfers—a large majority of which involved a small percentage of agents. The Commission alleges, however, that the company, in some cases, failed to record information it received about fraud-induced money transfers and share it with the FTC.

In addition to the monetary payment, MoneyGram has agreed to an expanded and modified order that will supersede the 2009 order and apply to money transfers worldwide. The modified order requires, among other things, that the company block the money transfers of known fraudsters and provide refunds to fraud victims in circumstances where its agents fail to comply with applicable policies and procedures. In addition, the modified order includes enhanced due diligence, investigative, and disciplinary requirements.

The Commission wishes to thank the following agencies for their assistance in this matter: The Department of Justice’s Money Laundering and Asset Recovery Section; the U.S. Attorney’s Office for the Middle District of Pennsylvania; the U.S. Postal Inspection Service, Philadelphia Division Office in Harrisburg, Pennsylvania; and the Office of the Minnesota Attorney General.

The Commission vote authorizing the staff to file the stipulated order for compensatory relief and modified order for permanent injunction was 5-0. The FTC filed the stipulated order in the U.S. District Court for the Northern District of Illinois, Eastern Division. NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

November 14, 2018 in AML | Permalink | Comments (0)

Tuesday, November 13, 2018

Former U.S. Congressman Sentenced to 10 Years in Prison for Extensive Fraud, Tax, and Election Crimes Scheme

Former U.S. Congressman Stephen E. Stockman was sentenced to serve 120 months in prison and ordered to pay $1,014,718.51 in restitution, to be followed by three years of supervised release, for orchestrating a four-year scheme to defraud charitable donors of hundreds of thousands of dollars and secretly to funnel the proceeds to pay for personal expenses and to illegally finance his campaigns for public office.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Patrick of the Southern District of Texas, Special Agent in Charge Matthew J. DeSarno of the FBI’s Washington Field Office’s Criminal Division and Special Agent in Charge D. Richard Goss of the IRS Criminal Investigation (IRS-CI) Houston Field Office, made the announcement.

“Former Representative Stockman stole hundreds of thousands of dollars from charities, then used the money to pay personal expenses and fund his political campaigns,” said Assistant Attorney General Benczkowski.  “As this case demonstrates, the Justice Department and our law enforcement partners will aggressively pursue corrupt public officials, including those who seek to corrupt our elections for personal gain.”

“At trial, the government proved to the jury that former Congressman Stockman ran his campaign and fraudulent charities to simply enrich himself and defrauded well-meaning donors,” said U.S. Attorney Patrick. “This type of corruption by public officials gives our entire democratic system a black eye.”

Former U.S. Representative Stephen E. Stockman, 61, was convicted by a federal jury in Houston on April 12, of 23 counts of mail fraud, wire fraud, conspiracy to make conduit contributions and false statements to the Federal Election Commission, making false statements to the Federal Election Commission, making excessive coordinated campaign contributions, money laundering, and filing a false tax return.  Two of Stockman’s former congressional staffers previously pleaded guilty in the case.  Thomas Dodd, 39, of Houston, Texas, pleaded guilty on March 20, 2017, to one count of conspiracy to commit mail and wire fraud and one count of conspiracy to make conduit contributions and false statements.  Jason T. Posey, 48, of Tupelo, Mississippi, pleaded guilty on Oct. 11, 2017, to one count of mail fraud, one count of wire fraud, and one count of money laundering.

“Former Congressman Stockman was entrusted by his constituents to serve in their best interest,” said FBI Special Agent in Charge DeSarno.  “Instead, Stockman used his position in a series of schemes for personal gain at the expense of the public. Today’s sentence should send a clear message that the laws of the land apply to everyone, regardless of position or power. The FBI and our partners at the IRS will continue our efforts to identify fraudulent practices carried out by elected representatives. Public officials who abuse their position will be investigated, prosecuted, and subjected to the full punishment of the law for their actions.”

“Congressman Stockman used his position to defraud charitable foundations to advance his political career and pay for personal expenses,” said IRS-CI Special Agent in Charge Goss.  “His actions and failure to pay taxes on these illicit funds not only undermines the American tax system, but cultivates a lack of trust in our elected officials.  Today’s sentencing demonstrates IRS-Criminal Investigation’s commitment to bring justice to those public officials who believe they are above the law.”

According to the evidence presented at trial, from May 2010 to February 2014, Stockman and his co-defendants solicited $1,250,571.65 in donations from charitable organizations and the individuals who ran those organizations based on false pretenses, then used a series of sham nonprofit organizations and dozens of bank accounts to launder the money before it was used for a variety of personal and campaign expenses. 

Specifically, the evidence established that in 2010, Stockman and Dodd solicited an elderly donor in Baltimore, Maryland for $285,000 to be used for legitimate charitable and educational purposes.  Stockman and Dodd used a sham charity named the Ross Center to funnel the money to be used for a variety of personal expenses.  The evidence further established that, in 2011 and 2012, Stockman and Dodd received an additional $165,000 in charitable donations from the Baltimore donor, much of which Stockman used illegally to finance his 2012 congressional campaign. 

The trial evidence also showed that shortly after Stockman took office as a Member of the U.S. House of Representatives in 2013, he and Dodd used the name of another sham nonprofit entity, Life Without Limits, to solicit and receive a $350,000 charitable donation, to be used to create an educational center called the Freedom House.  Stockman, Dodd, and Posey instead used this donation for a variety of personal and campaign expenses, including illegal conduit campaign contributions, a covert surveillance project targeting a perceived political opponent, an in-patient alcoholism treatment for a female associate, and payments for hundreds of thousands of robocalls and mailings promoting Stockman’s candidacy for U.S. Senate in early 2014.

In addition, the evidence established that, in connection with Stockman’s Senate campaign, Stockman and Posey used another sham nonprofit entity to secure a $450,571.65 donation in order to fund a purportedly legitimate independent expenditure promoting Stockman’s candidacy.  The evidence showed that the purportedly independent expenditure was in fact secretly controlled by Stockman, who directed his campaign and Posey to file false affidavits with the FEC covering up Stockman’s involvement. 

Finally, the evidence at trial demonstrated that Stockman failed to pay taxes on any of the $1,250,571.65 in fraudulently acquired donations.  In addition, during the early stages of the investigation, Stockman directed Posey to flee to Cairo, Egypt, for two and a half years so that Posey could not be questioned by law enforcement.

The FBI and IRS-CI investigated the case.  Trial Attorneys Ryan J. Ellersick and Robert J. Heberle of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Melissa Annis of the Southern District of Texas are prosecuting the case. 

November 13, 2018 in AML | Permalink | Comments (0)

Monday, November 12, 2018

Malaysian Financier Low Taek Jho, Also Known As “Jho Low,” and Former Banker Ng Chong Hwa, Also Known As “Roger Ng,” Indicted for Conspiring to Launder $2.7 Billion Stolen From Malaysian Sovereign Wealth Fund

Former Banker Tim Leissner Pleaded Guilty to Conspiring to Launder Money and to Violate the Foreign Corrupt Practices Act Related to 1MDB

A three-count criminal indictment was unsealed in federal court in the Eastern District of New York charging Low Taek Jho, 36, also known as “Jho Low,” and Ng Chong Hwa, 51, also known as “Roger Ng,” with conspiring to launder billions of dollars embezzled from 1Malaysia Development Berhad (1MDB), Malaysia’s investment development fund, and conspiring to violate the Foreign Corrupt Practices Act (FCPA) by paying bribes to various Malaysian and Abu Dhabi officials.  As part of the three-count indictment, Ng is also charged with conspiring to violate the FCPA by circumventing the internal accounting controls of a major New York-headquartered financial institution (Financial Institution), which underwrote more than $6 billion in bonds issued by 1MDB in three separate bond offerings in 2012 and 2013, while Ng was employed at the Financial Institution as a managing director.  Ng was arrested earlier today in Malaysia, pursuant to a provisional arrest warrant issued at the request of the United States.  Low remains at large.

Also unsealed in federal court in the Eastern District of New York was the guilty plea of Tim Leissner, 48, the former Southeast Asia Chairman and participating managing director of the Financial Institution, to a two-count criminal information charging Leissner with conspiring to launder money and conspiring to violate the FCPA by both paying bribes to various Malaysian and Abu Dhabi officials and circumventing the internal accounting controls of the Financial Institution while he was employed by it.  According to court filings, Leissner has been ordered to forfeit $43.7 million as a result of his crimes.

Principal Deputy Assistant Attorney General John P. Cronan of the Justice Department’s Criminal Division, U.S. Attorney Richard P. Donoghue for the Eastern District of New York, Assistant Director in Charge William F. Sweeney Jr. of the FBI New York Field Office, and Special Agent in Charge R. Damon Rowe of IRS Criminal Investigation (IRS-CI) Los Angeles Field Office announced the charges.

The Criminal Scheme

1MDB is a Malaysian state-owned and controlled fund created to pursue investment and development projects for the economic benefit of Malaysia and its people.  As alleged in court filings, between approximately 2009 and 2014, as 1MDB raised money to fund its projects, billions of dollars were misappropriated and fraudulently diverted from 1MDB, including funds 1MDB raised in 2012 and 2013 through three bond transactions that it executed with the Financial Institution.  As part of the scheme, and as alleged in court filings, Low, Ng, Leissner, and others conspired to bribe government officials in Malaysia, including at 1MDB, and Abu Dhabi to obtain and retain lucrative business for the Financial Institution, including the 2012 and 2013 bond deals.  They also allegedly conspired to launder the proceeds of their criminal conduct through the U.S. financial system by purchasing, among other things, luxury residential real estate in New York City and elsewhere, and artwork from a New York-based auction house, and by funding major Hollywood films.

As alleged, Low’s close relationships with high-ranking government officials in Malaysia and Abu Dhabi were central to the scheme.  Ng, Leissner, and others at the Financial Institution allegedly knew Low was close to these government officials, including a high-ranking Malaysian government official who had authority to approve 1MDB business decisions (Malaysian Official #1).  According to allegations in court filings, beginning in approximately 2009 and continuing through 2014, Low, Ng, Leissner, and the other co-conspirators used Low’s relationships to obtain and retain business for the Financial Institution through the promise and payment of hundreds of millions of dollars in bribes, including to ensure 1MDB awarded the Financial Institution a role on three bond transactions known internally at the Financial Institution as “Project Magnolia,” “Project Maximus,” and “Project Catalyze.”  As a result of its work for 1MDB during that time, the Financial Institution allegedly received approximately $600 million in fees and revenues along with increased reputational prestige.  At the same time, Ng, Leissner and others allegedly received large bonuses and enhanced their own reputations at the Financial Institution.  In total, according to allegations in court filings, more than $2.7 billion was misappropriated from 1MDB and Low, Ng, Leissner and others conspired to launder this money through the U.S. financial system to pay bribes to foreign officials and for the personal benefit of themselves and their relatives.

Project Magnolia 

In early 2012, according to allegations in court filings, following a series of meetings in Malaysia and the United Kingdom, Low, Leissner, Ng and the co-conspirators agreed that, with the assistance of the Financial Institution, 1MDB would issue $1.75 billion in bonds guaranteed by an entity wholly-owned and controlled by the government of Abu Dhabi.  Low allegedly explained to Ng, Leissner, and others at the time that, to complete the transaction, bribes would need to be paid to officials in Malaysia and Abu Dhabi and hundreds of millions of dollars were allegedly paid to officials in these countries.  Court filings also allege that Low, Ng, Leissner, and other co-conspirators knew that Low intended to use funds misappropriated from the bond transaction to bribe and influence the officials to obtain the necessary approvals and any additional assistance to execute Project Magnolia for the Financial Institution and to pay kickbacks to Ng, Leissner, and others.

In or around March 2012, 1MDB allegedly selected the Financial Institution to be the sole bookrunner and arranger for Project Magnolia.  As part of the scheme, Low and other co-conspirators allegedly enlisted the assistance of 1MDB officials, promising to pay them bribes and kickbacks.  In one instance, as alleged in court filings, in connection with Project Magnolia, Low told one 1MDB official that he would “[g]ive [the official a] big present” when the transaction closed.  According to allegations in court documents, the fact that bribes and kickbacks were being paid in connection with Project Magnolia was known to Ng, Leissner, and other employees of the Financial Institution.

After Project Magnolia closed on or about May 21, 2012, more than $500 million of the bond proceeds were allegedly misappropriated and diverted from 1MDB through numerous wire transfers to bank accounts in the name of shell companies beneficially owned and controlled by Low, Leissner, Ng, and other co-conspirators, including a high-level official at the Abu Dhabi entity that guaranteed the Project Magnolia bonds and a close relative of Malaysian Official #1.  As alleged, the bond proceeds transferred to Malaysian Official #1’s close relative were later used by the relative’s U.S. motion picture company to assist in the production of the film “The Wolf of Wall Street.” 

Project Maximus and Project Catalyze 

Court filings further allege that from May 2012 and continuing through 2013, Low, Ng, Leissner, and their co-conspirators continued to work to ensure that the Financial Institution obtained and retained additional 1MDB business, including the bond transactions known as “Project Maximus” and “Project Catalyze,” which transactions generated substantial fees and revenues for the Financial Institution.  As alleged, although both transactions were designed to raise more than $4 billion for 1MDB’s investment and development projects, Low, Ng, Leissner, and other co-conspirators used the transactions to further the criminal scheme, ultimately laundering hundreds of millions of dollars of diverted funds from these transactions into bank accounts beneficially owned and controlled by, among others, the co-conspirators, including Low, Leissner and officials in Malaysia and Abu Dhabi.  As alleged in court filings, throughout this time, Ng, Leissner, and at least one other employee of the Financial Institution knew that Low would and did pay bribes to influence officials in Malaysia and Abu Dhabi to obtain the necessary approvals to execute Project Maximus and Project Catalyze.  Low, Ng, Leissner, and others also allegedly knew that large portions of the bond proceeds would be illegally diverted to themselves and others, including to foreign government officials.

As part of the scheme alleged in court filings, Low, Ng, Leissner and other co-conspirators again used a series of wire transfers to launder billions of dollars of misappropriated and fraudulently diverted funds from Project Maximus and Project Catalyze.  Following the close of Project Maximus, approximately $790 million of the bond proceeds was allegedly transferred through a series of shell company accounts beneficially owned and controlled by Low, Leissner and others, including accounts of officials in Malaysia and Abu Dhabi.  In particular, Leissner and Ng allegedly caused millions of dollars of these funds to be transferred to accounts of 1MDB officials or relatives of such officials in exchange for their assistance in obtaining and retaining business for the Financial Institution.  Over $35 million of the bond proceeds also allegedly was used by a co-conspirator to help acquire a condominium in New York, New York beneficially owned by Low.

Similarly, according to allegations in court filings, after Project Catalyze closed in March 2013, more than $1 billion of diverted funds, traceable to the transaction, were laundered, at Low’s direction, to bank accounts in the name of entities beneficially owned and controlled by Low, Leissner, and others, including 1MDB officials.  As alleged, more than $4 million of the funds were transferred to a bank account beneficially owned by a relative of Ng.  Additionally, as part of the scheme, Low allegedly used a shell company account to receive more than $1 billion of the Project Catalyze bond proceeds and spent approximately $137 million of these funds to purchase works of art at a high-end art auction house in New York, New York. 

Post-Catalyze 1MDB Transactions at the Financial Institution

The Financial Institution continued to seek business from 1MDB after Project Catalyze.  As alleged, Leissner and others were particularly focused on securing a role for the Financial Institution on a proposed initial public offering (IPO) of 1MDB’s energy assets.  To influence certain officials to award the Financial Institution a role in the proposed IPO, Low and Leissner allegedly continued to pay bribes to certain officials at 1MDB.

For example, as alleged, in an online chat between Low and Leissner in June 2014, Low and Leissner discussed the need to “suck up to” a 1MDB official and to send “cakes” to a person believed to be the wife of Malaysian Official #1.  A few months after this chat, a bank account owned and controlled by Leissner and his relative was used to transfer approximately $4.1 million to a high-end New York jeweler, in part, to pay for gold jewelry for the wife of Malaysian Official #1.

The charges in the indictment as to Low and Ng are merely allegations, and those defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

The investigation was jointly conducted by the FBI’s International Corruption Unit and IRS-CI.  The government’s criminal case is being handled by the Criminal Division’s Money Laundering and Asset Recovery Section (MLARS) and Fraud Section and the Business and Securities Fraud Section of the U.S. Attorney’s Office for the Eastern District of New York.  MLARS Trial Attorneys Jennifer E. Ambuehl, Woo S. Lee, and Mary Ann McCarthy, Fraud Section Trial Attorneys Katherine A. Nielsen and Nikhila Raj, and Assistant U.S. Attorneys Jacquelyn M. Kasulis and Drew Rolle of the Eastern District of New York are prosecuting the case.  Additional Criminal Division Trial Attorneys and Assistant U.S. Attorneys within U.S. Attorney’s Offices for the Eastern District of New York and Central District of California have provided valuable assistance with various aspects of this investigation, including with civil and criminal forfeitures.

The Criminal Division’s Office of International Affairs provided critical assistance in this case.  The Department also appreciates the significant cooperation and assistance provided by the U.S. Securities and Exchange Commission and the Board of Governors of the Federal Reserve System along with the Federal Reserve Bank of New York.  The Department also appreciates the significant assistance provided by the Attorney General’s Chambers of Malaysia, the Royal Malaysian Police, the Malaysian Anti-Corruption Commission, the Attorney General’s Chambers of Singapore, the Singapore Police Force-Commercial Affairs Division, the Office of the Attorney General and the Federal Office of Justice of Switzerland, the judicial investigating authority of the Grand Duchy of Luxembourg, and the Criminal Investigation Department of the Grand-Ducal Police of Luxembourg.

The International Unit of the Criminal Division’s MLARS is home to the Kleptocracy Asset Recovery Initiative—a team of dedicated prosecutors working to prosecute individuals and forfeit the proceeds of foreign official corruption that has affected the U.S. financial system and, where appropriate, return those proceeds to benefit the people harmed by these acts of corruption and abuse of office.  MLARS’s Bank Integrity Unit investigates and prosecutes banks and other financial institutions, including their officers, managers, and employees, whose actions threaten the integrity of the individual institution or the wider financial system.

The Criminal Division’s 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 www.justice.gov/criminal/fraud/fcpa.

Individuals with information about possible proceeds of foreign corruption located in or laundered through the United States should contact federal law enforcement or send an email to kleptocracy@usdoj.gov(link sends e-mail).

The Defendants

LOW TAEK JHO and NG CHONG HWA

E.D.N.Y. Docket No. 18-CR-538 (MKB)

TIM LEISSNER

E.D.N.Y. Docket No. 18-CR-439 (MKB)

Attachment(s): 

November 12, 2018 in AML | Permalink | Comments (0)

Friday, November 9, 2018

Malta's Pilatus Bank Shut Down By European Central Bank

The European Central Bank withdrew the banking licence of Pilatus Bank in Malta, the country’s financial authority reported on Monday. The bank is at the heart of several investigations including money laundering and fraud.

read the full story here

November 9, 2018 in AML | Permalink | Comments (0)

Thursday, November 8, 2018

Argentina: Miami Investors Nabbed in Fernandez Corruption Case

Argentinian authorities are making headway in a massive corruption case against ex-president Cristina Fernandez de Kirchner, arresting late last month four individuals whose trails lead to a US$65 million property empire including luxury condos, pharmacies, and banks scattered across South Florida and New York City, the Miami Herald reported Sunday.

Read the full story on OCCRP here

November 8, 2018 in AML | Permalink | Comments (0)

Sunday, November 4, 2018

Treasury Designates Singapore-Based Targets for Laundering Money in Support of North Korea

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced North Korea-related designations of two entities and one individual, continuing the implementation of existing sanctions.  In a related action, today the U.S. Department of Justice unsealed criminal charges against the same individual, Tan Wee Beng.  Today’s action highlights North Korea’s continued illicit use of the financial system to circumvent sanctions, as well as the U.S. Government’s commitment to safeguard the international financial system and implement existing UN Security Council (UNSC) resolutions.  Today’s action also makes clear that the United States will not hesitate to impose sanctions on any individual, entity, or vessel supporting North Korea’s illicit activities, regardless of nationality.

“Tan Wee Beng and his co-conspirators made deliberate efforts to launder money through the U.S. financial system on behalf of North Korea,” said Secretary Steven T. Mnuchin.  “Governments, financial institutions, and other companies worldwide need to be on high alert to these types of schemes.  The U.S. government will not overlook these deceptive practices.  We are deeply committed to the final, fully verified denuclearization of North Korea, and Treasury will continue to enforce and implement sanctions until that time.”

OFAC designated Singapore-based Tan Wee Beng, Wee Tiong (S) Pte Ltd, and WT Marine Pte Ltd pursuant to E.O. 13551 for having, directly or indirectly, engaged in money laundering, the counterfeiting of goods or currency, bulk cash smuggling, narcotics trafficking, or other illicit economic activity that involves or supports the Government of North Korea or any senior official thereof. 

Tan Wee Beng is a director and significant shareholder of Wee Tiong (S) Pte Ltd, a Singapore-based commodities trading company.  Over several years, dating back to at least 2011, Tan Wee Beng and at least one other individual in his company fulfilled millions of dollars in commodities contracts for North Korea.  To do so, Tan Wee Beng made a concerted effort to obfuscate payment origins and structure transactions to avoid regulatory scrutiny.  Tan Wee Beng and his co-conspirators also knew of and took efforts to evade financial sanctions on North Korea.  In at least one instance, when a wire payment was rejected, Tan Wee Beng and Wee Tiong (S) Pte Ltd orchestrated payment in bulk cash, hand-delivered to a North Korean. 

OFAC also designated WT Marine Pte Ltd, a marine fuels company closely related to Wee Tiong (S) Pte Ltd, and of which Tan Wee Beng is the Managing Director.  Last year, the JW JEWEL (IMO: 9402964) and NYMEX STAR (IMO: 9078191), vessels operated and managed by WT Marine Pte Ltd, engaged in illicit economic activity that involves or supports the Government of North Korea. 

Many of the activities undertaken by Tan Wee Beng and his associated companies are the types of activities that were highlighted in the November 2, 2017 Advisory on North Korea’s  Use of the International Financial System published by the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).  Most notably, today’s designations illustrate Treasury’s previous warnings regarding North Korea’s use of third-country companies to divide their payments into smaller outflows in complex layering schemes directed through front companies, shell companies, and shipping or trade businesses elsewhere in Asia.  Moreover, North Korean financial representatives use third-country corporate service providers to establish the front or shell companies and use these companies to open bank accounts to access the U.S. and international financial systems.  Tan Wee Beng’s role in Wee Tiong (S) Pte Ltd and WT Marine Pte Ltd is also indicative of how North Korea-linked financial facilitators often establish and use multiple companies with the same owners or managers.  These companies also frequently share addresses, telephone numbers, and employees, and they may transact with similar business partners.  Additional questions or comments regarding the contents of the November 2, 2017 advisory should be addressed to the FinCEN Resource Center at FRC@fincen.gov.

Moreover, UNSC resolution 1718 (2006) prohibits transactions with designated entities who subject to an asset freeze.  In Resolution 2375 (2017) the UNSC decided that all Member State shall prohibit their nationals, persons subject to their jurisdiction, entities incorporated in their territory or subject to their jurisdiction, and vessels flying their flag from facilitating or engaging in ship-to-ship transfers to or from Democratic People’s Republic of Korea (DPRK)-flagged vessels of any goods or items that are being supplied, sold, or transferred to or from the DPRK.

As a result of today’s action, any property or interests in property of the designated persons, including the two vessels, in the possession or control of U.S. persons or within the United States is blocked, and U.S. persons generally are prohibited from dealing with the designated persons. 

Identifying information on the entities and individual sanctioned today.

November 4, 2018 in AML | Permalink | Comments (0)

Saturday, November 3, 2018

OECD and World Bank call for whole-of-government approach to combating tax evasion and corruption

Countries must step up work to ensure that tax authorities and anti-corruption authorities can effectively co-operate in the fight against tax evasion, bribery, and other forms of corruption, according to a joint OECD/World Bank report.

Drawing on the experiences of 67 countries, this study focuses on the legal, strategic, operational, and cultural aspects of co-operation between tax authorities and anti-corruption authorities. With annual revenue losses from tax evasion and corruption estimated to be in the billions, it is critical that government agencies are able to join forces to deter, detect, and prosecute these crimes. Improving Co-operation between Tax Authorities and Anti-Corruption Authorities in Combating Tax Crime and Corruption calls on countries to enhance co-operation by:

  • Making available the broadest range of legal gateways for reporting and information sharing permitted by law;
  • Implementing streamlined and efficient operational procedures to ensure that reporting and information sharing is effective in practice;
  • Utilising enhanced co-operation mechanisms such as joint operations and taskforces;
  • Promoting a culture of co-operation at all levels of an organisation, starting with political leaders and agency heads.

Launched today during the 18th International Anti-Corruption Conference (IACC) in Copenhagen, this report will enable countries to review and evaluate their own approaches for co-operation and identify opportunities for improvements based on practices that have proved successful elsewhere. The report will also support the OECD and World Bank’s ongoing capacity building work and further the OECD’s Oslo Dialogue – which promotes a whole-of-government approach to tackling financial crimes by fostering inter-agency and international co-operation.

November 3, 2018 in AML | Permalink | Comments (0)

Wednesday, October 31, 2018

Former Swiss Bank Executive Sentenced to Prison for Role in Billion-Dollar International Money Laundering Scheme Involving Funds Embezzled from Venezuelan State-Owned Oil Company

The former managing director and vice chairman of a Swiss bank was sentenced to 10 years in prison today, after previously pleading guilty for his role in a billion-dollar international scheme to launder funds embezzled from Venezuelan state-owned oil company Petróleos de Venezuela, S.A. (PDVSA).

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan of the Southern District of Florida, and Special Agent in Charge Mark Selby of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI) Miami Field Office made the announcement.

Matthias Krull, 44, a German national and Panamanian resident, pleaded guilty to one count of conspiracy to commit money laundering, on Aug. 22.  U.S. District Judge Cecilia M. Altonaga of the Southern District of Florida sentenced Krull to serve 120 months in prison, to be followed by three years of supervised release.  Judge Altonaga also ordered Krull to pay a fine in the amount of $50,000 and a forfeiture money judgment of $600,000.

As part of his plea, Krull admitted that in his position with the Swiss bank, he attracted private clients, particularly clients from Venezuela, to the bank.  In this role, Krull’s clients included Francisco Convit Guruceaga, who was indicted on money laundering charges on Aug. 16.  Krull’s clients also included three unnamed conspirators described in the Aug. 16 indictment. 

Krull admitted that the conspiracy began in December 2014 with a currency exchange scheme that was designed to embezzle around $600 million from PDVSA, obtained through bribery and fraud and the conspirators’ efforts to launder a portion of the proceeds of that scheme.  By May 2015, the conspiracy had doubled in amount to $1.2 billion embezzled from PDVSA.  PDVSA is Venezuela’s primary source of income and foreign currency (namely, U.S. Dollars and Euros).  Krull joined the conspiracy in or around 2016, he admitted, when a co-conspirator contacted him to launder the proceeds of a PDVSA foreign-exchange embezzlement scheme. 

Ultimately, Krull joined the conspiracy to launder $1.2 billion worth of funds that were embezzled from PDVSA, he admitted.  Krull and members of the money laundering conspiracy used Miami, Florida real estate and sophisticated false-investment schemes to conceal that the $1.2 billion was in fact embezzled from PDVSA.  Krull also admitted that surrounding and supporting these false-investment laundering schemes are complicit money managers, brokerage firms, banks and real estate investment firms in the United States and elsewhere, operating as a network of professional money launderers. 

Krull’s co-conspirators indicted on Aug. 16 include former PDVSA officials, professional third-party money launderers and members of the Venezuelan elite, sometimes known as “boliburgués.”

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

This case is the result of ongoing efforts by the Organized Crime Drug Enforcement Task Force’s (OCDETF) “Operation Money Flight,” a partnership among federal, state and local law enforcement agencies.  The OCDETF mission is to identify, investigate and prosecute high-level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state and local law enforcement.

The investigation was conducted by HSI Miami, HSI London, HSI Rome and HSI Madrid.  This case is being prosecuted by Assistant Chief David Johnson and Trial Attorney Gwendolyn A. Stamper of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Michael Nadler of the Economic and Environmental Crimes Section of the Southern District of Florida. Assistant U.S. Attorney Nalina Sombuntham of the Southern District of Florida is handling the asset forfeiture.

The Criminal Division’s Office of International Affairs provided substantial assistance in this matter; the National Crime Agency of the United Kingdom; and Italian, Spanish and Maltese law enforcement authorities provided assistance. 

The Fraud Section is responsible for investigating and prosecuting all Foreign Corrupt Practices Act (FCPA) matters.  Additional information about the Justice Department’s FCPA enforcement efforts can be found at www.justice.gov/criminal/fraud/fcpa.      

October 31, 2018 in AML | Permalink | Comments (0)

Sunday, October 28, 2018

Three Traders Charged, and Two Agree to Plead Guilty, in Connection with over $60 Million Commodities Fraud and Spoofing Conspiracy

Three former commodities traders of a New York-based financial services firm (“Trading Firm A”) were charged yesterday for their alleged participation in an over $60 million commodities fraud and spoofing conspiracy that was perpetrated through the U.S. commodities markets.  Two of these traders have agreed to plead guilty for their respective roles in the criminal conspiracy.   

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ryan K. Patrick of the Southern District of Texas and Special Agent in Charge Jeffrey S. Sallet of the FBI’s Chicago Field Office made the announcement.

Yuchun “Bruce” Mao, 39, a citizen of the People’s Republic of China, was indicted on one count of conspiracy to commit commodities fraud, two counts of commodities fraud and two counts of spoofing.  Kamaldeep Gandhi, 36, of Chicago, was charged by criminal information with two counts of conspiracy to engage in wire fraud, commodities fraud and spoofing.  Krishna Mohan, 33, of New York, New York, was charged by criminal information with one count of conspiracy to engage in wire fraud, commodities fraud, and spoofing. 

“As alleged in today’s charges, these individuals engaged in a sophisticated scheme to distort the futures market for their own advantage by placing large ‘spoofed’ trading orders that they never intended to execute,” said Assistant Attorney General Benczkowski.  “Investor trust is the cornerstone of our trading markets, and the Criminal Division will aggressively investigate and prosecute those who undermine that trust by engaging in spoofing or any other illegal conduct.”

“The Southern District of Texas aggressively prosecutes white collar crime,” said U.S. Attorney Patrick. “Home to the second most Fortune 500 companies in the nation, our Houston division is uniquely suited to prosecute white collar fraud in whatever form it comes, and we enjoy terrific relationships with law enforcement partners around the country and from around the world.”

“These charges demonstrate the FBI’s firm commitment to hold accountable those who seek to deceive and defraud the public,” said Special Agent in Charge Sallet.  “Such schemes cannot be allowed to threaten confidence in the free market, which represents one of many strengths of our great nation.  We will continue to work together to aggressively pursue anyone who undermines the integrity of our financial markets and disregards the rule of law.”

The indictment alleges that Mao was co-head of a trading team that traded commodities on behalf of Trading Firm A, working in Chicago and New York.  The indictment alleges that from in or around March 2012 through in or around March 2014, Mao and others conspired to mislead the markets for E-Mini S&P 500 and E‑Mini NASDAQ 100 futures contracts traded on the Chicago Mercantile Exchange (CME), and E-Mini Dow futures contracts traded on the Chicago Board of Trade (CBOT).  The indictment further alleges that Mao and his co-conspirators deceived market participants and manipulated markets by placing thousands of orders that they did not intend to execute, or “spoof orders,” in order to create the false and misleading appearance of increased supply or demand.  Market participants that traded futures contracts in these three markets while the spoof orders distorted market prices incurred market losses of over $60 million.  Mao and his co-conspirators are alleged to have placed these spoof orders in order to benefit themselves Trading Firm A.

Count one of the criminal information alleges that Gandhi conspired, with Mao and others, to commit the underlying offenses while employed at Trading Firm A.  Count two of the criminal information alleges that, from in or around May 2014 through in or around October 2014, Gandhi, while employed at a second Chicago-based trading firm (identified in the information as “Trading Firm B”), conspired with others to mislead the markets for E-Mini S&P 500 futures contracts traded on the CME by agreeing to place, and himself placing, spoof orders for E-Mini S&P 500 futures contracts in order to create the false and misleading appearance of increased supply or demand.  Gandhi has agreed to plead guilty to the charges in the criminal information.

The charges against Mohan arise from his participation in the conspiracy alleged above while employed at Trading Firm A.  Mohan has agreed to plead guilty to the charge in the criminal information.

The FBI’s Chicago Field Office is investigating the case.  Trial Attorneys Mark Cipolletti, Jeffery Le Riche and Matthew Sullivan of the Criminal Division’s Fraud Section, and Assistant U.S. Attorney John Lewis of the Southern District of Texas are prosecuting the case.  The CFTC’s Division of Enforcement provided substantial assistance in this case.

The charges in the indictment and the two criminal informations are merely allegations, and the defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law. 

October 28, 2018 in AML | Permalink | Comments (0)

Wednesday, October 24, 2018

Former State Street Executive Sentenced for Scheme to Defraud Clients through Secret Trading Commissions

A former executive vice president of State Street Corporation was sentenced today in federal court in Boston, Massachusetts, in connection with engaging in a scheme to defraud at least six of the bank’s clients through secret commissions applied to billions of dollars of securities trades. 

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Andrew E. Lelling for the District of Massachusetts, and Special Agent in Charge Harold H. Shaw of the FBI’s Boston Field Office, made the announcement.

Ross McLellan, 47, of Hingham, Massachusetts, was sentenced by U.S. District Court Judge Leo T. Sorokin to 18 months in prison and two years of supervised release. In June 2018, McLellan was convicted by a federal jury of one count of conspiring to commit securities fraud and wire fraud, two counts of securities fraud and two counts of wire fraud.

In April 2016, McLellan, a former executive vice president of State Street who served as global head of its Portfolio Solutions Group and president of its U.S. broker-dealer unit, and Edward Pennings, 47, of Surrey, England, a former senior managing director of State Street and the head of its Portfolio Solutions Group for Europe, the Middle East and Africa, were indicted. In June 2017, Pennings pleaded guilty and is scheduled to be sentenced on Nov. 6.  Also in June 2017, Richard Boomgaardt, 44, of Sevenoaks, England, a former managing director of State Street, was charged separately and pleaded guilty in July 2017 to one count of conspiracy to commit securities fraud and wire fraud.  Boomgaardt was sentenced in July 2018 to one year of probation.

According to the evidence presented at trial, between February 2010 and September 2011, McLellan, Pennings, and Boomgaardt conspired to add secret commissions to fixed income and equity trades performed for at least six clients of the bank’s “transition management” business, which helps institutional clients move their investments between and among asset managers or liquidate large investment portfolios.  The commissions were charged on top of fees that the clients had agreed to pay to the bank, and despite written instructions to the bank’s traders that generally reflected that the clients were not to be charged trading commissions.  McLellan, Pennings, and Boomgaardt took steps to hide the commissions from the clients and others within the bank, including by directing that the commissions not be broken out in post-trade reports.  For example, in a telephone call in March 2010, Pennings instructed Boomgaardt not to talk about the plans to charge hidden commissions on one transaction “with anyone . . . because it’s not going to help our story. Don’t even share it with the rest of the team, to be honest.” 

The evidence at trial demonstrated that in June 2010 McLellan and Boomgaardt requested that the bank’s traders provide them with the reported daily high and low prices of securities that the bank had traded for the client so that they could determine the amount of the commissions to be applied to each security without attracting the client’s attention.   In March 2011 McLellan instructed a U.S. fixed income trader to charge a commission of one basis point (0.01 percent) of yield to each trade conducted for another client – notwithstanding that the written trading instructions for the transaction said to charge zero commissions – and subsequently instructed the trader to delete any reference to the commissions from the trading results he sent to the transition manager assigned to the project.

The evidence at trial further showed that, in June 2011, when one of the affected clients inquired about whether it had, in fact, been charged commissions in breach of its agreement with the bank, Pennings initially denied that any commissions had been charged.  Later, at McLellan’s direction, Pennings acknowledged only that “inadvertent commissions” had been applied to securities traded in the United States, but did not disclose that they had, in fact, been intentionally charged in both the United States and in Europe.  McLellan and Pennings  sought to mislead the bank’s compliance staff into believing that the commissions had been charged in error and that the amount of the overcharges was limited to the commissions applied on U.S. securities.

The case was investigated by the FBI.  Valuable assistance was provided by the Securities & Exchange Commission and the Justice Department’s Office of International Affairs.

October 24, 2018 in AML | Permalink | Comments (0)

Monday, October 22, 2018

Four Men and Seven Companies Indicted for Billion-Dollar Telemedicine Fraud Conspiracy, Telemedicine Company and CEO Plead Guilty in Two Fraud Schemes

On October 12, 2018, the District Court for the Eastern District of Tennessee unsealed a 32-count indictment charging four individuals and seven companies in a $1 billion health care fraud scheme. The court also unsealed an additional two plea agreements and an information charging another individual and his company for their role in the scheme.

Andrew Assad, 33, of Palm Harbor, Florida, Peter Bolos, 41, of Lutz, Florida, and Michael Palso, 44, of Odessa, Florida, were indicted along with their compounding pharmacies, Synergy Pharmacy Services, located in Palm Harbor, and Precision Pharmacy Management, located in Clearwater. Co-conspirator Larry Everett Smith, 48, of Pinellas Park, Florida, also a pharmacy compounder, and his companies Tanith Enterprises, ULD Wholesale Group, Alpha-Omega Pharmacy, all located in Clearwater, Germaine Pharmacy located in Tampa, Florida, and Zoetic Pharmacy located in Houston, Texas, were all also named as defendants. All the defendants were charged with conspiracy to commit health care fraud, mail fraud, and introducing misbranded drugs into interstate commerce.

On September 26, 2018, HealthRight LLC, a telemedicine company with locations in Pennsylvania and Florida, and Scott Roix, 52, of Seminole, Florida, and the CEO of HealthRight, pleaded guilty to felony conspiracy for their roles in the telemedicine health care fraud scheme in a criminal information. Roix and HealthRight LLC, also pleaded guilty to conspiring to commit wire fraud in a separate scheme for fraudulently telemarketing dietary supplements, skin creams, and testosterone.

The indictment alleges that from June 1, 2015 through April 1, 2018, these individuals and companies, together with other persons and companies known to the grand jury, conspired to deceive tens of thousands of patients and more than 100 doctors located in the Eastern District of Tennessee and across the country for the purpose of defrauding private health care benefit programs such as Blue Cross Blue Shield of Tennessee out of approximately $174,000,000. The indictment further alleges that the defendants submitted not less than $931,000,000 in fraudulent claims for payment.    

According to the indictment, the defendants set up an elaborate telemedicine scheme in which HealthRight fraudulently solicited insurance coverage information and prescriptions from consumers across the country for prescription pain creams and other similar products. The indictment states that doctors approved the prescriptions without knowing that the defendants were massively marking up the prices of the invalidly prescribed drugs, which the defendants then billed to private insurance carriers.

Assad, Bolos, Palso, and Smith appeared in court on October 11, 2018 before U.S. Magistrate Judge Anthony E. Porcelli in the U.S. District Court for the Middle District of Florida. All four individual defendants were released on bond and are scheduled for an initial appearance and arraignment in the U.S. District Court in the Eastern District of Tennessee before U.S. Magistrate Judge Clifton Corker on October 25, 2018.

If convicted, Assad, Bolos, Palso, and Smith face a term of up to 20 years in prison as to each mail fraud charge, up to 10 years in prison for the conspiracy, and up to three years in prison for introducing misbranded drugs into interstate commerce. Additionally, they face fines of up to $250,000 and up to three years of supervised release as to each count. The companies face fines of up to twice the gross loss sustained as a result of the conspiracy. The indictment also seeks forfeiture of approximately $154,000,000.

In addition to their roles in the health care fraud conspiracy, the Information filed against Roix and HealthRight charged each of them with conspiring to commit wire fraud as part of a scheme to use HealthRight’s telemarketing facilities to fraudulently sell millions of dollars’ worth of products such as weight loss pills, skin creams, and testosterone supplements through concocted claims of efficacy and intentionally deficient customer service designed to stall consumer complaints. 

Roix and HealthRight pleaded guilty before U.S. District Judge J. Ronnie Greer of the Eastern District of Tennessee. Roix faces a statutory maximum sentence of 5 years of imprisonment for each conspiracy. The Court set sentencing for February 13, 2019.

The investigation was coordinated by Assistant U.S. Attorneys T.J. Harker, David Gunn, and Anne-Marie Svolto of the U.S. Attorney’s Office for the Eastern District of Tennessee, and Trial Attorney John Claud for the Department’s Consumer Protection Branch. Assistant U.S. Attorneys T.J. Harker and David Gunn will prosecute the telemedicine conspiracy for the U.S. Attorney's Office for the Eastern District of Tennessee. Trial Attorney John Claud will represent the Department's Consumer Protection Branch in court proceedings. 

The investigation was conducted by the Nashville, Tennessee office of the U.S. Department of Health & Human Services Office of Inspector General; the Nashville office of the Food and Drug Administration Office of Criminal Investigations; the Buffalo, New York, office of the U.S. Postal Inspection Service; the Knoxville and Johnson City, Tennessee, offices of the Federal Bureau of Investigation; the Atlanta, Georgia, Office of Personnel Management Office of the Inspector General; and the Tampa, Florida, office of Homeland Security Investigations. The U.S. Marshals Service also assisted in the investigation and the forfeiture of assets.

October 22, 2018 in AML | Permalink | Comments (0)

Sunday, October 21, 2018

Defendant Pleads Guilty in Multimillion Dollar Prize-Promotion Scam Affecting Elderly Victims

An individual who defied court orders by operating a multimillion mass-mailing fraud scheme pleaded guilty on October 12, 2018, in federal court on Long Island before a magistrate judge, the Department of Justice announced.

Tully Lovisa, 55, of Huntington Station, New York, pleaded guilty to conspiracy to commit mail fraud for sending prize-promotion mailings that led recipients, many of whom were elderly and vulnerable, to believe that they could claim a large cash prize in exchange for a modest fee.  This was false; victims who submitted fees, which in total exceeded $30 million, did not receive large sums of money.  Lovisa operated the prize-promotion mailing scheme in violation of court orders that resulted from a lawsuit against him by the Federal Trade Commission (FTC).

Lovisa also pleaded guilty to wire fraud in connection with a related scheme to defraud the FTC.  Specifically, as part of his resolution of the FTC lawsuit’s against him, Lovisa was ordered by a court to sell a home he owned in Las Vegas, Nevada, and to turn over the proceeds of the sale to the FTC.  Lovisa, however, failed to comply with this order by arranged a sham sale of the house in September 2012 for $155,500 (which he reported to the FTC), and then actually selling the house in April 2015 for $540,000 (which he did not report to the FTC).

“As the Attorney General has made clear, the Department of Justice is determined to bring to justice those who exploit elderly consumers in violation of federal law,” said Assistant Attorney General Joseph Hunt of the Department of Justice’s Civil Division.  “We will work with our law enforcement partners at the U.S. Postal Inspection Service to stop and punish schemes harming the elderly wherever we find them.”

When sentenced, Lovisa faces up to 20 years in prison on each charge, forfeiture, and a fine of up to $250,000 or twice the gross gain or gross loss from each offense.

Friday’s plea took place before Magistrate Judge Gary R. Brown, who recommended that it be accepted by the district judge. The United States Postal Inspection Service investigated the case. The case is being prosecuted by Trial Attorneys Daniel Zytnick and Timothy Finley of the Department of Justice’s Consumer Protection Branch and Assistant U.S. Attorney Charles P. Kelly of the Eastern District of New York.

October 21, 2018 in AML | Permalink | Comments (0)

Saturday, October 20, 2018

Attorney General Jeff Sessions Delivers Remarks Announcing the Creation of a Transnational Organized Crime Task Force

Thank you, Deputy Attorney General Rosenstein, for that introduction and thank you for your outstanding leadership at Main Justice. And thank you to Patrick and Adam for being here and for taking on this challenge.

There’s a lot of great federal law enforcement leadership in this room:

  • Jessie Liu, of course, our fabulous United States Attorney,
  • Thomas Chittum of ATF
  • Scott Hoernke of DEA
  • Matthew DeSarno of FBI, and
  • Patrick J. Lechleitner of HSI.


We are also honored to have a delegation of Mexican prosecutors here with us today.  Thank you to:

  • Ericka Ramirez Ortiz
  • Hugo Guevara Puertos
  • Lourdes Nava Garcia
  • Maria Cristina Guzman Gutierrez
  • Sonia Lopez Vivar, and
  • Uri Perez.


I want to thank all of the fabulous prosecutors in this office and our local partners.  You’re doing important work—and it’s especially important against criminal gangs like the cartels.

Almost one year ago, you obtained life sentences for the two hitmen with the Los Zetas cartel who murdered HSI Special Agent Jaime Zapata and attempted to murder HSI Special Agent Victor Avila.  These were vicious crimes against two outstanding law enforcement officers—and you have brought their attackers to justice.

And so I especially want to thank AUSA Michael DiLorenzo, AUSA Fernando Sanchez, Trial Attorneys David Karpel and Karen Seifert, as well as AUSA Jocelyn Ballantine and former Assistant Deputy Chief Andrea Goldbarg.  Great job.

And of course that case was investigated by our fabulous FBI agents with the assistance of ATF, DEA, the Marshals Service, CBP, and the State Department along with our allies in Mexico.  This is a perfect example of what law enforcement cooperation looks like. And we must have more of it.

Taking on transnational criminal groups like the cartels is a priority for this President and for his administration.  The same day I was sworn in as Attorney General, President Trump ordered me to disrupt and dismantle these groups.

We have embraced that goal—and we have been faithful to it every day.  That is true at Main Justice and it is true in this office.

For example, we have hammered the vicious MS-13, which is based in El Salvador.

With more than 10,000 members in the United States, this gang is the most violent gang in America today.

As the people in this room know well, MS-13 has put a special target on Washington, D.C. and the surrounding suburbs.

The people of this city remember the brutal killings of Christian Sosa Rivas and 15 year-old Damaris Reyes Rivas, from Fairfax County.  Sosa Rivas was just 21 years old when his mutilated body was found along the Potomac. 

And, according to testimony, Damaris Rivas was stabbed 13 times with knives and a wooden stake in the woods in Springfield.  We’re also told that it was all captured on video, to show the gang leaders who had given the order back in El Salvador.

The Washington area also remembers the brutal killing of Nelson Omar Trujillo.  Eight MS-13 members lured him to a park in Falls Church stabbed him to death with machetes and knives. 

In that very same park, Gerson Aguilar was beheaded and buried by MS-13. A total of 13 defendants were charged for this murder.

MS-13 member Jonathan Fuentes was sentenced to 10 years in prison for helping run a prostitution ring that specialized in selling underage girls.  At hotels in Washington, D.C., Maryland, and Northern Virginia, the girls were given drugs in an effort to make them dependent on their traffickers.

In Alexandria, MS-13 member Jose Juarez-Santamaria was sentenced to life in prison for trafficking a 12-year old girl. 

MS-13 members Alexander Rivas and Rances Amaya are also behind bars right now for trafficking underage girls in the Washington, D.C. area.

I could go on and on.  There are countless stories of MS-13’s disregard for human dignity—and the consequences for this community. We have such prosecutions all over the country.

Last October, I designated MS-13 as a priority for our Organized Crime Drug Enforcement Task Forces—or OCDETF.

As this group knows well, these task forces bring together a broad coalition of our federal prosecutors, DEA, FBI, ATF, ICE, HSI, the IRS, the Department of Labor Inspector General, the Postal Service Inspectors, the Secret Service, the Marshals Service, and the Coast Guard.

OCDETF brings together just about every federal law enforcement agency there is.  It’s the Swiss Army knife of law enforcement.  And with Adam Cohen in charge, they’re going to be more effective than ever. Adam, thank you for your willingness to serve.

These agencies have diverse capabilities and jurisdictions—but they all have one mission: to go after drug traffickers and criminal organizations at the highest levels.

MS-13 sells drugs, but they are not primarily a drug trafficking organization.  I have ordered OCDETF to prioritize MS-13 not because of their drug trafficking—but because OCDETF is such a powerful weapon.

OCDETF is able to hit MS-13 from all angles. 

That’s why I have ordered them to prosecute MS-13 members for any violation of law we can prove whatsoever: not just our drug laws, but everything from RICO to our tax laws to our firearms laws.  Just like we took Al Capone off the streets with our tax laws, I have told OCDETF to use whatever laws we have to get MS-13 off of our streets. 

Today I am announcing our next steps to carry out President Trump’s order to take MS-13 and other TCOs off of our streets.

I directed the FBI, DEA, OCDETF, and the Department’s Criminal Division to identify top transnational criminal organizations that threaten our safety and prosperity.

Based on the counsel that I have received from these experienced professionals, today I am designating the following criminal groups as our top transnational organized crime threats:

  • MS-13
  • Cartel de Jalisco Nueva Generacion, or CJNG,
  • the Sinaloa Cartel
  • Clan del Golfo, and
  • Lebanese Hezbollah.

Today I am announcing that we are creating a transnational organized crime Task Force of experienced prosecutors who will coordinate our efforts and develop a plan to take each of these groups off of our streets for good.

The new Task Force will be led by Deputy Attorney General Rosenstein. I want to thank Patrick Hovakimian in his office for stepping up and taking charge of this task. 

The new Task Force will be organized into one subcommittee for each of these target organizations. I am confident that he is going to be very effective in his new role.

The subcommittee on MS-13 will be led by Assistant U.S. Attorney John Durham of the U.S. Attorney’s Office for the Eastern District of New York.  AUSA Durham has played a significant role in the FBI’s Long Island Task Force, which has arrested hundreds of MS-13 members.

The subcommittee on Cartel Jalisco Nueva Generacion will be led by Trial Attorney Brett Reynolds of the Narcotic and Dangerous Drug Section of the Department of Justice’s Criminal Division.  Brett has led or co-led several investigations into the Cartel that have led to indictments of some of its highest ranking members.

The subcommittee on the Sinaloa Cartel will be led by Assistant U.S. Attorney Matthew Sutton of the United States Attorney’s Office for the Southern District of California. 

AUSA Sutton prosecuted several Sinaloa kingpins and led multiple international investigations targeting Sinaloa Cartel leaders, resulting in seizures of millions of dollars in drug proceeds and thousands of kilograms of illicit drugs.

The subcommittee on Clan del Golfo will be led by Assistant U.S. Attorney Robert Emery of the United States Attorney’s Office for the Southern District of Florida.  AUSA Emery has secured convictions against the top leadership of Clan del Golfo, including the kingpin Henry de Jesus Lopez Londoño, who commanded over 1,000 armed men for the cartel.

The subcommittee on Lebanese Hezbollah will be led by Assistant U.S. Attorney Ilan Graff of the United States Attorney’s Office for the Southern District of New York.  AUSA Graff is overseeing the prosecution of two alleged members of Hezbollah’s External Security Organization, the first such operatives to be charged with terrorism offenses in the United States.

This subcommittee will be led and staffed by members of the Hezbollah Financing and Narcoterrorism Team, which is a group I created in January. 

This team is composed of experienced international narcotics trafficking, terrorism, organized crime, and money laundering prosecutors who are tasked with investigating individuals and networks providing support to Hezbollah.

I have ordered each of these subcommittees to provide me with specific recommendations within 90 days on the best ways to prosecute these groups and ultimately take them off of our streets.

With the advice of these experienced professionals, the Department will be better able to follow the President’s order and dismantle transnational organized crime.

And so I want to encourage each of you to keep up the good work.  Keep hammering these groups. 

With this new task force in place, our efforts will be more targeted and more effective than ever.

October 20, 2018 in AML | Permalink | Comments (0)

Friday, October 19, 2018

Two Former Deutsche Bank Traders Convicted for Role in Scheme to Manipulate a Critical Global Benchmark Interest Rate

A former supervisor of Deutsche Bank’s Pool Trading Desk and a former derivatives trader were convicted in New York for their participation in a scheme to manipulate the London Interbank Offered Rate (LIBOR), a critical global benchmark tied to trillions of dollars in derivatives, loans, mortgages, and other financial products.    

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division; Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division; and Special Agent in Charge Matthew J. DeSarno of the FBI’s Washington Field Office’s Criminal Division made the announcement. 

Following a month long jury trial before the Hon. Chief Judge Colleen McMahon of the U.S. District Court for the Southern District of New York, a jury convicted former Deutsche Bank supervisor Matthew Connolly, 53, of Basking Ridge, New Jersey, of one count of conspiracy and two counts of wire fraud and former derivatives trader Gavin Campbell Black, 48, of London, of one count of conspiracy and one count of wire fraud.  A sentencing date has not been set. 

“Matthew Connolly and Gavin Black undermined the integrity of our financial markets by manipulating LIBOR, which is widely considered to be the most important number in the financial world because of its impact on trillions of dollars in financial products,” said Assistant Attorney General Benczkowski.  “The Justice Department and its law enforcement partners will aggressively investigate and prosecute individuals and financial institutions who engage in this sort of misconduct.”

“Today’s convictions demonstrate our continuing commitment to prosecute those who fraudulently manipulated the financial markets for their own personal benefit and, in doing so, undermined free market competition,” said Assistant Attorney General Delrahim.  “Such conduct will not be tolerated by this administration, especially when it threatens to destabilize global markets and financial stability worldwide.  This case is a compelling example of effective coordination among law enforcement agencies — both at home and abroad.  The Antitrust Division will continue to work with its many partners to aggressively pursue other individuals involved in this or other illegal schemes that undermine free financial markets.”

“Today’s conviction should serve as a reminder of our commitment to hold individuals and institutions accountable for their involvement in complex fraud schemes,” said Special Agent in Charge DeSarno. “The FBI will continue to work with our global partners in bringing those who undermine our financial markets to justice.”

According to evidence presented at trial, LIBOR is an averaged interest rate, calculated based on submissions from lending banks around the world, reflecting the honest and unbiased rates those banks believed they would be charged if borrowing from other banks.  LIBOR was published by the British Bankers’ Association, a trade association based in London.  The published LIBOR “fix” for USD currency was the result of a calculation based upon submissions from a panel of 16 banks, including Deutsche Bank. 

Connolly was Deutsche Bank’s director of the Pool Trading Desk in New York, where he supervised traders who traded USD LIBOR-based derivative products.  Black was a director on Deutsche Bank’s Money Market and Derivatives Desk in London, who also traded USD LIBOR-based derivative products.  In order to increase Deutsche Bank’s profits on derivatives contracts tied to the USD LIBOR, Connolly directed his subordinates to reach out to Deutsche Bank’s LIBOR submitters to ask them to submit false and fraudulent LIBOR contributions consistent with his traders’ or the banks’ financial interests, rather than the honest and unbiased costs of borrowing, the evidence showed.  The jury also heard evidence that Black asked Deutsche Bank’s cash traders who were responsible for submitting the bank’s LIBOR rates to ask that they adjust their submissions to favor his derivative trading positions.  According to evidence at trial, several Deutsche Bank LIBOR submitters accommodated the defendants’ LIBOR manipulation requests.

In April 2015, Deutsche Bank entered into a deferred prosecution agreement to resolve wire fraud and antitrust charges and Deutsche Bank Group Services (UK) Limited pleaded guilty to one count of wire fraud, collectively agreeing to pay a $775 million fine, for the bank’s role in the scheme.  Two Deutsche Bank traders pleaded guilty to fraud charges related to the LIBOR manipulation scheme. 

Special agents, forensic accountants and intelligence analysts of the FBI’s Washington Field Office are conducting the investigation.  Senior Litigation Counsel Carol L. Sipperly and Trial Attorney Alison L. Anderson of the Criminal Division’s Fraud Section and Trial Attorneys Michael Koenig and Christina Brown of the Justice Department’s Antitrust Division are prosecuting the case.  The department acknowledges the contributions of Clair Dobbin, of Three Raymond Buildings Barristers, and Alan Ward, of Stephenson Harwood LLP, for their advocacy on behalf of the United States in the British courts.    

October 19, 2018 in AML | Permalink | Comments (0)

Thursday, October 18, 2018

Federal Court Orders Trading Firm and CEO to Pay More than $2.5 Million for Fraudulent Bitcoin Ponzi Scheme

A New York federal court has ordered New York corporation Gelfman Blueprint, Inc. (GBI) and its Chief Executive Officer Nicholas Gelfman of Brooklyn, New York, to pay in total over $2.5 million in civil monetary penalties and restitution in what was the first anti-fraud enforcement action involving Bitcoin filed by the Commodity Futures Trading Commission (CFTC) (see CFTC Complaint and Press Release 7614-17). 

CFTC Director of Enforcement Comments

James McDonald, the CFTC’s Director of Enforcement, commented: “This case marks yet another victory for the Commission in the virtual currency enforcement arena.  As this string of cases shows, the CFTC is determined to identify bad actors in these virtual currency markets and hold them accountable.  I’m grateful to the members of Enforcement’s Virtual Currency Task Force for their tireless work on these matters.”

Together, the Order for Final Judgment by Default (Default Order), and the Consent Order for Final Judgment (Consent Order) (collectively, the Orders), entered respectively on October 2, 2018 and October 16, 2018, by Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York, resolve the charges of the CFTC Complaint against GBI and Gelfman filed on September 21, 2017.  

The Orders find that from approximately 2014 through approximately January 2016, Defendants Gelfman and GBI, by and through its officers and agents and employees, operated a Bitcoin Ponzi scheme in which they fraudulently solicited more than $600,000 from at least 80 customers.  As stated in the Orders, the customers’ funds supposedly were for placement in a pooled commodity fund that purportedly employed a high-frequency, algorithmic trading strategy executed by Defendants’ computer trading program called “Jigsaw.”  In fact, as the Orders indicate, the strategy was fake, the purported performance reports were false, and—as in all Ponzi schemes—payouts of supposed profits to GBI Customers in actuality consisted of other customers’ misappropriated funds. Also, the Consent Order finds that Gelfman was liable as a controlling person for GBI’s violations, and the Default Order finds that GBI was liable as a principal for the violations of Gelfman and its other officers, agents, and employees. 

The Orders find that, to conceal Defendants’ trading losses and misappropriation, Defendants made and provided false performance reports to pool participants, including statements that created the appearance of positive Bitcoin trading gains, when in truth Defendants’ Jigsaw trading account records reveal only infrequent and unprofitable trading.  The Orders also find that Gelfman, in order to conceal the scheme’s trading losses and misappropriation, staged a fake computer “hack” that supposedly caused the loss of nearly all customer funds. 

In addition to requiring GBI and Gelfman, respectively, to pay $554,734.48 and $492,064.53 in restitution to customers and $1,854,000 and $177,501 in civil monetary penalties, the Orders impose permanent trading and registration bans on GBI and Gelfman and permanently enjoin them from further violations of the Commodity Exchange Act and CFTC Regulations, as charged.

The CFTC cautions that orders requiring repayment of funds to victims may not result in the recovery of any money lost because the wrongdoers may not have sufficient funds or assets.  The CFTC will continue to fight vigorously for the protection of customers and to ensure the wrongdoers are held accountable.

The CFTC appreciates the cooperation and assistance of the New York County District Attorney’s Office and the Finland Financial Supervision Authority.

This case was brought in connection with the Division of Enforcement’s Virtual Currency Task Force, and the CFTC Division of Enforcement staff members responsible for this case are Gates S. Hurand, Christopher Giglio, K. Brent Tomer, Lenel Hickson, Jr., and Manal M. Sultan.   

*      *

CFTC’s Customer Fraud Advisory on Virtual Currencies and Bitcoin 

For more virtual currency resources, visit the CFTC’s dedicated virtual currency web page,www.cftc.gov/bitcoin, which includes several customer advisories informing the public of possible risks associated with investing or speculating in virtual currencies or recently launched Bitcoin futures and options.  The CFTC also has issued several customer protection Fraud Advisories that provide the warning signs of fraud.  These include, for example, the Commodity Pool Fraud Advisory, which warns customers about a type of fraud that involves individuals and firms, often unregistered, offering investments in commodity pools.

October 18, 2018 in AML | Permalink | Comments (0)

Sunday, October 14, 2018

Leader of International Cyber Fraud Ring Returned to United States to Face Federal Racketeering Charges

A Romanian national was returned to the United States Friday to face federal charges that accuse him of being the leader of an international cyber fraud ring that used malware to steal in excess of four million dollars after taking people’s passwords, personal identifying information, and bank account information.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Justin E. Herdman of the Northern District of Ohio, Peter Elliot of the U.S. Marshals Service, Stephen D. Anthony of the FBI and Chief Kevin Bielozer of the Westlake Police Department made the announcement.

Romeo Vasile Chita, 38, was charged in a four-count indictment unsealed in U.S. District Court in Cleveland, Ohio. The charges include racketeering, wire fraud conspiracy, conspiracy to launder money and conspiracy to traffic in counterfeit services.

Eight other defendants were named in the indictment unsealed today.  Two defendants—Daniel Mihai Radu, 39; and Manuel Tudor, 37, —have already been extradited from Romania and are awaiting trial in Cleveland. The other five defendants remain at large.

“Romeo Vasile Chita allegedly led a multinational criminal enterprise that stole sensitive personal data through deceptive phishing emails and organized fraudulent online auctions, causing millions of dollars in losses to innocent victims,” said Assistant Attorney General Benczkowski.  “The Criminal Division will continue to work with our law enforcement partners, both domestic and international, to aggressively disrupt and dismantle international cyber criminal organizations that victimize our citizens and businesses.”

“This defendant led an international operation that used fraudulent emails and the internet to scam hard-working people out of their savings,” said U.S. Attorney Herdman.  “It is gratifying that this defendant will be forced to answer the charges filed against him.”

According to the indictment, Chita was based in Romania and led a racketeering enterprise that operated in the United States, Romania, Canada, Croatia, Latvia, Hungary, Bosnia, China, Jordan, Malaysia and elsewhere. The goal of the enterprise was to generate money through various criminal acts, including wire fraud, trafficking in counterfeit services, and money laundering.  It began operating as early as 2007.

Among other things, Chita’s group sent “phishing” emails purporting to be from the Better Business Bureau, the IRS, U.S. Tax Court, the National Payroll Records Center, and others. When a victim clicked on a link in a fraudulent email, specialized malware incorporating a “keylogger” was installed onto the victims’ computers, allowing members of the criminal enterprise to capture sensitive and confidential information, including the victims’ bank account information.

The conspirators, including Chita, then transmitted the sensitive information to each other and others for the purpose of fraudulently withdrawing funds from the victims’ bank accounts. The stolen funds were then transferred to specific accounts in the United States, where the money was withdrawn and transferred to other members of the conspiracy. The conspirators used their own network of accounts and “money mules” to transfer hundreds of thousands of dollars at a time to conceal the origin of the money.

The defendants also are alleged to have engaged in an extensive campaign of online auction fraud, placing ads for non-existent cars and other expensive items on eBay, Craigslist, Autotrader.com, and other websites.  According to the indictment, victims were tricked into wiring thousands of dollars to money mules to purchase these vehicles.  The money mules then transferred and laundered the proceeds for the benefit of the enterprise.    

Chita managed and facilitated the various schemes, as well as directing other conspirators to launder fraudulently obtained money.

This case was investigated by the U.S. Marshals Service, the FBI, the Westlake Police Department and the U.S. Secret Service. The case is being prosecuted by Senior Counsel Brian L. Levine of the Criminal Division’s Computer Crime and Intellectual Property Section and Assistant U.S. Attorney Duncan Brown of the Northern District of Ohio.  Valuable assistance is being provided by the Justice Department’s Office of International Affairs.  The Justice Department thanks the government of Romania for its assistance in this matter.

The prosecution of Chita is timely, as it occurs during National Cyber Security Awareness Month (NCSAM).  NCSAM – observed every October – was created as a collaborative effort between government and industry to ensure all Americans have the resources they need to stay safer and more secure online.  The Department of Justice encourages citizens to take advantage of cybersecurity tips and information provided by law enforcement to ensure their personal information is secured.

October 14, 2018 in AML | Permalink | Comments (0)

Saturday, October 13, 2018

Dark Web Administrator Sentenced to 20 Years in Prison for Narcotics Trafficking and Money Laundering

A French national who was serving at times as an administrator and senior moderator on one of the largest dark web criminal marketplaces was sentenced to 20 years in prison, after previously pleading guilty to conspiracy to possess with the intent to distribute controlled substances and conspiracy to launder money.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division, U.S. Attorney Ariana Fajardo Orshan for the Southern District of Florida, Special Agent in Charge Adolphus P. Wright of the U.S. Drug Enforcement Administration (DEA) Miami Field Office, Special Agent in Charge Robert F. Lasky of FBI Miami Field Office, and Special Agent in Charge Michael J. De Palma of IRS Criminal Investigation (IRS-CI), made the announcement. 

Gal Vallerius, aka “Oxymonster,” 36, pleaded guilty before U.S. District Court Judge Robert N. Scola Jr. in the Southern District of Florida on Aug. 28.  Judge Scola sentenced Vallerius to serve 240 months in prison.  Vallierius forfeited 99.98947177 bitcoin and 121.94805811 bitcoin cash.

According to the court record, including the agreed upon factual proffer, beginning in or around November 2013 a criminal online marketplace known as Dream Market began operating on the Tor “dark web” network.  Dream Market was designed to promote and facilitate the anonymous sale of illegal items.  In time, the Dream Market website became one of the largest dark web criminal marketplaces.  All of the items and services on Dream Market were offered for sale in exchange for Bitcoin and other peer-to-peer crypto-currencies. 

According to the agreed upon factual proffer, Vallerius first participated in the conspiracy by becoming a vendor on Dream Market.  As a vendor, he sold Oxycodone and Ritalin under the moniker “Oxymonster.”  Shortly thereafter, Dream Market employed the defendant who acted at times as an administrator and senior moderator.  In these positions, he played a role supporting the daily illicit transactions between buyers and vendors on Dream Market, such as trafficking in narcotics, and the laundering of illicit proceeds using virtual currencies, Dream Market’s tumblers and the dark web. 

This investigation and prosecution was carried out by members of the South Florida High Intensity Drug Trafficking Area (HIDTA) Task Force.  The South Florida HIDTA, established in 1990, is made up of federal, state and local law enforcement agencies that, cooperatively, target the region’s drug trafficking and money laundering organizations.  The South Florida HIDTA is funded by the Office of National Drug Control Policy which sponsors a variety of initiatives focused on combatting the nation’s illicit drug trafficking threats.

The prosecution is a result of the ongoing efforts by the Organized Crime Drug Enforcement Task Force (OCDETF), a partnership between federal, state, and local law enforcement agencies.  The OCDETF mission is to identify, investigate, and prosecute high-level members of drug trafficking enterprises, bringing together the combined expertise and unique abilities of federal, state, and local law enforcement.  

The investigation was conducted by DEA Miami Field Office and Paris Country Office, FBI Miami’s Cyber Task Force, IRS-CI Miami Field Office, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations Miami and Atlanta Field Offices, U.S. Customs and Border Protection’s Field Operations Atlanta, U.S. Postal Inspection Service’s Miami Field Office, the Department of Justice’s Office of International Affairs, Europol, Special Operations Division (SOD), Finnish National Police, Finnish International Judicial Administration of the Ministry of Justice, Dutch National Police, French Ministry of Justice and the Direction Interregionale de la Police Judiciaire as well as the U.S. Attorney’s Office for the Northern District of Georgia.  The case was prosecuted by Trial Attorney C. Alden Pelker of the Criminal Division’s Computer Crime and Intellectual Property Section (CCIPS) and Assistant U.S. Attorney Juan A. Gonzalez and former Assistant U.S. Attorney Frank R. Maderal of the Southern District of Florida.

October 13, 2018 in AML | Permalink | Comments (0)

Thursday, October 11, 2018

Former Upstate New York Democratic Party Chair Pleads Guilty to Conspiracy to Cause Foreign Campaign Donation

A former Erie County, New York Democratic party chair pleaded guilty today to conspiring to illegally cause a $25,000 campaign donation from a foreign source to a New York state official running for reelection.

Assistant Attorney General Brian A. Benczkowski of the Justice Department’s Criminal Division and U.S. Attorney James P. Kennedy Jr. for the Western District of New York made the announcement.

G. Steven Pigeon, 58, of Buffalo, New York, pleaded guilty before U.S. District Judge Richard J. Arcara to an information charging him with conspiracy to cause a foreign donation in a state election in violation of federal law.  Sentencing is set for Jan. 25, 2019.     

As part of his plea, Pigeon admitted that while working as a political consultant and lobbyist in Buffalo, New York, he represented a foreign client, Company A.  At the time, the CEO of Company A was Person A, a Canadian citizen.  In early 2014, despite knowing that it was illegal to make a foreign donation to a state political campaign, Pigeon solicited Person A to make a $25,000 donation to the reelection campaign of a New York state elected official, Public Official A.  The campaign rejected the donation from Person A because Person A was not a citizen or permanent legal resident of the United States.  Pigeon and Person A then agreed to cause the donation from Person A to be made through Person B, a permanent legal resident of the United States and an employee of Company A.  On or about Feb. 24, 2014, as directed by Person A, Person B made a $25,000 donation to Public Official A’s campaign.  Pigeon and Person A knew that Person A would pay for, or reimburse, the donation.  As a result of the $25,000 donation, Pigeon and Person A were granted entry to a fundraising event for Public Official A in New York City on Feb. 26, 2014. 

“Steven Pigeon undermined the transparency and integrity of the electoral process by funneling foreign money into a campaign,” said Assistant Attorney General Benczkowski.  “The Criminal Division and our law enforcement partners are committed to protecting our electoral process and we will aggressively pursue those who seek to circumvent our campaign finance laws.”

“Transparency in political activity, including the disclosure of the sources of political contributions, is a necessary check on the power of money and a necessary ingredient for a healthy democracy,” said U.S. Attorney Kennedy.  “Schemes such as this, which introduce obfuscation and secrecy into the political process, threaten our very democracy by endeavoring to use anonymity as a means of eliminating accountability.”

The plea is the result of an investigation by the FBI Buffalo Field Office, under the direction of Special Agent in Charge Gary Loeffert; the New York State Attorney General’s Office, under the direction of Barbara Underwood; and the New York State Police, under the direction of  Major Edward Kennedy.  The case is being prosecuted by Deputy Chief John Keller of the Criminal Division’s Public Integrity Section and Assistant U.S. Attorney Paul E. Bonanno of the Western District of New York.

October 11, 2018 in AML | Permalink | Comments (0)

Wednesday, October 10, 2018

Saudi Arabia’s measures to fight money laundering and the financing of terrorism and proliferation

The Kingdom of Saudi Arabia is achieving good results in fighting terrorist financing, but needs to focus more on pursuing larger scale money launderers and confiscating their assets.

The FATF and the Middle East and North Africa Financial Action Task Force (MENAFATF) jointly conducted an assessment of Saudi Arabia’s anti-money laundering and counter-terrorist financing (AML/CFT) system.  The assessment is a comprehensive review of the effectiveness of a country’s AML/CFT system and its level of compliance with the FATF Recommendations.

Saudi Arabia recently made fundamental changes to its AML/CFT regime to bring its legal and institutional framework in line with up-to-date FATF Recommendations.  Given the recent introduction of some of these measures, their effectiveness cannot yet be demonstrated. 

Two separate national risk assessments have provided the country with a solid understanding of the money laundering (ML) and terrorist financing (TF) risks it faces.   Financial institutions generally understand their ML/TF risks, and are applying preventive measures such as customer due diligence, record-keeping and verification of beneficial ownership. This is largely the result of an effective and proactive supervision of this sector. However, the lack of suspicious transaction reports, in particular on suspected cases of terrorist financing, is a concern. Money exchangers, real estate agents, accountants and other designated non-financial businesses and professions do not fully understand the ML/TF risks they are exposed to, with a correspondingly low level or number of suspicious transaction reports.

Saudi Arabia’s financial intelligence unit is not able to conduct sophisticated financial analysis, although it does provide a wide variety of information that is available to and used by competent authorities.  While money laundering investigations have increased in recent years, Saudi authorities are not investigating and prosecuting money laundering in a proactive fashion, particularly when it comes to complex money laundering schemes. They do not systematically pursue confiscation of proceeds.

Saudi Arabia faces a significant and dynamic risk of terrorist financing including the presence of cells of Al Qaeda, ISIS, affiliates and other groups, as well as a large number of foreign terrorist fighters.  Saudi Arabia demonstrated an ability and willingness to pursue terrorist financing which resulted in over 1700 investigations and convictions since 2013, although these efforts were largely focused on domestic terrorist financing.  Saudi Arabia has a sound mechanism to implement United Nations targeted financial sanctions on terrorism, but the measures to implement targeted financial sanctions for proliferation financing and prevent sanctions evasion are weak.

FATF adopted this report at its Plenary meeting in June 2018.

Download the report: 

Mutual Evaluation of the Kingdom of Saudi Arabia - 2018

Mutual Evaluation of the Kingdom of Saudi Arabia - Executive Summary

Earlier report on Saudi Arabia's measures to combat money laundering and terrorist financing

More information:  

FATF Recommendations

Methodology for assessing technical compliance with the FATF Recommendations and the Effectiveness of AML/CFT Systems

Consolidate assessment ratings - an overview of ratings that assessed countries obtained for effectiveness and technical compliance

October 10, 2018 in AML | Permalink | Comments (0)