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Check Cashers in Brooklyn, Philadelphia, and Los Angeles Charged for Allegedly Evading Anti-Money Laundering Laws
On June 14, 2012 seven individuals and four check cashing businesses were charged in the Eastern District of New York and the Central District of California for their alleged roles in separate schemes to violate the Bank Secrecy Act (“BSA”). The defendants allegedly failed to follow reporting and anti-money laundering requirements for transactions totalling more than $50 million. A total of four indictments were filed.
Two of the indictments were returned in Los Angeles and named three individuals and two check cashing businesses. The other two indictments were returned in Brooklyn and named four individuals and two check cashing businesses. All seven individual defendants were arrested or surrendered to authorities. Those named in the indictments include Belair Payroll Services, Bargain Island, G&A Check Cashing, and AAA Cash Advance, all check cashing businesses. The individuals names in the indictments include Craig Panzera, Lasha Goletiani, Zhan Petrosyants, George Gonchar, Karen Gasparian, Humberto Sanchez, and Diana Brigitt.
The four indictments charge the defendants with failure to file currency transaction reports (“CTRs”) or falsely filing CTRs, as well as failure to have an effective anti-money laundering program, all violations under the BSA.
The BSA is a set of laws and regulations enacted by Congress to address an increase in criminal money laundering through financial institutions, which include check cashing businesses. Check cashers enable people to cash checks without having to go to a bank account or maintain a bank account. A check casher will typically charge a fee for this service.
Under the BSA, financial institutions, including check cashers, are required to file a CTR with the Department of Treasury for any transaction involving more than $10,000 in currency. As part of the CTR, the check casher is required to verify and accurately record the name and address of the individual who conducted the currency transaction, the individual on whose behalf the transaction was conducted, as well as the amount and date of the transaction. CTRs are important law enforcement tools for uncovering criminal activity.
The BSA also requires financial institutions, including check cashing businesses, to maintain an effective anti-money laundering (AML) program. The purpose of an AML program is to effectively detect and prevent attempts to facilitate money laundering. Check-cashing businesses are therefore required to have written policies and procedures regarding CTR filings, records maintenance and responses to law enforcement.
According to the indictments, despite these regulations, check-cashing businesses are a common venue for individuals who want to anonymously cash large numbers of checks to facilitate fraud and money laundering schemes. According to the indictments, the use of check cashers to launder money is particularly prevalent in the area of health care fraud, where fraudulent health care businesses commonly convert the proceeds of their fraud into cash by presenting checks to check cashers who they know will not ask for proof of the payee’s identity and will either not file CTRs or file false CTRs.
The BSA is intended to assist both the private sector and the government in its detection and prevention of criminal money laundering. By implementing these regulations, financial institutions provide law enforcement agencies from around the world with valuable insight into the banking and financial activities of people from all walks of life. Although the specific conduct of those named in the indictments may not in any way be connected to the criminal activity they’re designed to detect, the allegations of noncompliance with CTRs and anti-money laundering programs are in and of themselves considered criminal conduct.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
U.S. and Mexico Share Forfeiture Funds from Sigue Corporation
On Monday, U.S. Attorney General Eric Holder and Mexican Attorney General Marisela Morales Ibáñez signed a letter of intent for the United States to share approximately $6 million in forfeited funds with the Office of the Attorney General of the Republic of Mexico (PGR) to support Mexican efforts to combat the financial infrastructure of organized criminal groups and to enhance bilateral cooperation between the two countries in forfeiture matters.
The letter of intent recognizes the PGR’s recent cooperation in the investigation and resolution of the U.S. government’s case against Sigue Corporation for violations of the Bank Secrecy Act (BSA). In January 2008, Sigue entered into a deferred prosecution agreement with the Department of Justice on charges of failing to maintain an effective anti-money laundering program. As a result, Sigue forfeited $15 million to the United States and agreed to commit an additional $9.7 million to improving its anti-money laundering program.
Sigue is a large international corporation engaged in money transfer services, with a focus on transactions between the U.S., Mexico and Latin America. Money transfer services operating in the U.S. are required to comply with the BSA, which includes anti-money laundering provisions. Specifically, money transmitters are required to implement internal preventative measures to guard against money laundering and must report suspicious activity to the Financial Crimes Enforcement Network (FinCEN).
The case, filed in the Eastern District of Missouri, arose out of transactions conducted by Sigue and its authorized agents from November 2003 through March 2005. During this time, more than $24.7 million in suspicious transactions were allegedly conducted through registered agents of Sigue, including transactions conducted by undercover U.S. law enforcement agents using funds represented to be proceeds of drug trafficking. According to the government’s theory, Sigue did not identify broader patterns of money laundering activity, failed to prevent the unlawful activity from continuing and did not create systems and procedures to identify suspicious financial transactions being conducted by related senders and beneficiaries.
Failure to comply with the BSA may result in civil and criminal penalties, with this case being a prime example. Sigue was forced to forfeit $15 million to the DOJ to avoid prosecution, and was also required to pay an additional $12 million in civil penalties to FinCEN.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
New York Man Arrested for Alleged Identity Theft and Tax Fraud
Gary Rogers, of East Meadow, N.Y., was arrested on Monday after being charged with identity theft and tax fraud after allegedly filing more than 200 false tax returns with the Internal Revenue Service (IRS).
Rogers was named in a federal criminal complaint that alleged he used stolen identification information to make false claims against the U.S. government by filing false tax returns to obtain fraudulent refunds. According to the affidavit in support of the criminal complaint filed in U.S. District Court in Brooklyn, Rogers filed approximately 200 federal income tax returns from 2004 through 2010 using the identification information of others. The complaint alleges that Rogers sought approximately $4,393,356 in fraudulent refunds over the six year period. There is no indication how much Rogers may have actually received, or whose identities he allegedly used to obtain the funds.
In addition to the traditional IRS functions, the IRS also has a Criminal Investigations (CI) Unit. The CI Unit employees approximately 2,700 special agents whose sole purpose is to investigate tax fraud, money laundering, and Bank Secrecy Act violations. The investigations of money laundering and BSA violations tend to overlap with the Department of Justice (DOJ) and the Financial Crimes Enforcement Network (FinCEN); however, the CI Unit is the only federal department that investigates criminal violations of the tax code.
The CI Unit focuses on several areas of financial crimes, including bankruptcy fraud, corporate tax fraud, employment tax evasion, and other crimes as related to filing false tax returns. The U.S. government clearly has a heightened interest in the financial sector, particularly in this economic climate. It is important to remember that mistakes contained on a tax return are not necessarily criminal violations. The CI Unit is more concerned with willful, or intentional, violations of tax fraud and evasion.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
FinCEN Assesses Civil Money Penalty Against Maine-Based Money Transmitter
The Financial Crimes Enforcement Network (“FinCEN”) recently announced its assessment of a civil money penalty against a money transmitter based out of Westbrooke, Maine. Under the authority of the Bank Secrecy Act (“BSA”) and regulations issued pursuant to that Act, FinCEN determined that grounds exist to assess a civil money penalty against Sarith Meas (“Meas” or the “Money Transmitter”). In order to resolve the matter, Meas has entered into a “Consent to the Assessment of Civil Money Penalty” without admitting or denying the determinations by FinCEN.
A money transmitter is a type of “money services business” (“MSB”) and “financial institution,” under the BSA and regulations issued pursuant to that Act. The Internal Revenue Service, Small Business/Self-Employed Division, under delegated authority from FinCEN, examines MSBs for compliance with the BSA, and refers evidence of deficiencies to FinCEN for disposition. FinCEN’s enforcement authority empowers it to investigate and impose civil money penalties against MSBs for violations of the BSA and its implementing regulations.
From January 2006 through October 2010, Meas acted as an independent money transmitter, located in Westbrook, Maine. Meas executed funds transfers for customers and received financial compensation for those money transmission services. Meas engaged in the business of transmitting funds for persons located in the United States. At all relevant times, Meas was a “money transmitter,” within the meaning of the BSA and its implementing regulations.
As administrator of the BSA, FinCEN may impose civil money penalties against a money transmitter, or any person who owns or controls a money transmitter, for violations of money services business registration requirements, and may assess civil money penalties against a money transmitter, or any partner, director, officer, or employee thereof, for each willful violation of recordkeeping, reporting and/or anti-money laundering program requirements.
FinCEN has determined that Meas violated the registration and anti-money laundering program requirements of the BSA. From January 2006 through October 2010, Meas conducted business as an independent money transmitter out of her residence in Westbrook, Maine. In a typical transaction, a customer provided Meas with cash, checks, or money orders, along with instructions to transmit funds to a specified beneficiary, and Meas deposited those funds into her U.S. deposit accounts. Once the funds cleared, Meas instructed U.S. financial institutions to wire transfer funds to designated financial institution(s) in Cambodia — a jurisdiction classified by the United States Department of State as suffering from money laundering deficiencies6— where the funds were retrieved by Meas’ affiliate(s) and made physically available to beneficiaries in the designated currency.
For an extended period of time, Meas operated as an independent money transmitter by engaging as a business in the transfer of funds. She was required under the BSA to register as an MSB with FinCEN and implement a written anti-money laundering program. Meas failed to both register as an MSB and implement a written anti-money laundering program. For these violations, Meas has consented to the assessment of a $12,500 civil penalty against her.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
FinCEN Executes Civil Penalty Assessment Against Michigan Man
Last Friday, the Financial Crimes Enforcement Network (FinCEN) announced the imposition of a $25,000 civil penalty against Mohamed Sheikh for alleged violations of the Bank Secrecy Act. Specifically, the assessment alleges that Sheikh willfully violated the structuring requirements of the Act and further, that Sheikh was acting as an unregistered money transmitter.
Sheikh was the manager of Abbas Phone Card and Grocery store, located in eastern Michigan. The FinCEN civil penalty assessment comes two years after federal criminal charges were imposed against Sheikh, the store owner (Sheikh’s brother), and Sheikh’s two sons. Beginning in 2009, the individuals were investigated and subsequently arraigned in federal court for allegedly engaging in fraudulent transactions relating to the federal food stamps and WIC programs. Following their guilty pleas, Sheikh and his brother were sentenced to a period of incarceration, followed by a probationary period, and each were ordered to pay a restitution amount of $718,743 to the United States Department of Agriculture (USDA). The sons received probation and were ordered to pay a restitution of $439,809 to the USDA. Restitution is the government’s method of imposing criminal fines.
The execution of the civil penalty assessment against Sheikh relies on enforcement regulations in the Bank Secrecy Act. The Bank Secrecy Act requires those engaging in money services to register with FinCEN every two years, and further, financial institutions must also report monetary transactions of $10,000 or more. It is a violation of the Act if transactions are “structured” to avoid the reporting requirement, such as making multiple transactions under $10,000 rather than engaging in a single transaction over $10,000. The civil penalty assessments directly benefit the U.S. government, and in this situation, will be paid to the U.S. Treasury Department.
What is interesting is the fact that FinCEN has chosen to impose the civil fine on Sheikh, the manager of the store, rather than the store owner and Sheikh’s brother, Aidarus Abbas Mohamed. This means that either the evidence against Sheikh was stronger than the evidence against Mohamed, or that FinCEN will be assessing Mohamed with a civil penalty in the near future. Either way, Sheikh must unfortunately deal with the staggering amounts of restitution for his criminal case and the newly imposed civil fine from FinCEN.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
FinCEN Imposes Civil Fine on Money Services Business in Georgia
The Financial Crimes Enforcement Network, or FinCEN, is an enforcement branch of the U.S. Treasury Department. FinCEN was established in 1990 to investigate financial crimes, such as money laundering and fraud. In 1994, the branch increased in power when it was delegated with authority to enforce regulations under the Bank Secrecy Act (BSA).
Today FinCEN issued a financial penalty assessment against Altima, Inc., located in Norcross, Georgia. Altima is a money services business and therefore subject to specific reporting regulations under the BSA. Typically, a money services business is any entity that engages in transactions relating to money orders, traveler’s checks, check cashing and currency exchange. Such businesses are required to register with FinCEN once every two years, in addition to other reporting requirements.
According to the assessment, Altima failed to comply with the registration requirements and implement an anti-money laundering program. The assessment alleges that Altima engaged in numerous monetary transactions with entities in Iran. The assessment goes on to state the potential civil penalties it has the ability to impose, specifically, up to $5,000 for each registration violation and up to $25,000 for failure to implement an anti-money laundering program. However, FinCEN only imposed a $5,000 fine against Altima.
The imposition of only $5,000 is great news for Altima. The fact that Altima failed to register repeatedly and implement the required program could have resulted in much larger fines. Altima was owned and managed by one individual, and dissolved in September 2010, which is perhaps why the assessment is minimal. The last money services business that received an assessment, in March of this year, was required to pay $25,000 in civil fines.
Any institution that engages in monetary transactions within the U.S. must be aware of FinCEN and it’s regulatory power. Further, for institutions engaging in transactions with sanctioned countries, such as Iran, investigations by the Office of Foreign Assets Control (OFAC) is also a possibility. It is extremely important to follow proper compliance procedures regarding the U.S. financial system in order to avoid legal action.
The author of this blog is Erich Ferrari, an attorney specializing in Federal Criminal Defense matters. If you have any questions please contact him at 202-280-6370 or ferrari@ferrari-legal.com.
