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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.
Proactive Suspicious Activity Report Review Leads to the Arrest of Army Officer and Recovery of Iraqi War Funds
FinCEN recently reported that a U.S. military officer used his official position to steal currency designated for war use, transferred the funds to the United States, and then spent that money on personal items. When the defendant conducted transactions with the stolen currency at financial institutions, those transactions triggered anti-money laundering detection protocols. The resulting SAR led to a quick arrest and recovery of the stolen currency.
This is an example where the underlying crime went undetected, but where BSA reporting requirements resulted in the identification of transactions involving the fruits of the crime. The facts of the case stated that for a period of almost 2 years, the defendant was deployed to Iraq and was responsible for making monthly payments in U.S. currency, derived from an emergency relief program, to Iraqi nationals. At any one time, the defendant had nearly $300,000 in cash locked in a safe.
During his deployment, the defendant stole nearly $700,000 of the funds, which consisted of newly issued $100 bills. The defendant then forwarded the currency to his home address before returning from Iraq. After returning home, the defendant opened accounts at several different depository institutions and began to deposit the stolen currency into the accounts. In a 3-month period, the defendant made numerous currency deposits on consecutive days or the same day for less than $10,000. In all, the defendant deposited more than $350,000 in stolen currency into the accounts.
With the stolen money in the accounts, the defendant proceeded to purchase cashier’s checks for tens of thousands of dollars. The defendant used the checks to purchase expensive vehicles, electronics, computers, furniture, and handguns. Eventually a financial institution filed a SAR on some of the transactions. Of note, the SAR described a series of cash deposits on consecutive days or on nearly consecutive days where the source of the funds could not be determined and the aggregate amount exceeded reporting requirements.
An IRS agent conducted a proactive review of SARs and opened an investigation. Within a few months, agents executed a search warrant and found approximately $300,000 in currency at the defendant’s residence. The currency was still in the original wrappers from the Bureau of Engraving and Printing. Agents also seized around $50,000 from bank accounts and approximately $100,000 in investment accounts. Investigators, through either seizures or asset recovery, accounted for nearly all the stolen money.
A Federal jury sentenced the defendant to several years in prison for structuring of financial transactions, theft of government property, and money laundering.
FinCEN serves as the financial intelligence unit (or FIU) of the United States. An FIU is the central agency within a jurisdiction responsible for collecting, analyzing, and disseminating financial information in furtherance of law enforcement investigations and prosecutions. By analyzing the suspicious transactions utilizing the fruits of originally undetected criminal activity, FinCEN was able to work backwards and obtain a conviction of the defendant for the underlying criminal activity. SARs and other reporting requirements were specifically implemented to deal with scenarios such as this one involving suspicious financial transactions, transfers of money, and originally undetected transnational criminal activity.
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.
Suspicious Activity Report (SAR) Leads to Recovery of Funds Derived from Foreign Corruption
As was reported in our last blog post about Suspicious Activity Reports (SARs), such reports are critically important to the U.S. government’s efforts to detect complex criminal activity. FinCEN, the U.S. Department of the Treasury’s office responsible for analyzing such filings, has been more active than ever in detecting criminal activity. Since SARs are filed by a financial institution without the target’s knowledge they give the government a head start in their investigations. The information contained in the reports is analyzed by teams of government analysts who develop trends and establish findings that assists the government’s subsequent investigation.
One area of criminal activity SAR analysts focus on is foreign corruption. Analysts will search SARs for key terms such as “politically exposed person” or “PEP,” “foreign corruption,” and “senior foreign political figures.” In 2010 analysts documented 1,294 SARs related to the terms mentioned above. Most of the reports are filed by depository institutions like banks, but other institutions like securities dealers and money services businesses also filed “foreign corruption” related SARs. Most of the reports involved amounts or aggregate amounts between $100,000 and $50,000,000 and identified the activity as BSA/Structuring/Money Laundering.
One such SAR exposed a foreign corruption scheme to Federal officials. The government ultimately seized and forfeited criminal proceeds valued at more than $100 million from the findings of that initial SAR and its subsequent investigation. The investigation revealed that several subjects conducted a complex series of transactions, over a period of several years, using the proceeds of foreign corruption.
The investigation centered on the circumstances surrounding a foreign civil case in which the judge found for the plaintiff and ordered the defendant to pay the plaintiff (and heirs) the U.S. equivalent of half a billion dollars. Soon after the judgment in the civil case, law enforcement commenced an investigation into the possibility that the decision in the civil case was the result of a bribe, worth tens of millions of dollars, paid to the judge through a group of attorneys. This investigation led to the arrest of several individuals involved in the civil case, including the plaintiff’s heirs, the judge, and the attorneys. The judge and attorneys were convicted of bribery.
After the bribery scandal broke, a financial adviser (and co-conspirator) helped the plaintiff and his heirs set up corporate and trust structures to conceal and launder large portions of the public corruption proceeds. A significant portion of the corruption proceeds were then moved through these entities to or through bank and investment accounts located in the United States.
U.S. authorities became involved when members of the plaintiff’s family attempted to open accounts in the United States. Through the use of Bank Secrecy Act (BSA) data, especially SARs, and investigative information provided by foreign authorities, investigators identified approximately 2 dozen accounts in the United States that contained the proceeds of the fraud and bribery schemes.
All of the plaintiff’s family and heirs involved the scheme were arrested, pleaded guilty, and were sentenced to prison. The financial advisor was arrested and has yet to be tried.
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.
