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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.
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.
65 Count Indictment Against Texas Man for Bankruptcy Fraud and Structuring Financial Transactions
The U.S. Attorney’s Office for the Western District of Texas announced charges against Jack Texas Alves. The grand jury returned a 65 count indictment against Mr. Alves for one count of bankruptcy fraud in violation of 18 U.S.C. 152 and 64 counts of structuring domestic financial transactions in violation of 31 U.S.C. 5324(a)(3).
The indictment alleges that in a bankruptcy court filing on May 23, 2008, Mr. Alves falsely stated the amount of cash he had in his possession was $4,000 when in fact, Mr. Alves knew he possessed substantially more cash which he concealed from the bankruptcy court and creditors. The indictment further alleges that Mr. Alves engaged in a pattern of structuring bank deposits, totaling more than $100,000 in a 12 month period, for the purpose of evading reporting requirements. According to a detailed list in the indictment, from February 24, 2010 until May 12, 2011, Mr. Alves made a total of 64 bank deposits-each one between $5000 and $8100.
Not mentioned in the accouncement or the indictment is whether Mr. Alves’ bank notified FinCEN of these transactions by filing suspicious activity reports or SARs. The indictment dates all of the transactions and it isn’t suprising that the bank caught on to Mr. Alves activities. For example, Mr. Alves made a deposit almost every business day for nearly two months. Each deposit was shy of the standard trigger for reporting purposes, $10,000. Bank’s are instructed to report structured transactions when series of deposits in a short duration of time add up to an amount that would have otherwise been reported if deposited together. Furthermore, banks are prohibited from telling a person that they filed an SAR about them to FinCEN. Thus, Mr. Alves likely had no idea that the bank had sent the SAR to FinCEN where it was being processed by analysts who eventually coordinated with law enforcement officials about the transactions.
The indictment also indicates that the government is seeking forfeiture of two bank accounts currently seized. Pursuant to 18 U.S.C. 981(a)(1)(C), 28 U.S.C. 2461 and Federal Rules of Criminal Procedures Rule 32.2, the government is seeking to forfeit funds that Mr. Alves alledly concealed from the bankruptcy court and creditors. Pursuant to 31 U.S.C. 5317(c)(1)(A) and Rule 32.2 the government also seeks forfeiture of the funds involved in the structured transactions. The funds the government looks to forfeit amount to nearly $400,000.
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 Proposes Reporting Requirement of International Transport of Prepaid Access Products at U.S. Borders
Furthering the U.S. Department of the Treasury’s efforts to address the potential misuse of prepaid access products, the Financial Crimes Enforcement Network (FinCEN) recently proposed adding certain tangible prepaid access devices to the list of monetary instruments to be reported when transported into or out of the United States. FinCEN’s proposal would add devices such as general use prepaid cards, certain gift cards, and potentially cell phones to the list of other monetary instruments that must be aggregated to determine if they exceed more than $10,000 and included on the Currency and Monetary Instrument Report (CMIR), the form used to report international transport of funds at U.S. borders. The proposal is intended to address certain devices that can be used as a substitute for currency, as they provide access to funds by any bearer of the device. This product attribute, as FinCEN’s cooperation and consultation with law enforcement has indicated, may enable the anonymous transfer or concealed transport of illicit funds across the U.S. border.
Excluded from the proposal are credit cards and debit cards, and codes and personal identification numbers or items like computers or web enabled cell phones, or other devices that are not dedicated to accessing specific prepaid funds.
“The proposal we’re releasing today is a further step in our staged approach, building upon our newly implemented regulations of prepaid access, in a coordinated effort with law enforcement to shine a light on the transfer of money obtained through illicit activity,” said FinCEN Director James H. Freis, Jr. “Reporting tangible prepaid access devices puts another tool at the disposal of law enforcement to interrupt the transfer of monetary value anonymously across international borders when that value was obtained illegally.”
Current regulations require that a CMIR be filed regarding the international transportation, mail, or shipment of currency or other monetary instruments – defined as coin or currency, traveler’s checks, checks, promissory notes, money orders in bearer form, and bearer bonds among others – in an aggregate amount that exceeds $10,000. FinCEN’s proposal will update U.S. reporting requirements, which have been in place since the 1970s, to reflect the emergence of new payment methods and monetary instruments that could be used to facilitate illicit financial activity.
While FinCEN was already developing regulatory proposals in this area, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 required the issuance of regulations in final form implementing the BSA, regarding the sale, issuance, redemption, or international transport of stored value, including stored value cards. FinCEN defined prepaid access and included new regulatory requirements in July 2011, expanding beyond the previous framework for certain products known as “stored value.”
This proposal should serve as a warning to those who frequently travel with monetary instruments worth over $10,000. Travellers will need to accurately add up the total value of their monetary instruments and account for items such as gift cards, prepaid cards, and possibly even pre-loaded cell phones. If a traveller either fails to report or reports inaccurately their total value of monetary instruments, including these new items, such items can be seized by U.S. Customs and Border Protection and subsequently subject to forfeiture. Such seizures will make transporting money even more expensive by enabling the government to levy fines and penalties against travellers.
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.
FinCEN Implements New Rule Requiring U.S. Banks to Seek Information from Foreign Banks on Iranian Financial Ties
On October 5, 2011 the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) delivered to the Federal Register a final rule to implement section 104(e) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA) to complement Treasury’s ongoing efforts to protect the international financial system from abuse by Iran. The rule becomes law upon its publication in the Federal Register.
The new rule will be published in 31 C.F.R. Section 1060.300 and is entitled “Reporting obligations on foreign bank relationships with Iranian-linked financial institutions designated under IEEPA and IRGC-linked persons designated under IEEPA.”
The goal of this new rule is to further separate the U.S. financial system from Iran by ensuring that no foreign banks with which U.S. institutions have corresponding accounts with have any ties to suspect Iranian financial institutions. The outcome of this rule will be to further isolate the Government of Iran, disrupt its ability to develop weapons of mass destruction or support terrorism, and encourage the broader international financial system to isolate Iran if it wants to benefit from doing business with the United States.
The rule accomplishes these goals by requiring a U.S. bank, upon a request from FinCEN, to inquire into whether any of the foreign banks with which it holds a correspondent account has dealings or accounts associated with the Government of Iran, blocked Iranian banks, or the Revolutionary Guards (IRGC). The rule also requires, upon request, inquiries into a foreign bank’s transfers of funds for or on behalf of, directly or indirectly, an Iranian-linked financial institution or IRGC associated entity designated under IEEPA within the preceding 90 calendar days.
The new rule also requires that the U.S. bank request from the foreign bank a notification if the foreign bank subsequently establishes an account for an Iranian-linked financial institution designated under IEEPA at any time within 365 calendar days from the date of the foreign bank’s initial response. A laundry list of requirements is listed in the new regulation dictating the specific disclosures a bank must report to Treasury with regards to financial dealings involving Iranian entities designated pursuant to IEEPA and any of the foreign banks with which the U.S. bank has a correspondent account. U.S. banks have 45 days after a request from FinCEN to file their initial report. A U.S. bank will also have 10 days to file a report to FinCEN if they are subsequently informed that a foreign bank they hold an account with opens an account with an Iranian-linked financial institution.
This line of inquiry will ultimately determine whether or not that foreign financial institution itself will be prohibited from maintaining or opening, in the United States, a correspondent account or payable-through account. As authorized by Congress in CISADA, if the Secretary of the Treasury determines that the foreign financial institution knowingly engages in certain specified activities, that foreign financial institution will not be allowed to maintain or open such accounts with U.S. financial institutions. Those specified activities include facilitating a significant transaction or transactions or providing significant financial services for a financial institution whose property or interests in property are blocked pursuant to IEEPA. This prohibition is specifically aimed at disrupting Iran’s proliferation of weapons of mass destruction or delivery systems for weapons of mass destruction, or in connection with Iran’s support for international terrorism, or for the IRGC or any of its agents or affiliates whose property or interests in property are blocked.
Failure of a U.S. bank to comply with FinCEN’s request for inquirt into the Iranian-linked affairs of a foreign financial institution will subject the U.S. bank to both civil and criminal penalties as enumerated in 31 U.S.C. Sections 5321(a) and 5322.
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.
Suspicious Activity Report (SAR) Leads to Arrest and Conviction of U.S. Government Employee
In a case initiated from a Suspicious Activity Report review team, a Federal government accountant pleaded guilty to theft of public money and money laundering. The case began when an alert bank noticed several unusual transactions, including large cash payments to credit card accounts. Activity in one account at the bank, ostensibly a business account, appeared suspicious, because the only deposits were U. S. Treasury checks, most of the debits were for currency, and there was no apparent business activity.
A bank filed a SAR on the defendant indicating structuring and unusual transactions involving the subject’s business. The SAR narrative revealed cash payments made to two credit card accounts of approximately $8,000 each, but the balances on the cards were less than $200. The bank reported several check deposits into the business account, with almost all of the withdrawals consisting of currency. In addition, the bank found no signs of checks drawn on the business account for business expenses.
The bank also noted that some of the cash withdrawals appeared to occur at casinos. The defendant received cash advances at casinos and sent some of those payments back to credit card accounts. Casinos filed more than 80 Currency Transaction Reports on the defendant beginning around the time the defendant began his embezzlement. In addition, a casino filed a SAR on the defendant for cashing nearly $6,000 worth of checks in a month with no subsequent buy-ins or rated play.
The defendant confessed and was sentenced to more than 3 years in Federal prison without parole. The Court also ordered the defendant to pay approximately $600,000 in restitution.
SARs help the government identify potential and actual illegal activity such as money laundering, terrorist financing, and other financial fraud and abuse. These reports help the government detect and prevent flows of illicit funds and establish emerging threats through analysis of patterns and trends. The report, and the subsequent analyses associated with the report, helps the government target, arrest, and convict all sorts of criminals.
Many financial institutions are required by law to file SARs when someone conducts a transaction that seems suspicious. Financial institutions that are currently required to file SARs include depository institutions, money services businesses (MSBs), currency dealers, casinos, and securities and futures dealers. It has recently been proposed to include both insurance companies and mutual fund operators in the list of institutions required to file SARs.
SARs are to be filed no later 30 days after the date of initial detection of facts that may constitute a basis for the filing and no later than 60 days if no suspect was identified on the date of the incident requiring the filing.
SARs must be filed by the institution if that institution knows of or suspects violations of federal criminal laws or regulations committed or attempted against or through the institution and involves or aggregates at least $5000 (or $2000 for MSBs) in funds or other assets. Thus, the institution usually files SARs when it knows or suspects that the funds passing through its institution are (1) obtained from illegal activity, (2) intended or conducted to hide or disguise funds or assets derived from illegal activity, or (3) designed to evade any reporting requirements of the Bank Secrecy Act (BSA). Also, if the transaction is undertaken without any apparent reason or if the client does not normally undertake such transactions certain financial institutions will be required to file SARs.
People undertaking unusual transactions with financial institutions should know that U.S. law prohibits the institution from notifying any person involved in the transaction that the transaction has been reported. So the institution will likely process the transaction and then confidentially report the transaction to the Department of the Treasury via an SAR. The subject of the SAR will not know that his or her transaction has been reported until Federal, State, and local law enforcement have analyzed the facts and initiated an investigation into the individual.
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.
