Archive
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.
Massive Healthcare Fraud Takedown: 91 Defendants, $295 Million Scheme
Attorney General Eric Holder and Health and Human Services (HHS) Secretary Kathleen Sebelius announced that a nationwide takedown by Medicare Fraud Strike Force operations in eight cities has resulted in charges against 91 defendants, including doctors, nurses, and other medical professionals, for their alleged participation in Medicare fraud schemes involving approximately $295 million in false billing.
In recent years the government has ramped up enforcement to bring an end to Medicare fraud. The joint DOJ-HHS Fraud Strike Force is comprised of a multi-agency team of federal, state and local investigators. Accordingly, this massive takedown involved the work of approximately 400 law enforcement agents from the FBI, HHS-Office of Insepctor General, and other federal, state and local agencies. In addition to the 91 arrests, the Strike Force also executed 18 search warrants in connection with ongoing investigations. As if this massive takedown wasn’t already enough, the Strike Force arrested an additional 45 defendants the same day in Miami and in the past couple of months has charged 10 defendants in Baton Rouge, 6 defendants in Los Angeles, 18 defendants in Detroit, and 2 defendants in Houston.
This level of coordination is unmatched in other white collar/fraud related crimes. Thus, the government’s stubborn focus on preventing fraud should not be taken lightly by anyone in the healthcare industry. As Assistant Attorney General Breuer said at the press release, “as charged in these indictments, the defendants cover nearly the entire spectrum of healthcare providers, and perpetrated a variety of fraudulent schemes.” Since its inception in 2007, the Strike Force has operations in nine major cities across the nation and has charged more than 1,140 defendants who account for nearly $2.9 billion in false billings.
The best way to avoid being ensnared by a federal investigation is for healthcare providers to maintain aggressive Medicare fraud and abuse compliance programs. These internal corporate policies should, at the very least, be written and cover a wide range of corporate functions susceptible to fraud and abuse. Other critical elements to a successful compliance program include the designation of a compliance officer, conducting effective training and education, developing effective lines of communication, establishing internal enforcement procedures, auditing and monitoring, and maintaining a whistleblower/non-retaliation policy. Preventing all violations may be impossible, but that shouldn’t stop healthcare providers from establishing and faithfully administering an anti-fraud compliance program. With such a program in place, the government will tend to look the other way when technical violations of the law occur. This is a much better, and cheaper, outcome than being charged in a federal indictment.
Since Medicare is a federally funded program most defendants are charged with federal crimes and required to make appearances before a U.S. District Court judge. Indictments in these cases usually include “white collar” charges such as health care fraud, conspiracy to commit health care fraud, receipt of health care kickbacks, and money laundering. In addition, practically all of the defendants are subject to criminal forfeiture proceedings and required to pay restitution if convicted. These charges are very complex, time consuming, and expensive to defend against. Therefore for both compliance and defense purposes, healthcare providers should employ the services of an attorney that has an intimate understanding of the intersection between federal regulatory compliance and federal criminal defense.
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.
Operation Crystal Ball: Fraud, Fortune Tellers, and Money Laundering
The United States Attorney’s Office of the Southern District of Florida announced that 10 defendants have been charged in an indictment unsealed today. The indictment, the result of “Operation Crystal Ball,” focused on a group of individuals claiming to be fortune tellers, psychic readers and spiritual advisers. In reality, however, these individuals defrauded more than a dozen victims out of more than $40 million.
The 61-count indictment charges the defendants with conspiracy to commit mail and wire fraud, 11 counts of mail fraud, 48 counts of wire fraud, and one count of money laundering. Each count carries a statutory maximum of 20 years in prison, if convicted. In addition, the defendants will have to pay mandatory restitution to the victims of their crimes.
At first blush it would seem that the U.S. Attorney’s Office indicted these fortune tellers and psychics for being, well, fortune tellers and pyschics. Last I checked, our society had yet to make it criminal to market one’s self as “connected” to the spirit world and charge a fee to clients who want “access” to that world. Call it fortune telling, spiritual assistance, or religion, we haven’t yet deemed such practices as fraud. But upon closer inspection something more sinister was afoot than merely promising people their lives would improve by spiritual means.
On multiple occasions the defendants in this case would induce their clients “to give them large sums of money and other valuables. . . ‘temporarily’ . . . so [that] they could cleanse the money of curse[s] or evil spirits, with the promise of returning the money.” The defendants would represent to their clients that this money “was a sacrifice, not a payment.” That because money “was the root of all evil” it needed to be “set aside and prayed upon.” However the defendants never returned any of the money, even when asked by their clients.
So you see, the fraud (or false pretense) is not in the promise of “relieving [clients] of all evil spirits, the end of bad luck, and the end of curses.” The fraud is that these clients were induced to give the defendants money for purposes it wasn’t actually used for (no matter how ridiculous you may think that purpose is), namely that the money would be “set aside and prayed upon” and ultimately returned to the client.
There was no crime until it became apparent that the defendants were not interested in giving the money back to clients when requested. Instead, the “sacrifice, not payment” money was laundered through various bank accounts and businesses to give it the appearance of clean money, earned by the defendants and their co-conspirators. This extra step of laundering the money demonstrates the fraudulent intent of the defendants. According to the indictment the money was then used to buy homes, luxury cars, and motorcycles to the tune of nearly $40,000,000, further demonstrating their true intent to defraud their clients.
Had the defendants not actually spent the money but instead “set aside” the money, even in interest bearing accounts, where it was “prayed upon,” would have called into question whether a cognizable crime had even occurred. Since there is no verifiable means of proving or disproving the spiritual work performed by fortune tellers, and the fact that such spiritual marketing is not yet a criminal endeavor, the defendants might have been able to fight these charges effectively. But instead the defendants devised a scheme for obtaining money by means of false pretenses, representations, or promises, namely that they should be entrusted with large sums of money that would be available and eventually returned to their clients.
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.
F.B.I. Shifting its Focus from Ordinary Crime to National Security and Intelligence Gathering
The N.Y. Times is reporting that agents at the Federal Bureau of Investigation (FBI) are more likely to be hunting potential threats to national security than for ordinary criminals in recent years.
This finding comes from data collected detailing the bureau’s activities the last 2 years. The data was part of an internal FBI report that the NY Times successfully obtained under the Freedom of Information Act (FOIA). The report details the FBI’s shift from a law-enforcement agency focused on solving crimes to a domestic intelligence agency whose mission is to detect potential threats before they can reach fruition.
In order to accomplish this transition the FBI instituted a policy to investigate every single national security tip, no matter how dubious the tip may be. Further, if the FBI receives a national security related tip from another agency, like the CIA or OFAC, the FBI will immediately open a more intensive investigation instead of starting with an “assessment.” (A couple of posts about the FBI’s new operations guide regarding assessments and investigations were discussed previously here, and here)
The FBI’s shift away from investigating ordinary crime to prioritizing national security related issues has already had a significant impact. So the critical question that needs to be asked is: What exactly are national security related issues? The U.S. government has expressly stated at one time or another through its various agencies and institutions that crimes related to money laundering, bank secrecy, smuggling, currency transaction reporting, trade sanctions, tax evasion, and narcotics production and trafficking are all national security related issues. As this list demonstrates, the government has unequivocally focused its attention on terrorism finance as one of the major ways of securing national security.
Coupling the government’s focus on terrorism finance with the FBI’s new focus on national security issues probably means more criminal investigations of people in immigrant groups with links to the Middle East, South America, Africa, and East Asia for activities that, in fact, are not at all related to national security. Additionally, this change in federal law enforcement policy coupled with a newly invigorated focus on terrorism finance also means more criminal investigations and scrutiny of traditional white collar activities and financial transactions. Thus, as everyday activities are increasingly linked to national security the general public will be subjected to increased government scrutiny.
Although many traditional protections offered to people that are targets of criminal investigations have eroded since September 11, the FBI is still, at its heart, a law enforcement agency receptive to this country’s legal standards associated with criminal investigations and trials (i.e. reasonable suspicion, probable cause, and beyond a reasonable doubt). However, as the FBI increases its intelligence gathering operations, the need for an effective federal defense attorney becomes even more important. Because the FBI will be subjecting more everyday activities to investigations for “intelligence gathering,” a knowledgeable federal defense attorney will be needed to explain to agents cultural nuances, federal regulatory policies, and foreign policy concerns applicable to a particular client’s situation. This level of knowledge in an attorney is vital to ensuring that the FBI doesn’t misinterpret the findings of an investigation which can ultimately lead to an erroneous indictment or conviction.
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.
The Incorporation Transparency and Law Enforcement Assistance Act: The End of Anonymous Corporations and Hidden Owners?
On August 2, 2011 Senators Carl Levin and Chuck Grassley introduced bi-partisan legislation requiring companies to disclose the names of beneficial owners of corporations and limited liability companies. The legislation is intended “to ensure that persons who form corporations in the United States disclose the benficial owners of those corporations, in order to prevent wrongdoers from exploiting United States corporations in ways that threaten homeland security, to assist law enforcement in detecting, preventing, and punishing terrorism, money laundering, and other misconduct.”
According to anti-money laundering proponents, law enforcement groups, and financial transparency organizations, the legislation is a crucial step toward strengthening law enforcement and keeping criminal and tax evading money out of the U.S. As reported by the Center for International Policy’s Global Financial Integrity, “Criminals, kleptocrats, and tax evaders from around the world are taking advantage of . . . U.S. law to hide and launder illicit money . . . [because] financial opacity puts law enforcement at a major disadvantage. Too often cases are dropped, or investigations are closed, due to a lack of evidence connecting the illicit funds held in accounts owned by anonymous corporations to the criminal owners of those corporations.”
The problem identified by this piece of legislation is two-fold: First, that it is too easy to gain access to financial services in the U.S. through anonymous U.S. corporations; and second, that it is too difficult for law enforcement groups to figure out the real owners behind anonymous corporations. Therefore, this legislation imposes both civil and criminal penalties on anyone who (1) knowingly provides, or attempts to provide, false or fraudulent beneficial ownership information; (2) willfully fails to provide complete or updated beneficial ownership information; and (3) knowingly discloses the existence of a subpoena, summons or other request for beneficial ownership information.
However, the true crux of this legislation is that it prohibits States or corporate formation agents from knowingly failing to obtain or maintain credible, legible, and updated beneficial ownership information, including any required identifying photographs. The federal government will be able to require this from any state receiving funds from the Department of Homeland Security even though corporate formation has traditionally been a matter of state law.
States must be in full compliance with the requirements of this law no later than 2014. They must implement an incorporation system that follows specific guidelines “to protect the security of the United States from corporations and limited liability companies with hidden owners.”
In addition to any civil or criminal penalties that may be imposed by a State, any person who violates the requirements of this legislation can be fined up to $10,000 by the United States and imprisoned for up to 3 years. Thus the federal government continues to impose upon U.S. persons more regulations and criminal statutes by leveraging the U.S. economy in the name of national security and transparency. Now, when forming corporations or LLCs U.S. persons must be wary of significant federal requirements (with the risk of imprisonment) in an area of law that has traditionally been left to the states.
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.
Tax Evasion and Filing a False Tax Return – The Government’s Back-up Plans
Previously in this blog we discussed federal offenses such as money laundering, bulk cash smuggling, unlicensed money transmitting businesses, and smurfing. These are all serious offenses in their own right; offenses that can send someone to prison for up to 20 years. But as is the case in many financial crimes there are two offenses related to all the above that the goverment can additionally charge someone of at its own discretion. They are tax evasion and filing a false tax return.
Although these tax crimes are separate and distinct from the other financial crimes mentioned, the conduct of the underlying financial offense often overlaps and quite organically evolves into a subsequent tax crime. For example, someone who launders money, smuggles cash, or structures payments isn’t likely to truthfully report this illicit income in their tax returns. But let’s take a closer look at the offenses and understand why the government can convict someone of the tax offenses even if it cannot convict the person for the underlying financial crimes that originally motivated its investigation.
Tax evasion, 26 U.S.C. 7201, is the more serious of the two tax crimes because it carries the harshest penalties. An individual defendant can be charged with a separate tax evasion charge for every year the defendant evaded taxes. For each tax evasion charge the defendant faces a maximum penalty of 5 years and a $100,000 fine. For corporate defendants the fine could be as steep as $500,000 for each offense.
There does not need to be a filing or a false statement to convict someone of tax evasion. All the government must do is demonstrate beyond a reasonable doubt that the defendant (1) underpaid taxes; (2) engaged in an affirmative act of evasion or attempt to evade; and (3) acted willfully. So even if the government doesn’t catch a defendant smuggling cash out of the country it can still charge him with tax evasion if it later finds out that the money was put into an overseas bank account with the intent of evading tax liabilities.
Filing a false tax return, 26 U.S.C. 7206, is very similar to the offenses of false statements and perjury. Each individual ‘false’ filing can be charged as a separate offense and an individual defendant can face prison sentences as lengthy as 3 years and a $100,000 fine per offense. Corporate defendants can be fined as much as $500,000 per offense.
For the government to successfully prosecute someone under this offense they must prove beyond a reasonable doubt that the defendant (1) signed the tax return or related document; (2) signed under penalty of perjury; (3) the return or related document was in fact false; (4) the falsity was material; and (5) the defendant acted willfully. Most people file their taxes but probably don’t report illicit funds in their returns. By under-reporting or concealing material facts about the sources of income may subject a defendant to the provisions of this statute. For example, a defendant that fails to accurately mention in his return the funds that he received from overseas because they were under the $10,000 reporting requirement may never be investigated for a structured transaction offense but could very well be investigated for filing a false tax return. The government may not be able to prove that the underlying transaction was intended to evade a reporting requirement; but the government knows the money exists in the defendant’s account and that it is unaccounted for in the return.
It is evident that the government has plenty of tools in its kit when it suspects someone of committing a financial crime. With the ever growing link between global terrorism and financial crime it would be unwise to expect the government to withold from using any of its tools to prosecute people.
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.
Why is News Corp. Lawyering Up for a Potential FCPA Investigation?
The scandal involving News Corp. rocked both the U.K. and U.S. news media and political scenes. Commonly referred to as “Hackgate,” allegations against News Corp. range from hacking into private voicemails of victims of murder and terrorist attacks to bribing high level officials from police and government agencies. What has also become apparent is that News Corp. is anticipating an even further fall out from this scandal. Reports are in that News Corp. has hired some very expensive attorneys with expertise in Foreign Corrupt Practices Act (FCPA) investigations and litigation.
Although some may argue that the FCPA’s anti-bribery provisions only forbids an American corporation from making payments to a foreign official in order to help the company obtain or retain government contracts, nothing in the FCPA actually limits the statute’s reach in such a way. And although it is true that the statute is not a general foreign bribery statute, the statute is aimed at the problem of American companies buying business overseas.
So why is News Corp. so worried about an FCPA violation? News Corp. was allegedly bribing the police with the motivation that its tabloid magazine would have an inside scoop on lucrative newstories in order to sell more papers. Thus it seems, News Corp.’s conduct satisfies the literal requirements of the FCPA.
The FCPA is generally divided into two broad categories of offenses, the anti-bribery provisions and the accounting provisions. Although News Corp.’s conduct seems to implicate both provisions of the FCPA, this post will only discuss the anti-bribery provisions.
First, News Corp. is a person subject to U.S. jurisdiction because it is an entity traded and listed in the U.S. Under the FCPA domestic concerns and U.S. parent corporations may be held liable for the acts of foreign subsidiaries where they authorized, directed, or controlled the activity in questions. So it does not really matter that News Corp.’s U.K. subsidiary, New of the World, was the actual entity making the bribes so long as News Corp. authorized, directed, or controlled the activity in question. Determining whether News Corp. authorized, directed, or controlled the activity in question will likely be subject to heavy opposition by News Corp. throughout the course of the investigation.
The payments made must also have a corrupt intent, and the payment must be intended to induce the recipient to misuse his or her official position to direct business wrongfully to the payer or to any other person. The Justice Department have broadly construed the FCPA to prohibit any corrupt payment intended to influence any act or decision of a foreign official. Should the allegations against News Corp. prove true, payments paid to police officials to hack into private voicemails would surely satisfy the corrupt intent because they were paid with the intent to influence the officer to give News Corp. access to potentially lucrative voicemails of newsworthy individuals. It isn’t likely that these payments will be excepted from the FCPA as “facilitating payments for routine governmental action.” Such routine payments tend to be limiting for things such as permits, licensing, phone, mail pick-up etc.
The FCPA also requires payment. Technically, payment includes actually paying but it also includes offering or promising to pay money or anything of value. Should the allegations against News Corp. prove true, satisfying the payment requirement will not challenge the Department of Justice.
It must also be proven that the recipient of a payment be a “foreign official.” The FCPA defines foreign official as any officer or employee of a foreign government, a public international organization, or any agency therof. The allegations against News Corp. involve bribing British police officers for access to private voicemail accounts of newsworthy individuals. Police officials of a foreign government clearly qualify as foreign government officials.
As a person subject to U.S. jurisdiction, News Corp. cannot make corrupt payments to foreign police officers inducing them to hack into the voicemails of newsworthy individuals with the intent of selling more papers without violating the FCPA. Thus it seems that News Corp.’s conduct meets the technical requirements of the FCPA statute. They are lawyering up accordingly.
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.
Money Laundering: Understanding 18 U.S.C. 1956 and 1957
Congress enacted the principal money laundering statutes in 1986. 18 U.S.C. 1956 and 1957 criminalize financial and monetary transactions with proceeds of underlying criminal activity. These statutes make money laundering a crime in and of itself. Thus, not only can someone be charged with the underlying offense that initially taints the funds, they can also be charged with money laundering if they use (or attempt to use) the proceeds derived from their criminal activity in ways sanctioned by the money laundering statutes.
Although initially enacted as a means of countering narcotics trafficking activities, the money laundering statutes are now applied to all kinds of kinds of white collar or national security related offenses. For example, these statutes can be invoked when the underlying criminal activity is fraud, sanctions violations, tax evasion, etc. Any time money is derived, earned or otherwise possessed from some specified unlawful activity, it is considered dirty and the person possessing such funds is at risk of also being a money launderer. This is significant because money laundering carries a 20 year maximum sentence, a sentence significantly higher than most white collar or national security related offenses.
Although sections 1956 and 1957 are related, they differ in some very important ways. Under section 1956 a federal prosecutor must prove that: (1) the defendant conducted or attempted to conduct a financial transaction; (2) the defendant knew that the financial transaction involved the proceeds of some type of unlawful activity; (3) the funds were in fact proceeds from unlawful activity; and (4) the defendant intended to “promote” criminal activities, “conceal” the funds, avoid currency transaction reporting laws, or commit tax fraud. [Concealment money laundering makes it an offense to make "dirty" money look "clean" or that attempts to hide the money from the government in any way. Promotion money laundering criminalizes those who use the proceeds of their criminal activity to further or promote their criminal activity].
Under section 1957 a federal prosecutor must prove that: (1) the defendant engaged or attempted to engage in a monetary transaction; (2) the monetary transaction was of a value greater than $10,000; (3) the transaction derived from criminal activity; (4) the transaction either took place in the U.S. or the defendant is a U.S. person; and (5) the defendant knew that the property was criminally derived.
One critical distinction between the two statutes is the conduct being targeted. 1956 targets “financial transactions,” while 1957 targets “monetary transactions.” Financial transactions includes a broad range of financial dealings that affect interstate commerce. The term encompasses almost any deal, like bank transactions, gifts, purchases and other transfers of money and property. 1957 accomplishes its goal primarily by prohibiting “dirty” money from entering the financial system through monetary transactions (i.e. deposits, withdrawals, etc.) with financial institutions (i.e. banks). Thus the goal of 1956 is prohibiting the actual “laundering” of “dirty” money whereas 1957 is concerned with keeping the financial system clean by keeping “dirty” money out.
Another key distinction is that 1956 has no specified minimum value for the financial transactions to be subject to the statute. Thus, even the most miniscule financial transaction can subject someone to criminal prosecution under 1956. Quite by design, the statute broadly covers most everyday transactions and includes transactions of any value so long as the requisite intent is present. On the other hand, Section 1957 mirrors currency reporting laws and requires the monetary transaction to be worth at least $10,000.
Both statutes require the government to prove that the defendant knew the funds were criminally derived, but does not require the government to prove that the defendant knew the specific criminal activity underlying the transaction. Therefore, as long as the government can prove beyond a reasonable doubt that the defendant knew the funds he was transacting with were likley derived from some prohibited conduct, he can be liable under either money laundering statute. Willful ignorance is not a defense to this intent requirement. Thus, the defendant need not be involved in the criminal activity himself, let alone know what criminal acts were specifically undertaken to derive the funds, to be liable in these cases.
It is apparent that these statutes broadly apply to many people in many situations. Most of these situations would seem more economic in nature, rather than criminal. Bank tellers, traders, merchants, retailers, etc. are at risk and should understand these statutes because they directly relate to their lawful businesses. Thus people should be mindful of money transfers, purchases or transactions by performing some level of due diligence to ensure the funds are not derived from criminal activity. Further, people conducting trade or transactions on an international level should be mindful of the various economic sanctions programs, export/import laws, etc. in order to minimize their instances of possessing “dirty” money. In other words: know where the money is coming from and decline to work with those who cannot give you adequate assurances, even if those people are your customers, friends, or family.
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.
Evading currency reporting requirements? Immigration and Customs Enforcement has a Bulk Cash Smuggling Center for that.
The U.S. government has a plethora of criminal statutes designed to curb the illicit transfer of funds and the flow of money in the underground economy. Federal law enforcement officers can investigate unlicensed money transmitting businesses (i.e. hawala) pursuant to 18 U.S.C. 1960, ensure compliance with reporting requirements in 31 U.S.C. 5316, investigate structured transfers (or “smurfing”) subject to 31 U.S.C. 5324, investigate RICO related foreign travel in 18 U.S.C. 1952, and intercept bulk cash smuggling pursuant to 31 U.S.C. 5332. These are in addition to the anti-money laundering and tax evasion statutes also found in the U.S. code.
Law enforcement officers from the FBI, Customs and Border Protection, Homeland Security Investigations and Immigration and Customs Enforcement rely on these authorities to, either directly or indirectly, disrupt and dismantle criminal networks that move bulk cash. Although you may not consider yourself an associate of a criminal network, you are still at risk of being criminally prosecuted for technical violations of these statutes.
At least since 9/11 and the USAPATRIOT Act the U.S. has identified the link between illicit funds, criminal enterprises, and terrorist organizations that endanger American national security. To curb these threats Congress has unapologetically empowered the executive branch to shine a light on funds transfers by either targeting institutions or individuals that facilitate money transfers or targeting the transfers themselves when they are worth more than $10,000 USD. From the U.S. government’s perspective, if everyone with legitimate funds complied with its financial laws, then the only funds left to be transferred outside the law would be the ones derived from illicit activities. Therefore it is imperative for any individuals looking to move around money to fully comply with Treasury’s reporting requirements and to utilize only licensed money transmitters, in addition to satisfying any tax liabilities. Merely paying your taxes will not exonerate you from violations of the financial criminal statutes listed above.
As if the federal government didn’t have enough assistance from the authority granted to it by Congress, ICE provides a law enforcement resource known as the Bulk Cash Smuggling Center (BCSC). The BCSC provides real-time tactical intelligence, investigative support and expertise to federal, state, tribal, local, and foreign law enforcement authorities. This center is available to law enforcement officers 24-hours a day so that they always have access to financial investigative expertise that will help them better follow the money trail, seize and forfeit criminal proceeds. In addition to using K-9 units to identify large amounts of cash, BCSC has awarded government contracts to technology firms to research and develop nonintrusive technology that can more accurately identify large amounts of U.S dollars, Canadian dollars, and Euros. These efforts have recently made enforcement more effective than ever. In 2010 alone 203 individuals were arrested and over $101 million USD was seized. Many of the offenses can lead to sentences that could be as severe as several years in prison.
So please, be mindful of these laws the next time you need to transport money internationally between family members or friends. There is no law limiting the amount of money you can move, so long as you follow the rules associated with moving it.
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.
“Operation Stolen Dreams” & The Financial Fraud Enforcement Task Force Continues to Target Large Numbers of Mortgage Lenders
The Justice Department announced on July 6, 2011 the unsealing of a criminal information, charging four defendants – Louis Gendason, 42, of Delray Beach, Fla.; Kimberly Mackey, 46, of Pittsburgh; John Incandela, 24, and Marcos Echevarria, 29, both of Palm Beach, Fla. – with conspiracy to commit wire fraud involving a nation-wide reverse mortgage scam that defrauded elderly borrowers, financial institutions and the Department of Housing and Urban Development (HUD). A reverse mortgage allows borrowers, who are at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit. Three of the defendants made their initial appearances at the federal courthouse in Fort Lauderdale, Fla., earlier today. If convicted, the defendants each face a statutory maximum term of up to 30 years in prison and a fine of up to $1 million. These charges coincide with the one-year anniversary of “Operation Stolen Dreams,” the department’s anti-mortgage fraud enforcement initiative announced by Attorney General Eric Holder last June.
These latest charges demonstrate the department’s continued commitment to the identification and eradication of mortgage fraud. The scheme charged today contains many of the characteristics common to mortgage fraud around the country. The information charges Louis Gendason, John Incandela and Marcos Echevarria with using a Florida-based loan modification business known as Lower My Debts.com LLC as a front to identify elderly borrowers who were financially-vulnerable. They are alleged to have in their capacity as loan officers at 1st Continental Mortgage LLC solicited borrowers to refinance their existing mortgages with a reverse mortgage loan financed by Genworth Financial Home Equity Access Inc. To induce Genworth and HUD to fund and insure the reverse mortgage loans, the defendants allegedly changed the unwitting borrowers’ real estate appraisal reports to fraudulently represent equity in the properties. The information alleges that Gendason, Incandela and Echevarria originated fraudulent loans on properties located in seven different states between May 2009 and November 2010 exceeding $2.5 million.
As a further part of the charged conspiracy, a fourth defendant, Kimberly Mackey, a licensed title agent and proprietor of the Pittsburgh title agency Real Estate One Land Services Inc., fraudulently closed the Genworth loans by failing to pay off the seniors’ existing liens. Instead, Mackey wired nearly $1 million in Genworth loan proceeds to the business checking account for Lower My Debts.com. She conspired to conceal the fraudulent loan closings from financial institutions by preparing written settlement documents which falsely represented that the borrowers’ existing mortgages had, in fact, been paid off. In some instances, after Mackey wired the loan proceeds to bank accounts in Florida controlled by her co-conspirators, she is alleged to have assisted them with defrauding the banks holding the borrowers’ first mortgages by negotiating fake short sales. This was designed to induce these banks to release their valid liens on the seniors’ properties at a fraction of their existing loan balance. All of the defendants are accused of pocketing the illegally-obtained loan proceeds.
Initiated in June 2010, Operation Stolen Dreams targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud. The operation was organized by the Mortgage Fraud Working Group of President Obama’s interagency Financial Fraud Enforcement Task Force, which was established to lead an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The President’s Financial Fraud Enforcement Task Force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. Operation Stolen Dreams targeted 1,517 criminal defendants nationwide, included 525 arrests, and involved an estimated loss of more than $3 billion. The operation has also resulted in 191 civil enforcement actions and the recovery of more than $196 million.
Needless to say, the federal government’s various enforcement agencies continue to work together to investigate fraud and find reasons to explain the economic collapse still plaguing the nation. A network of agencies as broad and well financed as the Fincancial Fraud Enforcement Task Force means that too many individuals will have their economic activities scrutinized. Thus, early intervention by an experienced federal defense attorney can mean the difference between an indictment and a dropped charge.
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.
