This Week in AML

Interesting Announcements from DOJ, Other Agencies, and Interpol

The US Departments of Commerce, Treasury, and Justice recently updated their voluntary self-disclosure policies. The DOJ also announced the sentencing in a case for conspiring to violate Iranian sanctions and an indictment for a fraudulent charitable contribution tax scheme. In Europe, Interpol announced that it disrupted a transnational migrant smuggling network resulting in 62 arrests. John and Elliot discuss these announcements in a busy week in the financial crime prevention community.



Interesting Announcements from DOJ, Other Agencies, and Interpol - TRANSCRIPT

Elliot Berman: Hi, John. How are you today?

John Byrne: I'm good, Elliot. What's going on?

Elliot Berman: Saw a bunch of things this week. A couple announcements from the DOJ about either indictments or a sentencing. And an announcement about voluntary self disclosure which I found interesting that they took the time to pull from across three departments Treasury, Justice, and Commerce about how voluntary self disclosure, mostly in the sanctions or sanctions related space. How that could impact the outcome of an investigation or a review by one of the agencies.

John Byrne: Yeah, I think going back to the one you mentioned on voluntary self disclosure. It's probably the last press statement from Andrea Gacki as OFAC director, because, as we've mentioned before, she's moving over to FinCEN, I think, August 1st.

One of the things in the press release about self disclosure besides the fact that helps at any sort of enforcement is their focus that it underscores the importance of a robust and effective compliance program. We're certainly used to that in the financial sector that's important to have.

This obviously is a broader coverage, as we know, sanctions covers everybody in every corporation, but making it clear that if you discover a potential violation, the company must promptly disclose and remediate, and then that would enable you to be eligible for significant mitigation. So that's always an important way to go. So the full compliance note is available on all their websites.

The other thing that's jumped out at me besides yet another enforcement or prosecution is the indictment of this Florida attorney who created a fraudulent charitable contribution tax scheme Which is just it's so awful. He earned over $10 million. He worked with people to advise them on tax shelters. Created an illegal tax shelter. This is an area where it's so important that IRS have their resources needed to, investigate and refer cases like this. But every time I see something where charities are being used, I go back to my other passion. And that's how humanitarian charities, because they're quote considered high risk by many. Get caught up in this de risking issue that we've talked about from time to time.

But this is just another example, that again, this guy helped clients falsely claim charitable tax deductions, and the good news is it was discovered. Again, almost $10 million. Obviously, the case was done between the Justice Department's Tax Division and IRS-CI. And it's an allegation, doesn't mean that individual is guilty. But we will wait and see what happens with that. But I thought that was important to continue to talk to folks as you deal with tax related issues. How important it is that we get this right?

Elliot Berman: One of the things that was caught my eye in here is his activities started in 2013. So here we are 10 years out. And the Justice Department and the IRS sought several injunctions, they demanded document production and he was consistent, according to the press release related to the indictment. He falsified records and it didn't bother him to hand them to the government as well as anybody else who he had to produce documents to.

Very interesting, very convoluted, and pretty clear that the $10 million that he allegedly earned went to those really important things like very expensive cars. It says in here he bought a multi-million dollar estate and luxury, and a luxury vehicle collection that included Lamborghinis, Rolls Royces, Mercedes Benzes, a Bentley, and a Ferrari.

You'll notice that three of those were plurals. So one Benz wasn't enough. One Lamborghini wasn't enough. So the other thing that was interesting in the fact pattern is he falsely created the charities as well. You got to give him credit. It was end-to-end service to his tax clients.

John Byrne: Exactly. And the other one that you flagged was here in my backyard. An individual from McLean, Virginia is sentenced to prison for violating Iranian sanctions. And this is one that went on also for a number of years. One of the conspiracies went from 2018 to 2020. Another one 2013 to 2017.

Bottom line was this individual ran a number of businesses. Some were in UAE and others from Iran under the name the FSR Network. So he pleaded guilty. He's going to forfeit $2.8 million. And he's going to spend 41 months in prison and three years of supervised release after that.

But the key point is that this person admitted he knew, and he was a U. S. citizen, that he was engaging in businesses with Iranian entities without first obtaining a license or permission from OFAC. He knew that was prohibited. And he also knew it was illegal to engage in transactions intended to evade Iranian sanctions that related to good services of Iranian origin or export.

Again, took a while to get this to sentencing. But another example of the importance of following sanctions, but also that the Justice Department and other agencies are looking carefully at those that try to circumvent all of this.

Elliot Berman: The 1st conspiracy, the 2013 to 2017 one involved illicit shipments of petrochemicals to and from Iran. And he used -- wait for it -- a front company called East and West Shipping, that was in Panama. Which coming all the way back to one of our other regular topics, which is beneficial ownership, transparency.

There was one other thing that you pointed out, and I know these were all domestic, but there was a Interpol was involved in helping disrupt a transnational migrant smuggling network. There were, 45 million Euros of illicit gains. There were 62 arrests and this involved smuggling people from Cuba ultimately to Spain through a complex network of activity that moved through Greece and Serbia.

And each of these people apparently were charged 9,000 Euros, which is a little less than $10,000. But there were over 5,000 of them. It wasn't clear why these people wanted to get to Spain. But it was a circuitous and expensive trip. That was clearly illegal.

John Byrne: Right. Eighteen pieces of real estate, 133 vehicles were seized, 144 bank accounts frozen. A major event there. So Interpol another obviously international organization that bears watching.

Before we jump off, I do want to highlight something that's going on as we're recording the House Financial Services Committee is going through some major markups of a number of legislative proposals.

Some designed to probably get in the National Defense Authorization Act, that omnibus bill that in the past, as we know from AMLA has been a place where other often unrelated, but other pieces of legislation get attached. And the chairman McHenry has Patrick McKenna from North Carolina, who was chairman this year.

He's got a bill on digital asset market structure. So they're are arguing about who should provide that oversight? But there's also a number of other bills that are being considered by the majority and the minority.

There's a Stop Fentanyl Money Laundering Act, which will be interesting to see from the subcommittee chair. There is a No Russia Agricultural Act, as you can guess what that's about. One on China support for the Taliban. So there's a whole host of national security bills as well as those related to digital assets.

We'll certainly report on the outputs next week because in August, the US Congress goes out for the whole month of August and early September for their quote break unquote. There'll be more to come in the Fall, but there'll be a number of things that we can look at and see the potential impact on our community. After this legislation moves, if in fact, it gets attached to broader legislation, or if it goes freestanding, which is also a possibility.

Elliot Berman: Lastly two things to remind folks of another episode of our AML conversations, the solution series has dropped. So there's more in there for you to listen to and get some insight into operational activities for your compliance program. And our August webinar, will be on AML compliance best practices. And we're putting together a great panel of experts to bring you insights into ways to take a look at your program and ideas against which you can benchmark your program and continue with your constant process improvement.

John Byrne: That sounds great. I'm going to be doing an interview on Friday with an expert in the antiquities space. Doing an interview on Monday on sanctions. So those will get recorded and posted in the future. . And as always, if you have an idea for a topic, a somebody we can interview if and you can offer up some suggestions, we'd love to hear from you. So send those to either Elliot and myself or send it to both of us. We'd love to produce additional content that you find valuable.

Elliot Berman: Have a great weekend, John, and I will talk to you next week.

John Byrne: Take care.

Elliot Berman: Bye bye.