This Week in AML

What Do a Retired FBI Agent and Real Estate Have in Common?

This week a retired senior FBI agent Charles McGonigal was arrested on charges of money laundering and violating US sanctions. Also this week, the Financial Crimes Enforcement Network (FinCEN) issued an alert on Potential U.S. Commercial Real Estate Investments by Sanctioned Russian Elites, Oligarchs, and Their Proxies. John and Elliot discuss the arrest and its implications for national security and look at the details of the alert including the typologies and red flags included in it. They also examine McGonigal’s relationship to a sanctioned Russian oligarch and efforts by other sanctioned oligarchs to us real estate transactions to hide and preserve their wealth.



What Do a Retired FBI Agent and Real Estate Have in Common?TRANSCRIPT

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

John Byrne: Good, Elliot. Appreciate the fact you ran the webinar today on human trafficking. Heard it went really well. Can get additional information on that. Why don't we just tell them how that's gonna happen.

Elliot Berman: For people who registered for the webinar there'll be a follow up email with some information related to some of the things that are being done by Polaris.

So we'll be pushing that out in an email either by the end of this week or the beginning of next week. And we urge people who are looking for information go to the Polaris website you'll find that they have a lot of good information, whether you're new to thinking about these difficult issues or you're learned, but trying to stay up to speed.

John Byrne: Oh, that sounds great.

A number of things this week, but to two that are somewhat connected in terms of Russia oligarchs. Yeah. The hiding of funds. We'll talk about the fence and alert in a minute, but we want to flag. For those that didn't see this, it got some press play, but for my money's not gotten enough.

And I guess we'll see as this plays out. But on Monday the FBI through the Justice Department and US attorney in DC announced that they are charging a retired FBI executive with a number of things, including concealing $225,000 in cash from a foreign former intelligence officer. Charles McGonigal was the FBI special agent in charge of the New York Field Office and more relevant he was head of Counterterrorism since 2016.

He was named in that position by Comey at the time, and he's been arrested on charges related to the receiving of cash. But also he concealed from the FBI a relationship he's had with an oligarch that's been sanctioned since or he concealed it since August, 2017, while he was still at the FBI.

So this is major. There's money laundering charges, the making of false statements. I've seen at least one account that said, given all the charges and obviously, you are innocent until proven guilty. But if these charges stay there could be as much as 75 years in prison. So the thing that jumps out at me besides the obvious, and that is working for an oligarch who's been sanctioned and so we're doing so much to, to deal with detecting and reporting sanctions.

That this individual, he was the one in charge of investigating the Trump Russia collusion, and he's connected to Paul Manafort, as everybody remembers, was pardoned by Trump, but also was his campaign manager who did it for no salary. And we don't have to speculate on why that occurred. So this is major, this really hurts unfortunately our partners at the FBI. But the fact that he was connected to D arispaska who again, was a sanctioned oligarch, is really not just disappointing, but it's a dramatic hit for oversight from the FBI. And we know our FBI partners do so many good things, but this is a problem.

Elliot Berman: Fully agree. There is a lot to unpack, although a retired agent, McGonagal, I think his name is Charlie McGonagal, has not yet been charged, or not yet had a, had his initial court appearance, right? As far as I know, he has been charged. . I think John, you met, you said he was in charge of the, New York field office. I think he was in charge of counter-terrorism at the New York.

John Byrne: No, he was No, he was special agent. They list him as special agent in charge of the New York Field office. That's what the press release says. But you're right, he was head of counter-terrorism. He was named that by Comey. But the press release does say so.

I'm not sure how this works. That's okay. But he did it while he was with the FBI and obviously after it and the money laundering charge. Very serious. You're right. He's been arrested. He's been charged but he hasn't had his day in court yet.

Elliot Berman: I think the key point here as you already pointed out is the importance of all of us paying attentions to sanctions. And something, and I don't mean to something simple. Doing work for an individual or an entity who is sanctioned is a violation, assuming it's a blanket sanction, is a violation of that sanction. And certainly this person should have known better. But it's a good reminder to all of us that sanctions are very broad and they touch all U S persons in terms of their reach.

John Byrne: Yeah. I've talked to a few law enforcement friends of ours, and they say that the thing that they have to figure out is how connected was he to others?

Because as, PBS pointed out last evening, he had a key role in very sensitive investigations that the Russian intelligence activities before, during, and after the 2016 election and Chinese efforts to shut down US spies. So with all of that, are you doing all this on your own? Did you have other, partners in crime as they say? I don't know. So all of that, we have to watch carefully. As I said I'm surprised the press isn't paying as much attention, but I guarantee there'll be more on this, if not hearings and oversight in the House and Senate going forward.

And we'll, we should watch that carefully. But people can look the DOJ press releases on their website on the FBI's website. The other thing that occurred just today as we're recording this, not directly attached to that but definitely relevant in terms of oligarchs, is a FinCENt alert on what they're calling potential commercial real estate investments by sanctioned Russian elites, oligarchs and others. And so this alert is the fourth one in the series. FinCEN has done a lot of these and it talks a lot about sanctions evaision issues and what are the risks and vulnerabilities in the commercial real estate market. So it's relevant because again, the Russian that he was working with was sanctioned as well and they were trying to evade those sanctions.

But I know they have a series of typologies in this alert as well as some red flags. Most are well known to our folks, but do you want to talk a little bit about that?

Elliot Berman: So most of the red flags in one way or another are transactions or activities where they relate in some way to a family member or an associate of one of the sanctioned elites, as that's defined in the release and I think they can be obvious, but on the other hand, it's a reminder that you have to scratch a little bit beyond the face of the transaction, which I know people in our community are very good at doing. But you can't take things at face value. The other thing that's interesting about this alert is when you put it in the overall context of FinCEN's approach as it relates to real estate. They did put out an advanced notice of proposed rulemaking about 13 months ago in December of 2021, asking a number of questions. And we've talked, you and I have talked about this and I wrote a blog post about it, asking a number of questions about how should real estate be brought more directly into the BSA compliance regime. To this point, they have not yet issued proposed regulations, but they have a number of geographic targeting orders in place that relate to real estate, and they have been renewing and broadening those throughout 2022. And would, I'd expect when they're up for renewal they will be renewed in 2023.

And the other thing that plays in here is, the rule that they recently issued about beneficial ownership. Because a lot of what's happening in the alert, a lot of the activity they're talking about, really comes back to do we know who owns what, and, what's the requirement and how do you move things around to avoid any requirements?

Clearly the alert is important. Tying these things together is important, but ultimately having FinCEN fill in some of the gaps and by publishing draft regulations in the real estate area and ultimately final regulations, and maybe going a little further than they did in the beneficial owner regulation. To bring all this stuff together.

John Byrne: So the tail end of the alert does remind filers besides the on how to file a SAR, that there's other relevant reporting requirements. So they go back and talk about Section 312 of the Patriot Act, about senior foreign political figures, so proper due diligence obligations for private banking accounts, which is relevant here. And then AML/CFT programs and correspondent account due diligence requirements. So there's a series of other obligations that you need to look at here as well. So all of that is connected. So again, the alert was issued on January 25th.

It's FinCEN FIN-2023. Alert 002. And it gives you SAR recommendations and what Elliot mentioned plus a few typolgies that you can add to your training tools.

Elliot Berman: We'll link to the alert in our posting on our website.

[00:09:15] John Byrne: We'll also link to the DOJ release, that's from Monday about the arrest. And then as I mentioned the key here is there's a lot more here. And I would expect there to be more going on in terms of investigations and we will see as a former FBI agent said to PBS, besides the fact that the oligarch is sanctioned, there's very significant connections that McGonigal had and so does his contact with Deripaska, his connections were not only to Russian intelligence, but to Putin himself. So I would expect there'd be more coming from here. And the other thing, I would just say at a very high level, there's no chance DOJ brings this if they don't have a lot going, there's no chance. This is too sensitive. Given what we've seen in the past they must have a lot more than was even in the indictment.

Elliot Berman: Yes. I expect that we may see press coverage pick up , with his court appearance and then afterward.

We've just seen the beginnings of this. John, I know you've got a, an exciting interview scheduled for yet this week that will appear on our website in the near future. Do you wanna talk about that?

John Byrne: Yeah. So Jim Lee great partner of the private sector of the financial AML sector. He's the chief of IRS-CI that everybody knows. He's been doing the rounds with the media all week and last week as well on the value proposition of BSA data, which we all know is so important and how it's important. So I'm going be talking to Jim tomorrow afternoon.

And I know that our our audience welcomes anytime we, we can hear from folks at the top of these agencies and what they're seeing and what they need. So that's coming up. I'm also doing one in a week or two with a recently retired enforcement lawyer from one of the banking agencies, who is now with a law firm and he's gonna share some war stories of cases he's worked, but also give us some recommendations regarding, proper AML compliance to avoid MRAs, and the like, so that, that'll be coming up in a few weeks as well.

Elliot Berman: And our next webinar is February 28th and it's on financial crime compliance at mid-size banks, tips and trends. And watch for your opportunity to register for that on our website and through our email list. And lastly, we want to remind you that in addition to This Week in AML and our other great content that we talk about each week, that we also offer great solutions to your financial crime compliance challenges.

So if you have questions or need advice, or are interested in those solutions, certainly reach out and we'll get you connected to the right person. John, you have a great week.

John Byrne: Take care, Elliot. Stay safe.

Elliot Berman: You too. Bye-bye.