WASHINGTON— In a ceremony held at the U.S. Department of the Treasury today, the Financial Crimes Enforcement Network (FinCEN) recognized the outstanding efforts of law enforcement agencies that successfully used Bank Secrecy Act (BSA) reporting in their criminal investigations. The BSA’s recordkeeping and reporting requirements help to create a financial trail that law enforcement agencies use to track criminals, their activities, and their assets. The FinCEN Director’s Law Enforcement Awards Program underscores the importance of a successful partnership between the financial industry that provides BSA information and law enforcement that utilizes it.
“Industry reporting under the BSA is critical to supporting law enforcement investigations that combat money laundering and other financial crimes,” said U.S. Treasury Secretary Steven T. Mnuchin. “Today we are recognizing the tireless efforts of law enforcement to combat financial crimes and thanking them for their partnership. We also appreciate our partnership with the new private sector as they identify and report suspicious activity.”
“FinCEN’s awards highlight how vital BSA information is in law enforcement, counterterrorism, and national security investigations, as we work to stop the flow of illicit money,” said Sigal Mandelker, Under Secretary of the Treasury’s Office of Terrorism and Financial Intelligence. “These awards highlight successful law enforcement actions that resulted from critical BSA information and the great value that financial institutions bring to these cases through their reporting of suspicious activity.”
“BSA data is one of the first lines of defense in our fight to keep our country, our communities, and our families safe,” said FinCEN Director Kenneth A. Blanco. “I am proud to confer these awards on our law enforcement partners to demonstrate how important the submission of this data is, and how it can be best utilized by true professionals. BSA information helps put together pieces of the puzzle we would not otherwise see.”
Representatives from financial industry trade groups, including The Clearing House Association, the Institute of International Bankers, the Independent Community Bankers of America, the American Bankers Association, and the Credit Union National Association, also assisted in the presentation of each award.
Since 2015, FinCEN has held the annual program to recognize law enforcement agencies that make effective use of financial institution reporting to successfully pursue and prosecute cases, and to demonstrate to the financial industry the value of its reporting under the BSA. With this year’s addition of a category recognizing state and local law enforcement, FinCEN’s annual program now includes seven award categories acknowledging achievements in combatting significant threats to the integrity of the financial system and the safety of our communities. The program is open to all Federal, state, local, and tribal law enforcement agencies. The 2018 award categories and award recipients are listed below.
SAR Review Team: Internal Revenue Service – Criminal Investigation (IRS-CI)
IRS-CI investigators initiated their case based on a review of financial data showing a pattern of unusual cash withdrawals by one subject from a single financial institution. Large deposits from the estate of a recently deceased individual funded the withdrawals. In addition to the withdrawals, the funds were also being electronically transferred to other individuals and accounts with no personal connection to the deceased, aside from being tenants in a home owned by the decedent. IRS-CI officials coordinated with the Toledo Police Department and determined that the initial subject was part of a larger criminal conspiracy to defraud the estate of the deceased individual of over $2 million.
Investigators uncovered a large volume of falsified documents executed by the conspirators, including a well-known local attorney, to liquidate the deceased individual’s accounts and cover up the conspiracy. The attorney falsely induced the local probate court to process fraudulent documents giving her control of the estate, rather than to the true heir.
IRS-CI officials executed search warrants based on the laundering of the criminal proceeds, and falsified documents submitted to the probate court. The warrants were successful in recovering nearly $500,000 in currency, a motor home, three vehicles, and four parcels of real estate. All four conspirators were indicted, arrested, and convicted of various money laundering, structuring, and conspiracy charges and sentenced to 24 to 111 months in prison. Additionally, over $2 million in restitution was ordered to be returned to the true heir of the estate.
Transnational Organized Crime: Drug Enforcement Administration (DEA)
Relying heavily on financial data and FinCEN’s investigative tools, DEA officials successfully helped dismantle two very lucrative Southern California and Tijuana-based money laundering organizations. These criminal groups utilized a complex network of cash couriers, accounts, shell companies, and investments throughout the United States and Latin America to launder drug proceeds for various Sinaloa Cartel-linked traffickers.
Over the course of their investigation, DEA investigators poured over a high volume of data to piece together the financial trail. Information obtained from a suspect involved in a bulk cash seizure in Chicago tied him to subjects that the agents were already investigating in southern California. Subsequent investigative efforts identified a group of nine individuals with ties to a locally based money laundering organization with an international nexus. Valuable information obtained through FinCEN resources, banks, and other investigative avenues provided the agents with the basis to implement several wire intercepts.
DEA officials coordinated their efforts with Homeland Security Investigations (HSI) officials after the wire intercepts revealed more information about the criminal activities of this organization. This coordination led to the inclusion of an additional criminal organization into the investigative efforts. The two organizations were separate, but associated through common individuals. A Tijuana-based attorney led one of the organizations under the guise of a property management company, receiving and depositing millions of dollars in illicit drug proceeds for the purported purpose of purchasing Mexican real estate. Investigators learned that this attorney had the assistance of a bank branch manager, who protected the organization’s accounts from scrutiny in exchange for a “commission.” The second organization was run in a similar fashion, under the guise of a grain company, and moved nearly $45,000 per day in illicit drug proceeds.
As a result of their efforts, investigators served over 50 search warrants in southern California. Arrest warrants were issued for 27 individuals, 20 of whom have been apprehended. Officials were able to seize millions of dollars in cash, real estate, and vehicles. DEA personnel also assisted the Mexican government with a parallel investigation into many of the same individuals. This assistance led to the freezing and seizure of additional high value accounts and Mexican financial institutions.
Transnational Security Threats: Federal Bureau of Investigation (FBI)
A unique combination of FBI agents, analysts, accountants, and Assistant U.S. Attorneys with expertise in money laundering, national security, counterintelligence, economics, and other disciplines led this investigation into North Korean sanctions violations. This team of investigators poured through mountains of financial data and utilized several FinCEN resources to enhance its investigation and develop the basis to obtain numerous search warrants. This effort led to the seizure and filing of a forfeiture complaint for the largest sum of North Korean funds in the history of the Department of Justice.
FBI investigators became aware of an elaborate network of front companies, which sanctioned North Korean entities used to purchase millions of dollars of gasoil from a Russian provider. The front companies then accessed the U.S. financial system on behalf of the North Korean entities, thereby evading U.S. sanctions. FBI officials identified transactions of this nature, and in coordination with Treasury’s Office of Foreign Assets Control (OFAC), were able to block these transactions and others, totaling nearly $7 million. The transaction data was compared to shipping records and, as a result of this analysis, the Department of Justice instituted a forfeiture action and civil money laundering penalty against two of the entities for $20 million.
FBI utilized numerous FinCEN resources, which resulted in critical information that became the basis for a money laundering penalty and development of forfeiture actions. This investigation led to a forfeiture action for nearly $7 million previously blocked by OFAC, the $20 million monetary penalty, and the addition of several entities to OFAC’s Designated Nationals and Blocked persons List (SDN list).
Cyber Threats: Internal Revenue Service – Criminal Investigation (IRS-CI)
This IRS-CI-led investigation began after a review of financial data revealed numerous unexplained cash withdrawals by an individual sourced with large wire transfers from an unknown corporation. IRS-CI officials, in coordination with other local, federal, and international law enforcement agencies, untangled a complicated web of cyber intrusion, black market transactions, and global money laundering.
The investigation’s primary subjects were four individuals involved in a scheme to reverse engineer a specific video game to fraudulently generate a large amount of the in-game currency used by legitimate online players to enhance their gaming experience. The subjects then sold the in-game currency to individuals around the world on the black market. The subjects employed software that bypassed the game’s security mechanisms and fooled the game’s servers into believing that millions of online games had been played in short periods, thus generating a high volume of in-game currency paid out to the subjects who controlled various accounts. Investigators with the video game publisher identified an unusually high volume of connection traffic from a particular IP subnet. This helped them identify which accounts were receiving the in-game currency and they determined that once a certain threshold of currency was generated by an online account, the currency was then transferred off the account.
Many of the payments to the subjects’ bank accounts were sent from multiple foreign-based accounts, which led investigators to seek further financial data. The information they were able to obtain through FinCEN resources was critical in untangling the money laundering scheme.
By the time search and seizure warrants were issued, the scheme had generated over $17 million in proceeds, which resulted in cash holdings, luxury real estate, high value bank accounts, and numerous high-end vehicles. These warrants were issued simultaneously with search warrants at multiple residences across the United States. This led to the forfeiture of $10 million in fraudulent proceeds. Three of the subjects pled guilty to conspiracy to commit fraud and related activity in connection with computers, and the fourth subject was found guilty of wire fraud and money laundering.
Significant Fraud: Immigration and Customs Enforcement – Homeland Security Investigations (HSI)
This HSI-led investigation identified a complex money laundering conspiracy in which India-based call center operators and U.S.-based facilitators worked together to launder 300 million USD (stolen from over 17,000 victims) into the U.S. banking system through an international hawala network. HSI investigators poured through massive amounts of financial data to help identify undiscovered accounts and transactions involving their subjects.
Investigators and attorneys from several federal, state, and local law enforcement agencies conducted an investigation into an international scheme to extort funds from U.S. residents. The investigation was triggered by complaints received from victims of fraud who received phone calls from individuals impersonating government officials. These individuals extorted payments by threatening arrest and deportation of the victims. Investigators were able to subpoena many of the banks sending and receiving such payments, which indicated that a significant portion of the funds was being used to fulfill hawala transactions for Indian and Iranian Americans. Subsequent reviews of financial data identified the individuals and businesses receiving the funds and outlined the movement of funds between subjects.
Investigators used information obtained from subpoenas in the production of the indictment documents, naming 56 individuals in the United States and India, as well as five India-based call centers. Twenty-four subjects in the United States were arrested across eight states, all of whom were convicted of conspiracy, money laundering, and various fraud crimes. Investigators also determined that none of the domestic subjects who conducted hawala operations were operating as a registered money services business (MSB).
Third-Party Money Launderers: Internal Revenue Service – Criminal Investigation (IRS-CI)
This investigation, led by the IRS-CI, was a multi-agency effort to combat Mexican kleptocracy, involving senior political figures and the illicit use of the U.S. financial system. Representatives from IRS-CI, DEA, HSI, FBI, and other federal, state, and local law enforcement agencies co-sponsored Organized Crime Drug Enforcement Task Force (OCDETF) investigations in order to jointly investigate this case. Financial data played a critical role in this investigation by initially bringing the criminal activity to the attention of investigators and identifying numerous co-conspirators and previously unidentified accounts and transactions from Mexico to the United States.
During the investigation, law enforcement officials learned that individuals were transferring large sums of money from Mexico into the United States. Investigators determined that the funds originated as bribe payments to government officials from Mexican drug cartels, the theft of Mexican government funds, and various contractor bribe schemes. Several Mexican government officials used their positions to send illegally gained funds through a series of shell companies in an attempt to conceal the nature of the funds. The officials included numerous former state Governors and lower-ranking associates and businessmen. The Mexican officials laundered their money through various accounts and transactions in the United States, including real estate and aircraft purchases. Investigators determined that two individuals set up several accounts and companies in Texas and sent approximately $50 million in wire transfers, which they subsequently used to purchase real estate in Texas or send through shell companies to accounts domiciled in Bermuda.
Investigators from the various law enforcement agencies used a high volume of financial data to trace the illicit funds’ movement. Investigators also utilized numerous FinCEN resources, which were critical in identifying accounts and transactions belonging to the subjects of the investigation.
As a result of this investigation, assets totaling over $80 million have been seized, including residential and commercial real estate, financial accounts, currency, gold coins, jewelry, vehicles, and aircraft. The subjects of this investigation have been charged with various financial crimes, including money laundering, bank fraud, wire fraud, operating unlicensed MSBs, loan fraud, racketeering, and others. Several of the targets have pled guilty and are awaiting sentencing, while others are awaiting extradition or remain fugitives.
State and Local Law Enforcement: Nassau County Police Department
Nassau County Police officials launched the investigation into their subject after becoming aware of a high volume of cash deposits into the subject’s account, followed by large international wire transfers to construction equipment companies located in Asia and Europe. Subsequent financial data provided investigators with invaluable information in pursuit of their subjects.
Investigators determined that on many occasions, financial institutions closed the account relationships with the subject based on his account activity, and the subject then simply moved his illicit activity to another bank. Nassau County PD officials determined that the subject maintained over 50 personal and business accounts with 9 different banks in the names of various shell companies, as well as his own name. Financial data indicated that the subject made over $9 million in cash deposits, nearly all of which was wired out of the country to the aforementioned international beneficiaries.
Investigators determined that the source of the bulk cash was a trade-based money laundering operation run by the owner of a construction equipment company out of Guyana. The subject would meet associates of the company owner at various locations in and around New York City to collect the cash ranging in amounts between $300,000 and $1.7 million. He would then receive instructions via text message from a co-conspirator indicating where to wire the funds.
Coordination with DEA officials led to the discovery that this was a trade-based money laundering scheme designed to launder the proceeds of illegal narcotics transactions. Numerous sources indicated that the individuals conducting the cash drops to the primary subject were members of a drug trafficking organization out of New York, who received cocaine smuggled via frozen fish from Guyana into the United States.
The owner of the Guyana-based construction equipment company and his co-conspirators were arrested and charged with money laundering. The nearly 2-year investigation included complex financial analysis, physical surveillance, a pen-register, wire taps, and interviews, and resulted in the indictment of two of the subject’s shell corporations and fines totaling a $8.5 million.
First appeared on fincen.gov
Felix Shipkevich is a principal of Shipkevich PLLC. His practice focuses on providing counsel to FinTech and financial services firms, including financial technology, payments and emerging digital currency space. He has spoken at national panels in the money transmitter space and payments industry. Mr. Shipkevich’s payments practice has brought him into contact with money transmitter registration requirements in all fifty U.S. States.
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