Thursday, February 25, 2021

EU Doesn’t Prosecute for Money Laundering, Financing of Terrorism and Corruption

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A Different Style: the U.S. Approach

In recent years, the U.S. Department of Justice (“DOJ”) has aggressively prosecuted foreign defendants for alleged international money laundering and corruption. The following examples illustrate this approach, which tends to target foreign individuals committing foreign crimes that have an alleged effect on the U.S. financial system.  It is hardly a comprehensive list.

  • In June 2019, a grand jury in the Southern District of Florida returned an indictment against two former Venezuelan officials who headed the country’s energy department and state-owned electricity company, Corporacion Electrica Nacional, S.A. The indictment, which we have blogged about here, charged the officials with seven counts of money laundering and one count of money-laundering conspiracy arising from their alleged receipt of bribes and kickbacks, including wire transfers from a bank in the Southern District of Florida.
  • On March 29, 2019, the DOJ charged Aleksandr Musienko, a Ukrainian national, with one count of money laundering conspiracy and two counts of money laundering (among other charges). Musienko purportedly partnered with overseas cybercriminals who hacked into and stole funds from online bank accounts belonging to a large number of individual and corporate victims in the U.S. Musienko employed a network of “money mules” based in the U.S. to assist his cybercriminal partners in transferring stolen funds outside of the country. He directed his “money mules” to use their own bank accounts to receive and then transfer proceeds from the compromised bank accounts overseas. As alleged in the indictment, Musienko’s operation laundered at least $2.8 million in stolen funds from 2009 to 2012.
  • The DOJ in December 2018 brought charges under seal against Chinese technology giant Huawei Technologies and its chief financial officer, Meng Wanzhou, ranging from money laundering to bank fraud and obstruction of justice. Certain banks were reportedly misled by Huawei into funneling illicit payments from Iran. Huawei purportedly used a small Hong Kong-based technology company as an intermediary to channel payments between Huawei and Iran. At the request of U.S. authorities, Wanzhou was arrested during a layover in Vancouver on December 1, 2018. This unusual case has ongoing repercussions, both legal and diplomatic.
  • On December 5, 2018, a federal jury in New York City convicted Chi Ping Patrick Ho, based in Hong Kong, of international money laundering and conspiracy to commit international money laundering (in addition to other charges). Ho headed a nongovernmental organization based in Hong Kong and Arlington, Virginia, the China Energy Fund Committee. Among other claims, the DOJ alleged that Ho caused a $500,000 bribe to be paid, via wires transmitted through New York, to government officials in Uganda in an effort to secure unfair business advantages on future projects in the country. Ho was sentenced to three years in prison for his crimes.
  • Also in December 2018, the U.S. Attorney’s Office for the Southern District of New York unsealed an indictment charging a lawyer, asset manager, and accountant — along with their client – with an alleged tax evasion scheme arising out of the international Panama Papers scandal. Notably, the indictment included one count of conspiracy to launder money that relied on the “international” money laundering provision which, as we have blogged, does not require that the relevant financial transactions involve the proceeds of underlying criminality – so long as the transactions are designed to promote a criminal scheme.
  • One month earlier, in November 2018, Alejandro Andrade Cedeno, a Venezuelan citizen residing in Florida and the former Venezuelan national treasurer, was sentenced to 10 years in prison after pleading guilty the previous year to one count of conspiracy to commit money laundering. As part of his guilty plea, Andrade admitted to receiving over $1 billion in bribes from co-conspirator Raul Gorrin Belisario and other co-conspirators in exchange for selecting them – in his official capacity as national treasurer – to conduct currency exchange transactions at favorable rates for the Venezuelan government. As part of his plea agreement, Andrade agreed to forfeit $1 billion and all of the assets implicated by the scheme, including real estate, vehicles, horses, watches, aircraft and bank accounts.

For better or for worse, many of these prosecutions involve primarily or completely foreign conduct by non-U.S. actors. That is, sometimes none of the defendants are American, and sometimes the underlying criminal conduct occurs entirely abroad. The jurisdictional hooks for U.S. prosecutors and courts, however tenuous, are often financial transactions incidental to the primary conduct or laundering activity, typically occurring through transfers involving correspondent bank accounts in New York. More substantially, sometimes the jurisdictional hook involves the use of dirty money earned abroad to conduct real estate transactions in New York, Miami or other high-end markets. Although it is impossible to know with precision whether or how much these prosecutions truly deter future bad actors from looking to the U.S. financial system to launder their money, it is hard to conclude that they have no effect whatsoever.

In theory, at least, a focus on individual prosecutions has become a priority for the DOJ. In September 2015, the DOJ released its “Yates Memorandum,” which announced its priority in seeking individual accountability for corporate misconduct. As the DOJ explained, “[o]ne of the most effective ways to combat corporate misconduct is by seeking accountability from the individuals who perpetrated the wrongdoing.” Although this principle is easy to state, and seems intuitively correct, the U.S. arguably has not always followed its own advice, as suggested by the relative dearth of recent prosecutions of U.S. executives and other individuals involved in financial crime.

However, the U.S. does not appear to be alone in its approach. Certain Asian countries appear more than willing to prosecute individuals, including foreigners allegedly committing financial crimes which affect the financial system of the home country. For example, Malaysia recently prosecuted 17 current and former Goldman Sachs executives arising from their role in raising $6.5 billion from 2012 – 2013 for IMDB, the Malaysian sovereign wealth fund. According to Malaysian authorities, fund officials and the former Malaysian prime minister, Najib Razak, looted $4.5 billion from the fund. The DOJ is also investigating the bank for its role in the fund.

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