Page 11 - White-Collar Crime

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White-Collar Crime | MONDAY, SEPTEMBER 29, 2014 | S11

‘Laler’
Bank Secrecy Act
a inancial institution must know of its legal
These regulations were the only ones implemented by
Treasury prior to the PATRIOT Act of 2001.
13. Pub. L. No. 107-56, Title III, §352, 115 Stat. 272, at obligation and intentionally violate it. 26
Yet,
322(2001).
14. Under the PATRIOT Act, Treasury did have the determining when conduct becomes “willful”
« Continued from page S7
« Continued from page S5
authority to and did, in fact, provide temporary exemp- and subject to criminal action, as opposed to
Some courts have already started conducting by its recent actions against Standard Char- tions to the AML program requirements for certain inan- something the inancial institution just “missed”
inquiries of defendants who decline a plea tered Bank.23 In addition, the non-bank federal cial institutions. However, Treasury has since issued reg- and therefore limited to potential civil liability,
offer and proceed to trial, which mirrors the regulators have publicly stated that the non- ulations covering all inancial institutions listed in §1512.
is not always easy. As to the second feature
typical allocution that is conducted in con- bank institutions they regulate will be under 15. A slow ramp-up of criminal enforcement of a new statute is not unprecedented. The Foreign Corrupt Prac- of criminal enforcement actions to date, the
nection with the acceptance of a plea. While the microscope for BSA AML compliance. For tices Act for example was passed in 1977, yet it was not movement of dirty money through the inan-
the pre-trial inquiry cannot delve into the example, the Securities and Exchange Com- until the last 10 years where it has seen vigorous crimi- cial institution is not a statutory prerequisite
nal enforcement.
content of attorney-client privileged com- mission (SEC) announced its intention to be 16. Information, United States v. Broadway Nat’l Bank, for prosecution. In other words, nothing in the
munications, it can include (1) a recitation more active in the area of AML enforcement. No. 02-CR-1507, at ¶¶ 5-12 (S.D.N.Y. 2002).
17. During this period there were eight §5318(h) crimi- BSA states that AML programs are only willfully
from the prosecution regarding whether plea In an Oct. 10, 2013 speech, SEC Chair Mary nal actions. They are as follows: United States v. Broad- deicient if dirty money actually lows through
offers were extended, (2) questioning of the Jo White expressed the SEC’s commitment to way Nat’l Bank, No. 02-CR-1507 (S.D.N.Y. 2002); United the inancial institution. While it makes sense
defendant regarding the presentation of plea pursuing AML violations—either on their own States v. Bank Atl., No. 06-CR-60126 (S.D. Fla. 2006); from a jury appeal or public appearance per-
offers, (3) conirmation that the defendant or through referral to the Financial Industry United States v. Am. Express Bank Int’l, No. 07-CR-20602 spective that the DOJ has chosen to focus on
received advice of counsel in connection Regulatory Authority (FINRA). White stated (S.D.N.Y. 2007); United States v. Union Bank of Califor- nia, 07-CR-2566 (S.D. Cal. 2007); United States v. Sigue, those types of cases where the resulting harm
with the plea offers, (4) conirmation that that the SEC “will pursue even the smallest of No. 08-CR-54 (E.D. Mo. 2008); United States v. Pamrapo from such AML failures can be shown, there is
Sav. Bank, No. 10-CR-220 (D.N.J. 2010); United States v.
the defendant knowingly and voluntarily infractions.”24 Similar to casinos and banks, ABN Amro Bank N.V., No. 10-CR-124 (D.D.C. 2008); United no guarantee that the DOJ will continue to focus
rejected the plea offers, (5) conirmation that brokers and dealers registered with the SEC States v. Wachovia, No. 10-CR-20165 (S.D. Fla. 2010).
only on such cases in the future.
the defendant is satisied with the advice of are deemed “inancial institutions” under the 18. United States v. CommunityOne Bank, N.A., No. 11- CR-122 (W.D.N.C. 2011); United States v. HSBC Bank USA, While there are many lessons to be learned
counsel in connection with the consideration BSA and subject to all of its regulations.
N.A., No. 12-CR-763 (E.D.N.Y. 2012).
and questions still lingering from the recent
of plea offers, and (6) conirmation that the Likewise, the Financial Crimes Enforcement 19. United States v. MoneyGram Int’l, No. 12-CR-291 ramp-up in BSA criminal enforcement, the most
defendant knowingly and voluntarily chooses Network (FinCEN), the entity within the Trea- (M.D. Pa. 2012).
signiicant take-away is that inancial institu-
to go to trial and forgo the plea offers. This sury Department responsible for collecting all 20. United States v. AAA Cash Advance, No. 12-CR-559 United States v. G&A Check Cashingtions across the full spectrum of that deinition
type of allocution could be accomplished in BSA data and that has regulatory authority (C.D. Cal. 2012); , No. 12-CR-560 (C.D. Cal. 2012); United States v. Bargain must be aware of their risks, and be prepared
under 10 minutes on the eve of jury selection over all BSA covered entities, has been equally Island, No. 12-CR-396 (E.D.N.Y. 2012); United States v. Be-
lair Payroll Serv., No. 11-CR-591 (E.D.N.Y. 2011). Several to address their obligations under the BSA,
and could actually deter ineffective assistance vocal about stepped-up enforcement of the of the defendants received prison sentences in connec- including and in some ways most importantly,
of counsel claims that will continue to be iled BSA. At a recent conference hosted by the Inde- tion with these indictments.
21. Press Release, U.S. Dep’t of Justice, “Operator of evaluating what it will mean to have an effec-
in the wake of Laler.
pendent Armored Car Operators Association, Venetian Resort in Las Vegas Agrees to Return Over $47 tive AML program for its particular type of
While the legal community awaits guid- Jennifer Shasky Calvery, Director of FinCEN, Million After Receiving Money Under Suspicious Circum- business and inancial products offered.
ance from the Supreme Court on the myriad speciically noted that armored car services, stances,” Aug. 27, 2013, available at http://www.justice.
open questions left unanswered in Laler and depending upon their business model, may fall gov/usao/cac/Pressroom/2013/110.html.
•••••••••••••••••••••••••••••
its progeny, counsel must remain mindful of within the deinition of a inancial institution for 22. See FN 20-22 supra; United States v. Ocean Bank, No. 11-CR-20552 (S.D. Fla. 2011); United States v. H. Jack
the increased likelihood that advice during purposes of the BSA, and that FinCEN would be Miller, No. 13-CR-00445 (E.D. Pa. 2013); United States v. 1. Pub. L. No. 91-508, 84 Stat. 1114 (1970).
2. S. Rep. No. 91-1139, at 4 (1970).
plea negotiations will become the subject engaging with the armored car industry going J.P. Morgan Chase, N.V., No. 14-CR-0007 (S.D.N.Y. 2014).
3. Pub. L. No. 91-508, §221, 84 Stat. 1114, 1122 (1970).
23. Karen Freifeld, “Standard Chartered Nears Deal 4. Id. §203.
of evidentiary hearings, and of the speciic forward to ensure compliance with the BSA Over Compliance Failure: Source,” Reuters, Aug. 18, 2014, 5. Id. §§101-102.
aspects of counsel’s conduct that the courts and cooperation with law enforcement.25 This available at http://www.reuters.com/article/2014/08/18/ us-standardchartered-ine-idUSKBN0GI22L20140818.
6. Id. §205 (emphasis added).
7. Pub. L. No. 99-570, §1359(a)(1), 100 Stat. 3207, at 27
will rely on in the resolution of those issues.
focus should come as no surprise, as Shasky 24. Mary Jo White, Chair, SEC, “Remarks at the (1986).
•Calvery, a former federal prosecutor and for- Securities Enforcement Forum,” Oct. 9, 2013, avail- 8. See, e.g., 12 C.F.R. §326.8 (1987).
••••••••••••••••••••••••••••
mer Chief of the Asset Forfeiture and Money able at http://www.sec.gov/News/Speech/Detail/ 9. Pub. L. No. 102-550, 106 Stat. 3672 (1992).
1. 132 S. Ct. 1376 (2012).
Laundering Section (AFMLS) at the DOJ, was Speech/1370539872100#.U_KGTmNjsVo.
10. Id. §1517.
2. 132 S. Ct. 1399 (2012).
one of the main people responsible for creat- 25. Jennifer Shasky Calvery, Director, FinCEN, “Pre- pared Remarks of Jennifer Shasky Calvery” (May 18, 11. Id. at §1517(h); 1206 Stat. 4060.
12. In 1993, Treasury, through the [Financial Crimes
3. Laler, 132 S. Ct. at 1391 (J. Scalia, dissenting).
ing MLBIU within AFMLS.
2014), available at http://www.incen.gov/news_room/ Enforcement Network (FinCEN)], issued regulations
4. See Jed S. Rakoff, “Frye and Laler: Bearers of Mixed
speech/html/20140519.html.
requiring casinos to establish anti-money laundering
Messages,” 122 Yale L.J. Online 25 (2012).
26. United States v. Ratzlaf, 510 U.S. 135 (1994).
compliance programs that incorporated the four pillars.
5. Strickland v. Washington, 104 S. Ct. 2052, 2067
Implications for Financial Institutions
(1984).
6. See id. at 2064.
7. See Frye, 132 S. Ct. 1399; Laler, 132 S. Ct. 1376.
The DOJ’s aggressive criminal focus in this
8. See Frye, 132 S. Ct. at 1408.
area together with these regulatory initiatives,
9. See Laler, 132 S. Ct. at 1390-91.
demonstrate a multi-faceted offensive on AML
10. See id. at 1391.
non-compliance and enforcement of the BSA.
11. Id.
The risks to inancial institution clients are
12. 134 S. Ct. 10 (2013).
13. Id. at 14.
great. With increased enforcement comes
14. Id. at 17.
15. Id. at 18-20 (J. Sotomayor, concurring).
the potential for staggering ines and loss of
16. Id. (J. Sotomayor, concurring) (noting that “this
regulatory licenses. Given the breadth of the
case turns on [defendant]’s failure to present enough deinition of “inancial institution” under the
evidence”).
BSA and the previous lack of enforcement of
17. See Strickland, 104 S. Ct. at 2064.
18. See, e.g., Sawaf v. United States, No. 13-5620, 2014 the BSA in the non-bank inancial institution
U.S. App. LEXIS 12693, at *8 (6th Cir. June 30, 2014).
area, many businesses may not even realize
19. See, e.g., United States v. Frederick, 526 F. App’x 91, that they are covered by the BSA’s AML require-
93 (2d Cir. 2013); Cf., Foster v. United States, 735 F.3d 561, ments. A prime example is the challenge to Be sure to reserve your space in the upcoming
566-567 (7th Cir. 2013) (noting questionable nature of mobile payment applications in deciphering
Seventh Circuit position on requirement of objective evi-
dence pending the Supreme Court’s resolution of Burt).
20. See Frederick, 526 F. App’x at 93.
when they cross the line from a payment pro- Litigation
21. Laler, 132 S. Ct. at 1391
cessor (not subject to the BSA) to a money
22. Id.
service business (subject to the BSA and its
23. See, e.g., Johnson v. Uribe, 682 F.3d 1238, 1244 (9th
programmatic requirements). In addition,
Cir. 2012); United States v. Polatis, No. 2:10-CR-0364, 2013 private equity irms may acquire or invest in
U.S. Dist. LEXIS 39064, at *43-44 (D. Utah March 19, 2013); companies that are actually “inancial institu- Tabloid Pull-Out Sections
United States v. Wolfe, No. 2: 11-CR-33, 2012 U.S. Dist. LEXIS, at *46-47 (E.D. Tenn. May 31, 2012).
tions” under the BSA and are required to have
24. See, e.g., Jones v. United States, 504 F. App’x 405, an effective AML program, though they may Farrell McManus
408 (6th Cir. 2012); Soto-Lopez v. United States, Nos. please contact:
07-cr-3475-IEG, 10-cv-1852-IEG, 2012 U.S. Dist. LEXIS not be entirely cognizant of that fact.
212 457-9465
3134253, at *23 (S.D. Cal. Aug. 1, 2012).
The criminal enforcement actions to date
25. See, e.g., United States v. Love, No. 10 C 50285, 2012 have had two main features: The conduct was Phone:
U.S. Dist. LEXIS, at *24 (N.D. Ill. July 17, 2012).
26. No. 10-10137-EFM, 2012 U.S. Dist. LEXIS 80119, at willful, and the conduct involved dirty money. [email protected]
*7-8 (D. Kan. June 11, 2012).
However, only the willfulness element is neces-
27. 744 F.3d 44, 51-52 (2d Cir. 2014).
sary for a criminal prosecution. To be willful,