Page 4 - White Collar

S4 | MONDAY, FEBRUARY 10, 2014 | White-Collar Crime
| NYLJ.COM

BY JEFFREY ALBERTS

Commentators have widely cited S.A.C.
Capital’s $1.8 billion settlement as
an example of the recent increase in
enforcement actions targeting insider trad-
ing. However, it also is part of a less obvious

emerging trend: a surge in claims iled under
the federal civil money laundering statute.
The extent of this escalation is apparent from
the fact that over the past three years, the U.S.
Attorney’s Ofice in the Southern District of
New York (SDNY USAO) iled more civil money
laundering cases seeking penalties in excess
of $100 million than all U.S. Attorney’s Ofices
combined had iled in the preceding 25 years.
This upswing in civil money laundering
actions is partially due to an expansion in
prosecutors’ focus beyond banks. Banks are
the traditional targets of money laundering
investigations due to their role in the inan-

cial system. In recent civil money laundering
cases, however, the government has increas-
ingly used the civil money laundering statute
against entities outside the banking industry
and even against individuals. Federal pros-
ecutors clearly have recognized the power
of the civil money laundering statute as an
enforcement tool, and there is good reason to
think that their use of this statute will increase
in the future.

The Statute
18 U.S.C. §§1956(a) and 1957 set forth

the substantive federal money laundering
offenses and the criminal penalties for these
crimes. Section 1956(a) makes it a crime to
engage in certain financial transactions
involving proceeds of any crime identi-
ied in 1956(c)(7) as a speciied unlawful
activity (SUA). The inancial transactions
involving SUA proceeds that are criminal K
offenses under §1956(a) include transac- TOC
tions designed to conceal proceeds of an GS
SUA (“concealment money laundering”) BI
and transactions intended to promote an
SUA (“promotional money laundering”).1
Section 1956(a) also makes it a crime to The Rise of the Civil

engage in international transfers with the
intent to conceal SUA proceeds or to pro- Money Laundering Prosecution
mote an SUA, even if the transferred funds
are not themselves SUA proceeds (“inter-
national money laundering”). Section 1957
criminalizes certain monetary transactions
in property that is derived from an SUA and
is worth more than $10,000 (“bulk money
laundering”).
Section 1956(b)(1) creates a civil penalty years, however, prosecutors largely ignored in 2007, the SDNY USAO iled a civil money given inancial transaction or knew that the
for engaging in transactions that violate sec- §1956(b) and rarely pursued civil money laundering action against Lloyds TSB Bank proceeds were being transferred to further
tions 1956(a) or 1957. The maximum penalty laundering penalties.
and Bank of Cyprus, alleging that the banks a crime. Prosecutors therefore often view a
is “the value of the property, funds, or mon- laundered the proceeds of a securities fraud civil money laundering claim, which requires
etary instruments involved in the transac- scheme.only proof by the preponderance of the evi-
Banks
3
tion” or $10,000, whichever is greater.
Prosecutors’ historical use of civil money dence, as a natural it for a bank involved in
Prosecutors have made frequent use of In the handful of civil money laundering laundering claims against banks is under- money laundering.
the criminal provisions in sections 1956(a) cases iled in the irst 25 years after 1956(b) standable. Schemes to launder the proceeds Given the government’s record of bring-
and 1957 ever since Congress irst enact- was enacted, the most common defendants of criminal activity usually involve banks ing money laundering claims against banks,
ed these laws in 1986. Until the past few
were banks. For example, in 1999 federal pros- because the banks create and maintain it is unsurprising that the recent lurry of
ecutors brought a civil money laundering case accounts through which funds are laundered civil money laundering actions has included
against Banco Internacional/Bital S.A., a Mexi- and process the money laundering transac- claims against banks. For example, in 2012,
JEFFREY ALBERTS, a partner at Pryor Cashman and can bank, alleging that the bank laundered tions. However, the banks rarely are directly the SDNY USAO settled United States v. Leba-
leader of its white-collar defense and investigations money that it had received from undercover involved in the underlying SUA. This can make nese Canadian Bank, No. 11 Civ. 9186 (PAE).
practice, is a former Assistant U.S. Attorney in the government agents who had represented to it dificult for the government to prove beyond The settlement resolved civil money laun-
Criminal Division of the U.S. Attorney’s Oice for the the bank, in the course of a sting operation, a reasonable doubt that the banks knew the dering claims against the Lebanese Canadian
Southern District of New York.
that the funds were drug proceeds.2 Similarly,
criminal origin of proceeds involved in a
Bank and other inancial entities, primarily