Category: Anti-Money Laundering

Financial Crimes Enforcement Network 2008 Annual Report

The Financial Crimes Enforcement Network 2008 Annual Report (.pdf) has been released.

Outcome Goal 1: Financial systems resistant to abuse by money launderers, terrorists and their financial supporters, and other perpetrators of financial crime

Outcome Goal 2: Detection and deterrence of money laundering, terrorism financing, and other illicit activity.

Outcome Goal 3: Efficient management, safeguarding, and use of BSA information.

Management Goal: FinCEN’s mission is accomplished by high-performing employees and managers operating in a stimulating and responsible work environement.

Government Seizes 650 Park Avenue

650 fifth avene

According to the Wall Street Journal, the United States Attorney for the Southern District of New York has filed a forfeiture proceeding against 650 Fifth Avenue in New York.

In its press release: United States files civil forfeiture action against ASSA corporation’s interest in Manhattan office tower (.pdf), the DOJ claims that a 40% interest in the building is held by the ASSA Corporation which is acting as a front for Bank Melli. The Government of Iran controls Bank Melli and ownership is considered an export under the Iraninan Transaction Regulations (Title 31 CFR, part 560)

This post originally appeared in one of my old blogs: Real Estate Space.

Canadian Real Estate Developers and Money Laundering

Eli Udell of Perley-Robertson, Hill and McDougall LLP penned a summary of the effect of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act on Canadian real estate developers: Real Estate Developers And Money Laundering Law – What You Need To Know.

What Must a Developer Do To Comply?

1)  Implementation of a “Compliance Regime”
2)  Obligation to Report Certain Transactions
3)  New Record-keeping Requirements

See:

What You Need to Know About U.S. Sanctions Against Drug Traffickers

As part of OFAC‘s Specially Designated National List, OFAC includes narcotics kingpins. OFAC has published What You Need to Know About U.S. Sanctions Against Drug Traffickers (.pdf).

On December 3, 1999, the President signed into law the Foreign Narcotics Kingpin Designation Act (the “Kingpin Act”), 21 U.S.C. § 1901-1908, 8 U.S.C § 1182. The related regulations are styled the “Foreign Narcotics Kingpin Sanctions Regulations” (31 C.F.R. Part 598).

The Kingpin Act blocks all property and interests in property, subject to U.S. jurisdiction, owned or controlled by significant foreign narcotics traffickers as identified by the President. In addition, the Kingpin Act blocks the property and interests in property, subject to U.S. jurisdiction, of foreign persons designated by the Secretary of Treasury, in consultation with the Attorney General, the Director of Central Intelligence, the Director of the Federal Bureau of Investigation, the Administrator of the Drug Enforcement Administration, the Secretary of Defense, and the Secretary of State, who are found to be: (1) materially assisting in, or providing financial or technological support for or to, or providing goods or services in support of, the international narcotics trafficking activities of a person designated pursuant to the Kingpin Act; (2) owned, controlled, or directed by, or acting for or on behalf of, a person designated pursuant to the Kingpin Act; or (3) playing a significant role in international narcotics trafficking.

Significant foreign narcotics traffickers and foreign persons designated by the Secretary of the Treasury are referred to collectively as Specially Designated Narcotics Traffickers. Foreign persons designated under the Kingpin Act are referred to as “[SDNTK]s” on OFAC’s listing of “Specially Designated Nationals and Blocked Persons” to differentiate them from the Specially Designated Narcotics Traffickers named under Executive Order 12978.

U.S. persons are prohibited from engaging in any transaction or dealing in property or interests in property of [SDNTK]s and from engaging in any transaction that evades or avoids the prohibitions of the Kingpin Act. These prohibitions affect trade transactions as well as accounts, securities, and other assets.

Updates to OFAC’s SDN List

FinCEN updated the SDN list with companies and individuals associated with the Mugabe regime in Zimbabwe: Treasury Designates Mugabe Regime Cronies.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) today designated four Mugabe regime cronies and a number of entities owned or controlled by two of them. The financial and logistical support they have provided to the regime has enabled Robert Mugabe to pursue policies that seriously undermine democratic processes and institutions in Zimbabwe.

“The Mugabe regime continues to resist the call of the Zimbabwean people to loosen its corrupt and violent hold on power,” said OFAC Director Adam J. Szubin.  “The United States supports the people of Zimbabwe in their struggle to achieve a political and economic system built on fairness and transparency rather than patronage and self-dealing.”

Today’s designations include John Bredenkamp, a well-known Mugabe insider involved in various business activities, including tobacco trading, gray-market arms trading and trafficking, equity investments, oil distribution, tourism, sports management, and diamond extraction. Through a sophisticated web of companies, Bredenkamp has financially propped up the regime and provided other support to a number of its high-ranking officials. He also has financed and provided logistical support to a number of Zimbabwean parastatal entities.

The following entities owned or controlled by John Bredenkamp also are designated: Alpha International (Private) Ltd., Breco (Asia Pacific) Ltd., Breco (Eastern Europe) Ltd., Breco (South Africa) Ltd., Breco (U.K.) Ltd., Breco Group, Breco International, Breco Nominees Ltd., Breco Services Ltd., Corybantes Ltd., Echo Delta Holdings Ltd., Kababankola Mining Company, Masters International Ltd., Masters International, Inc., Piedmont (UK) Limited, Raceview Enterprises, Scottlee Holdings (Pvt) Ltd., Scottlee Resorts, Timpani Ltd., and Tremalt Ltd.

Also designated today is Muller Conrad Rautenbach (a.k.a. Billy Rautenbach). Billy Rautenbach is a Zimbabwean businessman who has maintained close relations with the Mugabe regime. He has provided support to senior regime officials during Zimbabwe’s intervention in the Democratic Republic of the Congo and also provided logistical support for large-scale mining projects in Zimbabwe that benefit a small number of corrupt senior officials there. Today’s designations include an entity owned and controlled by Billy Rautenbach, Ridgepoint Overseas Developments Limited.

In addition, OFAC is designating Nalinee Joy Taveesin, a Thai businesswoman who has facilitated a number of financial, real-estate, and gem-related transactions on behalf of Grace Mugabe, Gideon Gono, and a number of other Zimbabwean Specially Designated Nationals (SDNs). Ironically, Nalinee Taveesin has participated in a number of initiatives on corruption and growth challenges in Africa and Southeast Asia while secretly supporting the kleptocratic practices of one of Africa’s most corrupt regimes.

Finally, OFAC is designating Mahmood Awang Kechik, a Malaysian urologist and one of Robert Mugabe’s physicians and business advisors. Kechik has used his medical practice to conceal the ultimate destination of medical equipment shipped to Zimbabwe, and he has transacted secretly with a number of SDNs, including Gideon Gono and Constantine Chiwenga, to generate wealth for these regime officials and the Government of Zimbabwe.

Today’s action was taken pursuant to Executive Order 13469, which targets, among others, individuals and entities who provide financial and other support to the Government of Zimbabwe and Zimbabwean SDNs. As a result of Treasury’s action, any assets of the individuals and entities designated today that are within U.S. jurisdiction must be frozen. Additionally, U.S. persons are prohibited from conducting financial or commercial transactions with these individuals or entities.

Specially Designated Nationals and Blocked Persons List Updated

Here are the new bad guys on the OFAC’s Specially Designated Nationals list:

AW-MOHAMED, Ahmed Abdi (a.k.a. ABUZUBAIR, Muktar Abdulrahim; a.k.a. AW MOHAMMED, Ahmed Abdi; a.k.a. “ABU ZUBEYR”; a.k.a. “GODANE”; a.k.a. “GODANI”; a.k.a. “SHAYKH MUKHTAR”); DOB 10 Jul 1977; POB Hargeysa, Somalia; nationality Somalia (individual) [SDGT]

EL HABHAB, Redouane (a.k.a. “ABDELRAHMAN”), Iltisstrasse 58, Kiel 24143, Germany; DOB 20 Dec 1969; POB Casablanca, Morocco; nationality Germany; National ID No. 1007850441 (Germany) issued 27 Mar 2001 expires 26 Mar 2011; Passport 1005552350 (Germany) issued 27 Mar 2001 expires 26 Mar 2011; currently incarcerated in Lubeck, Germany (individual) [SDGT]

ISSA, Issa Osman (a.k.a. ATTO, Abdullah; a.k.a. BUR, Abdullah; a.k.a. SUDANI, Abdala; a.k.a. “AFADEY”; a.k.a. “MUSSE”); DOB 1973; POB Malindi, Kenya; nationality Kenya (individual) [SDGT]

ROBOW, Mukhtar (a.k.a. ALI, Mujahid Mukhtar Robow; a.k.a. ALI, Mukhtar Abdullahi; a.k.a. ALI, Shaykh Mukhtar Robo; a.k.a. RUBU, Mukhtar Ali; a.k.a. “ABU MANSOUR”; a.k.a. “ABU MANSUR”); DOB 1969; alt. DOB 10 Oct 1969; POB Xudur, Somalia; alt. POB Keren, Eritrea; nationality Eritrea; National ID No. 1372584 (Kenya); Passport 0310857 (Eritrea) issued 21 Aug 2006 expires 20 Aug 2008; (Following data derived from an Eritrean passport issued under the alias name of Mukhtar Abdullahi Ali: Alt. DOB: 10 October 1969; Alt. POB: Keren Eritrea; nationality: Eritrean; National ID No.: 1372584, Kenya; Passport No.: 0310857, Eritrea, Issue Date 21 August 2006, Expire Date 20 August 2008) (individual) [SDGT]

Full SDN lists.

Treasury Issues Final Regulations for Committee on Foreign Investment in the United States

On November 14, 2008, the Department of the Treasury issued its final rule to implement the Foreign Investment and National Security Act of 2007, which provided guidelines for the Committee on Foreign Investment in the United States when reviewing investments by foreign persons in U.S. businesses for national security issues.

The Foreign Investment and National Security Act of 2007 amended section 721 of the Defense Production Act of 1950 (50 USC §2170) authorizing the President to review merger, acquisitions and takeovers by or with any foreign person which could result in foreign control of any person engaged in interstate commerce in the United States to determine the effects of such transaction on the national security of the United States.

FINSA codifies the structure, role, process and responsibilities of the Committee on Foreign Investment in the United States. Previously, CFIUS had existed only by executive order. FINSA establishes CFIUS in statute.

On April 21, 2008, the Department of the Treasury issued proposed regulations for the CFIUS . You can also get the comments on the proposed CFIUS regulations.

The final regulations go into effect 30 days after publication in the Federal Register: Regulations Pertaining to Mergers, Acquisitions, and Takeovers by Foreign Persons. (.pdf) That means they should be in effect by the end of the year.

See my blog posts:

See also:

Opening Securities and Futures Accounts from an OFAC Perspective

The Office of Foreign Assets Control published new guidance specific to the securities industry on 11/06/2008: Opening Securities and Futures Accounts from an OFAC Perspective.

A strong OFAC compliance program consists of procedures that are similar to those found in a brokerage firm’s Customer Identification Program (“CIP”). Firms should use risk-based measures for verifying the identity of each new customer who opens an account. In establishing procedures, firms should identify and consider their size (e.g., total assets under management), their location, their customer base, the types of accounts they maintain, the methods by which accounts can be opened (e.g., in person or non face-to-face), and the types of identifying information available for each customer. Firms should also assess risks posed by each customer and transaction, asking questions such as:

  • Is the customer regulated by a Federal functional regulator, widely known, or listed on an exchange?
  • Has the firm had any previous experience with the customer or does it have prior knowledge about the customer?
  • Is the firm facilitating a U.S. person’s investment in a foreign issuer or other company that conducts business in a sanctioned country?
  • Is the customer located in a high-risk foreign jurisdiction that is considered to be poorly regulated or in a known offshore banking or secrecy haven?
  • Is the customer located or does it maintain accounts in countries where local privacy laws, regulations, or provisions prevent or limit the collection of client identification or beneficial ownership information?

Prior to entering into a business relationship with a client, you should screen the new client’s identification information, as well as the customer’s proposed transaction(s), against OFAC’s Specially Designated Nationals and Blocked Persons list (“SDN list”) [which is available at
http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx], and applicable OFAC sanctions programs.

The paper highlights a few key differences between OFAC compliance and CIP requirements. OFAC requires you to look deeper into the beneficial ownership of a client. CIP is limited to the “person that opens a new account.”

The other key difference is that OFAC does not permit you to reallocate your legal liability to a third party such as an introducing firm. OFAC takes the position that you can still be “held liable for any OFAC violations that occur due to the third parties’ negligence.”

Corporate Governance of Public Web Sites

Jane K. Storero and Yelena Barychev of The Legal Intelligencer and Law.com authored an article that the system of reviewing and monitoring information posted on a company Web site should be part of the disclosure controls included in the enterprise-wide risk management system established by the company: Corporate Governance of Public Web Sites.

This article describes methods of effectively complying with the SEC guidance related to company websites: Commission Guidance on the Use of Company Websites (Release 34-58288, August 7, 2008).

That release gave some guidance as to whether a company’s website is a means of public dissemination of information under Regulation FD.

It also addresses how the anti-fraud provisions of the federal securities laws can be applied to a statements made on the internet.  One issue is whether historical information is considered “republished” each time the material is accessed on the company’s website. If they are considered republished, then the company would have a duty to update the materials.

As a general matter, we believe that the fact that investors can access previously posted materials or statements on a company’s web site does not in itself mean that such previously posted materials or statements have been reissued or republished for purposes of the antifraud provisions of the federal securities laws, that the company has made a new statement, or that the company has created a duty to update the materials or statements.

The release also notes that hyperlinks to third party information could be implicated as part of the anti-fraud provisions. The key is the context of the hyperlink. If explicit approval or endorsement is plainly evident, then the hyperlink to a third party statement can be found to be a implicit approval of the statement in the hyperlinked web page.

The release also endorses the use of blogs:

We acknowledge the utility these interactive web site features afford companies and shareholders alike, and want to promote their growth as important means for companies to maintain a dialogue with their various constituencies. As we noted in the Shareholder Forum Release, companies may find these forums “of use in better gauging shareholder interest with respect to a variety of topics,” and the forums “could be used to provide a means for management to communicate with shareholders by posting press releases, notifying shareholders of record dates, and expressing the views of the company’s management and board of directors.”

Statements made on a blog or forum will not be treated any differently than any other statements made by the company for purposes of anti-fraud provisions.