Money Laundering Enforcement Trends: Winter 2021

White Collar Alert
01.07.2021

Introduction

In late 2020, Congress passed sweeping anti-money laundering (AML) reforms that, among other things, create a registry of beneficial ownership information for companies formed or registered in the United States. These changes, reflected in the Corporate Transparency Act, will significantly enhance the ability of law enforcement to investigate suspected money laundering. The Corporate Transparency Act could eventually lead to changes in the way that businesses structure their operations, including partnerships, trusts, and limited liability companies. 

In this issue, we cover the Corporate Transparency Act, the leaks of over $2 trillion in transactions that were reported to the Financial Crimes Enforcement Network (FinCEN) through Suspicious Activity Reports (SARs), provide an update on U.S. and foreign regulatory developments, discuss notable actions against companies, provide updates on cryptocurrency enforcement, and shine the spotlight on anti-money laundering in Colombia

The Corporate Transparency Act: Congress Passes Broad Money Laundering Reforms, Including Reporting of Beneficial Ownership

[This article was updated to clarify that the NDAA was enacted on January 1, 2021.]

The Corporate Transparency Act, part of the William M. (Mac) Thornberry National Defense Authorization Act for Fiscal Year 2021 (NDAA) enacted on January 1, 2021, requires U.S. registered entities to report to FinCEN the identity and personal identifying information (including name, date of birth, address, and unique identifying number such as a passport number or FinCEN identifier) of each beneficial owner of any corporation, limited liability company, or similar entity created under the laws of a state or registered to do business in the United States. A beneficial owner is someone who exercises "substantial control" over the entity or owns more than 25 percent of the entity, with some exceptions. 

While the details regarding these disclosures will be addressed in regulations effectuating the law, the statute goes a long way to bringing to United States in line with international AML standards. Under the law, most private companies formed under state law or registered to do business in a state will have to file the beneficial ownership reports with FinCEN, though issuers, banks, credit unions, and many entities that have to register with the U.S. Securities and Exchange Commission (SEC), FinCEN, and other regulators are among the entities that are exempt from reporting. Willfully reporting false or fraudulent information will be a criminal offense punishable by up to two years in prison. The reports to FinCEN will not be publicly available but will be available upon request to state and federal law enforcement agencies and to financial institutions conducting due diligence if authorized by the registered company. 

In addition to the beneficial ownership registry, the NDAA made several other changes to laws relating to money laundering designed to make it easier for the U.S. government to investigate and combat money laundering. For example, the NDAA provides that the Secretary of the Treasury or the Attorney General may issue subpoenas to any foreign bank "that maintains a correspondent account in the United States" for records outside the United States. While U.S. law previously permitted the government to subpoena foreign bank records with correspondent accounts, the information sought had to relate to the correspondent account. The NDAA expands the scope of permissible subpoenas stating that the subpoena may relate to the correspondent account "or any account at the foreign bank, including records maintained outside the United States…" that are the subject of certain criminal and civil forfeiture matters. Notably, the receiving foreign bank is not permitted to "directly or indirectly" notify any account holder or person named in subpoena about the existence or content of the subpoena. 

The NDAA also substantially increases the amount of money that whistleblowers can receive for providing unknown, non-public information to FinCEN leading to monetary sanctions. Previously, a whistleblower's reward was capped at 25 percent or $150,000, whichever was lower. The NDAA increases the cap to 30 percent of all monetary sanctions collected to the whistleblower and mandates that the Secretary of Treasury "shall" pay an award for actions that result in monetary sanctions over $1 million. The NDAA also adds anti-retaliation protections for whistleblowers. 

The law both increases penalties for violations of the Bank Secrecy Act (BSA) and gives FinCEN additional resources and authority both to investigate money laundering and to interact with financial institutions to combat money laundering. Given the breadth of the NDAA AML provisions, we expect to write more about the law in future issues of this newsletter and other articles and alerts. 

Regulatory Updates

Several U.S. financial agencies have issued informal guidance over the past few months through joint statements and updates to agency manuals regarding BSA and AML enforcement. One common theme: agencies with BSA and AML oversight and enforcement authority, including examiners, should take a risk-based rather than one-size-fits all approach to evaluating banks and other financial institutions' compliance with BSA and AML regulations. Relatedly, banks should have some flexibility in how they design their BSA/AML compliance programs and should not be punished (such as by being issued cease and desist orders) for minor lapses and technical violations. 

FinCEN AML Program Rule Extends Certain Requirements to Banks Without a Federal Functional Regulator

On September 15, 2020, FinCEN issued a final rule extending AML program minimum standards and customer identification and beneficial ownership requirements to banks lacking a federal functional regulator (e.g., private banks, non-federally insured credit unions, certain trust companies). The requirements implement sections 352, 326, and 312 of the USA PATRIOT Act, removing the pre-existing exemption for these banks. Banks falling under the scope of the final rule have 180 days (until March 2021) to comply with the new obligations. 

Guidance on Politically Exposed Person (PEP) Screenings

On August 21, 2020, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System (Federal Reserve), the Federal Deposit Insurance Corporation (FDIC), FinCEN, and the National Credit Union Administration (NCUA) released a joint statement on due diligence requirements for customers that a bank may deem are PEPs. The statement does not impose any new requirements but provides guidelines in the context of requirements in FinCEN's 2016 customer due diligence (CDD) final rule, 81 Fed. Reg. 29398 (May 11, 2019). The guidance notes that the agencies do not consider U.S. public officials to be PEPs. This guidance suggests that financial institutions conducting CDD should take a more nuanced, risk-based approach to assessing risks posed by PEPs, emphasizing that "not all PEPs are high risk solely by virtue of their status." 

Cease and Desist Orders for Certain Violations of BSA/AML Requirements

On August 13, 2020, the Federal Reserve, FDIC, NCUA, and OCC issued a joint statement interpreting when these agencies should exercise their authority to issue cease and desist orders against covered financial institutions under section 8(s) of the Federal Deposit Insurance Act (section 8(s)) and section 206(q) of the Federal Credit Union Act (section 206(q)), 12 U.S.C. §§ 1786(q), 1818(s). The joint statement articulates two main (but not exclusive) reasons why an agency should issue a cease and desist order: 

  1. Failure to establish and maintain a reasonably designed BSA/AML compliance program. For example, if a covered institution:
  • "fails to have a written BSA/AML compliance program, including a customer identification program, that adequately covers the required program components or pillars (internal controls, indepenvdent testing, designated BSA/AML personnel, and training)"
  • "fails to implement a BSA/AML compliance program that adequately covers the required program components or pillars" (emphasis added)
  • "has defects in its BSA/AML compliance program in one or more program components or pillars that indicate that either the written BSA/AML compliance program or its implementation is not effective (for example where deficiencies are coupled with other aggravating factors such as 'highly suspicious activity creating a potential for significant money laundering, terrorist financial, or other illicit financial transactions' or 'significant insider complicity')"
  1. Failure to correct a previously reported problem with their BSA/AML compliance program. The joint statement makes sure to note that a cease and desist order for a failure to correct a compliance violation is only warranted when the uncorrected deficiency is central to compliance efforts and has been expressly reported (rather than isolated and technical).

The joint statement reminds that covered financial institutions should continue to treat seriously the requirement to file SARs and to keep track of SARs violations, mentioning that a SAR violation would be an "aggravating factor" relevant to a mandatory cease and desist order if it indicates that an institution's BSA/AML compliance programs are not effective. 

FFIEC Revises Bank Secrecy Act/Anti-Money Laundering Examination Manual

The Federal Financial Institutions Examination Council (FFIEC) recently revised several sections of its FFIEC Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual on "Scoping and Planning," "BSA/AML Risk Assessment," "Assessing the BSA/AML Compliance Program," and "Developing Conclusions and Finalizing the Exam." The FFIEC is an interagency body tasked with developing uniform standards for the federal examination of financial institutions by several agencies, including the Federal Reserve, FDIC, OCC, and the Consumer Financial Protection Bureau (CFPB). The stated reason for revising the manual was "continued commitment to, and leadership on, interagency reform efforts that improve the effectiveness and efficiency of the BSA/AML regime and reduce unnecessary burden on banks." One way of doing this is to "reinforce the risk-based approach to BSA/AML examinations" and to "include updated information for examiners regarding transaction testing, including examples." For example, an examiner can access the adequacy of a bank's BSA/AML risk assessment processes by first identifying specific risk categories unique to the bank and an analysis of the information identified to better assess risk within those categories. 

Actions Against Corporations

Agencies have continued to aggressively target financial institutions they view as insufficiently calibrating and acting on risk. In what is perhaps the most high profile recent case, Deutsche Bank recently settled AML charges related to its customer relationships with Jeffrey Epstein and foreign banks, agreeing to pay a $150 million penalty to the New York State Department of Financial Services (NYDFS).

In July 2020, Deutsche Bank AG, Deutsche Bank AG New York Branch, and Deutsche Bank Trust Company of the Americas (collectively, Deutsche Bank or the Bank) entered into a Consent Order with NYDFS in connection with "significant compliance failings" involving Deutsche Bank's customer relationship with Jeffrey Epstein and two correspondent banking relationships with foreign banks FBME and Danske, in violation of AML laws. Deutsche Bank agreed to pay a $150 million penalty to NYDFS. According to NYDFS, Deutsche Bank's "fundamental failure" with respect to Mr. Epstein was that, while it "properly classified Mr. Epstein as high-risk," the Bank "failed to scrutinize the activity in the accounts for the kinds of activity that were obviously implicated by Mr. Epstein's past," including cash payments averaging more than $200,000 per year. The Bank terminated its relationship with Mr. Epstein in 2018 after the Miami Herald released an article detailing Mr. Epstein's 2008 plea deal, citing reputational risks. NYDFS concluded that the Bank's failure to recognize "obvious" suspicious transactions through Mr. Epstein's accounts constituted a "major compliance failure." 

Additionally, NYDFS concluded that Deutsche Bank failed to adequately monitor and manage its correspondent banking relationships with "high risk" customers FBME and Danske Bank. NYDFS noted that Deutsche Bank ignored AML red flags and suspicious transactions and continued to facilitate/clear billions of dollars in transactions and maintained its client relationships with these banks.

NYDFS noted that, while it did not currently contemplate an extension of the independent monitorship imposed following a prior Consent Order with Deutsche Bank in 2017, it may extend the scope of duration of the monitorship to address the Bank's recent violations.

Other notable cases include:

Interactive Brokers LLC. On August 10, 2020, the SEC, Commodity Futures Trading Commission (CFTC), and Financial Industry Regulatory Authority (FINRA) announced fines totaling more than $38 million against Interactive Brokers LLC (Interactive Brokers), an electronic broker-dealer based in Greenwich, Connecticut. The SEC announced Interactive Brokers will pay a $11.5 million penalty to settle charges it repeatedly failed to file SARs for U.S. microcap securities trades it performed on behalf of its customers as required by Section 17(a) of the Exchange Act and Rule 17a-8. 

In parallel actions against Interactive Brokers, the CFTC announced a settlement of $11.5 million penalty and $706,215 in disgorgement and FINRA announced a $15 million settlement; both settlements also related to various AML-related regulatory violations, including as to customer monitoring, SARs reports, and related internal investigations. According to its Order, the CFTC found that Interactive Brokers violated Regulations 42.2 and 166.3, 17 C.F.R. §§ 42.2, 166.3 (2019) by failing to "provide sufficient oversight of its employees' handling of [specific accounts]" that led to a "failure to maintain an adequate anti-money laundering ('AML') program and to conduct appropriate customer monitoring. As a result, Interactive Brokers employees failed to identify or adequately investigate certain indicia of suspicious activity in the accounts at issue that, according to Interactive Brokers' own compliance procedures and given its knowledge of each customer's background and trading patterns, should have prompted the filing of [SARs]," which Interactive Brokers failed to file. Notably, the settlement was entered into as part of the Division of Enforcement's Bank Secrecy Act Task Force and is the first CFTC enforcement action charging a Regulation 42.2 violation, which requires registrants to comply with the BSA. 

Interactive Brokers signed a Letter of Acceptance, Waiver, and Consent (AWC) with FINRA to resolve violations of FINRA Rules 3310(a), (b), and (c), and 2010. FINRA highlighted various AML-related deficiencies that led to the violations including: failure to reasonably surveil certain money movements; failure to develop and implement reasonably designed surveillance tools for certain money movements and securities transactions, including transactions by customers of foreign financial institutions in high risk jurisdictions; failure to reasonably investigate potentially suspicious activity; failure to file SARs; and inadequate AML testing. 

As part of the CFTC and FINRA settlements, Interactive Brokers must continue to retain an Independent Compliance Consultant to undertake an independent review of its AML program. 

Hilltop Securities, Inc. On July 28, 2020, FINRA entered into a settlement with Hilltop Securities (Hilltop), a retail brokerage firm based in Dallas, Texas over allegations that Hilltop violated FINRA Rules 3310(a) and 2010 and Municipal Securities Rulemaking Board (MSRB) Rules. As part of the settlement, Hilltop agreed to pay a fine of $475,000 ($100,000 of which relates to the violations of MSRB Rules). Specifically, the AWC stated that Hilltop: (1) failed to follow the U.S. Treasury Department's standard for determining whether to file a SAR and instead required proof of actual fraud as opposed to suspicion of unlawful activity; (2) failed to review red flags due to Hilltop's failure to implement AML procedures requiring the completion of Deposit Review Forms in regard to the receipt of low-priced securities; and (3) failed to devote adequate resources to its AML program, leaving two to three analysts to review only 20 percent of transactions without a risk-based approach. As part of the settlement, Hilltop must engage an Independent Compliance Consultant to review its AML procedures. 

JKR & Company, Inc. On July 27, 2020, FINRA entered into a settlement with JKR & Company, Inc. (JKR), a broker-dealer headquartered in California, to resolve allegations that it violated FINRA Rules 3310(a) and 2010. JKR agreed to a $50,000 fine as part of the settlement. According to the AWC, JKR failed to detect red flags, investigate, and report suspicious activity in four related accounts. FINRA highlighted the following red flags: 

  • "common ownership of multiple accounts without an apparent business purpose for multiple accounts; 
  • one account owner with significant disciplinary history related to securities fraud; 
  • potentially manipulative trading activity, unusual transfer activity between related accounts that was inconsistent with expected activity in such accounts and without an apparent business purpose; and 
  • unexplained third-party wire transfers that were inconsistent with expected account activity." 

The AWC acknowledged that JKR had established AML procedures that required the firm to monitor for red flags, but that it failed to implement such procedures. The settlement did not require JKR to engage an Independent Compliance Consultant. 

Celadon Financial Group LLC. On July 27, 2020, the SEC issued a Cease and Desist Order against Celadon Financial Group LLC (Celadon) for facilitating improper trades by its broker dealers. The SEC found that Celadon "failed to adequately implement its policies and procedures to reasonably address the risks associated with [its] business," and failed to file SARs for "numerous transactions that the firm had reason to suspect involved fraudulent activity or had no business or apparent lawful purpose." Celadon was charged with violating the short-selling provisions of Rule 203(b)(1) of Regulation SHO under the Securities Exchange Act of 1934, and the SAR-filing provisions of Section 17(a) of the Exchange Act and Rule 17a-8. Celadon did not admit or deny the SEC's findings and agreed to be censured, to cease-and-desist, and to pay a $125,000 civil penalty.

Update on International Money Laundering Scandals

Danish Prosecutors Drop Probe into Danske Bank's Auditor

On May 29, 2020, the Danish Business Authority (DBA) announced that Denmark's Public Prosecutor for Special Economic and International Crime (Public Prosecutor) has ended its eight-month-long investigation into Ernst & Young (EY), Danske Bank's auditor, for alleged violations of Danish money laundering laws in connection with EY's audit of Danske Bank's annual and consolidated financial statements for 2014. According to the announcement, the Public Prosecutor did not find evidence that EY had known about "specific transactions or transaction patterns" and that there was "no reasonable suspicion that any criminal offense ha[d] been committed."  

In April 2019, the DBA had reported EY to the Public Prosecutor following allegations that the auditor had become aware of information about potential money laundering in Danske Bank in 2014 that should have prompted EY to conduct further review yet it neither investigated the claims nor alerted the Money Laundering Secretariat, the specialized unit within the Danish State Prosecutor for Serious Economic Crime that is tasked with combatting money laundering. 

As we reported previously in Spring 2019, Fall 2019, and Summer 2020, Danske Bank has been under investigation in several countries, including Denmark, Estonia, Britain, France, and the United States over money laundering allegations that the bank allowed suspicious funds from the former Soviet Union to flow through its Estonian branch into western financial institutions. Specifically, between 2007 and 2015, more than $220 billion flowed through the "non-resident portfolio" of Danske Bank's Estonia branch. Danske Bank's own 2017 investigation concluded in September 2018 that most of the payments were suspicious and that the bank could have laundered billions of dollars between 2007-2015. The report also described a series of compliance and control failures by the bank, as well as the failure of senior bank managers to act sooner and stop the suspected illicit payments. 

Foreign Regulatory Developments

EU Sues Austria, Belgium, and the Netherlands Over Non-Compliance with AML Directive

We have previously covered the European Union's efforts to require members states to make certain AML amendments to their national laws through the 5th Anti-Money Laundering Directive and 6th Anti-Money Laundering Directive. Recently, the European Commission sought to enforce the 4th Anti-Money Laundering Directive (EU/ 2015/849) against certain European states. The European Commission filed a suit against Austria, Belgium, and the Netherlands in the Court of Justice of the European Union (see press release here) for failing to fully implement the 4th Anti-Money Laundering Directive into their national laws by the set deadline. Filed on July 2, 2020, the suit focused on insufficient action by the national governments in the areas of: (1) betting and gambling legislation in Austria; (2) Financial Intelligence Units document and information exchange in Belgium; and (3) the Netherlands' approach to requesting beneficial ownership information on legal entities. The Dutch Finance Ministry responded that the required legislation was passed by the Senate on June 23, 2020 and would soon come into force. The lawsuit against Austria, Belgium, and the Netherlands preceded by a few days an award by the European Court of Justice against Ireland and Romania fining Ireland 2 million euros and Romania 3 million euros for not timely implementing the 4th AML Directive. 

Cryptocurrency Enforcement

New Department of Justice Cryptocurrency Enforcement Framework Focuses on High-Risk Businesses

In October 2020, the U.S. Department of Justice (DOJ) released a Cryptocurrency Enforcement Framework, which examines the perceived threats posed by cryptocurrency. The Framework details the ways in which cryptocurrencies can be used for illegal purposes – including the financing of terrorism, the concealment of financial transactions, and crimes within the cryptocurrency market, such as theft or fraud – and DOJ's strategies for addressing the potential threats. Though the Framework is largely a summary of existing law, it may signal an increased desire by the DOJ to investigate high-risk cryptocurrency businesses both in the U.S. and abroad. 

The Framework emphasizes DOJ's commitment "to continue its aggressive investigation and prosecution of a wide range of malicious actors, including those who use cryptocurrencies to commit, facilitate, or conceal their crimes," and says that DOJ would use its authority to prosecute entities and individuals who violate U.S. law, even when those entities and individuals are located outside the U.S. 

The Framework identifies high-risk business models that DOJ believes can be used for criminal activity. The Framework is most critical of anonymity enhanced cryptocurrencies (AECs), such as Monero, Dash, and Zcash, which use non-public blockchains that undermine AML controls for detecting suspicious activity, saying "The Department considers the use of AECs to be a high-risk activity that is indicative of possible criminal conduct" and "[c]ompanies that choose to offer AEC products should consider the increased risks of money laundering and financing of criminal activity and should evaluate whether it is possible to adopt appropriate AML/CFT measures to address such risks."  In addition to AECs, the Framework notes that the DOJ considers the following businesses to be high risk:  

  • Peer-to-peer exchanges, which are networks of individuals who buy and sell cryptocurrency outside of registered exchanges, often "fail to register with FinCEN as MSBs [money services businesses] or to comply with BSA [Bank Secrecy Act] obligations, and some even conduct transactions without requiring any form of identification from the customer." 
  • Cryptocurrency kiosks, which allow users to convert currency to and from cryptocurrency and provide an easy access point for virtual currency exchanges, are often "not BSA-compliant and fail to collect required customer and transaction information." DOJ said that investigators have linked kiosks to illicit use by drug dealers, credit card fraud schemers, prostitution rings, and unlicensed virtual asset exchangers.
  • Mixers and tumblers attempt to obfuscate the owner of cryptocurrency by mixing the cryptocurrency of multiple users before redistributing. Mixers and tumblers are MSBs and subject to the BSA and other regulations, and the Framework notes that mixers and tumblers can be criminally liable for money laundering because their products "are designed specifically to 'conceal or disguise the nature, location, the source, the ownership, or the control of a financial transaction.'" 
  • Chain-hopping (moving from one cryptocurrency to another in rapid succession) is "frequently used by individuals who are laundering proceeds of virtual currency thefts." 
  • Cryptocurrency exchanges and virtual casinos are noted by the Framework as business that must follow FinCEN regulations but are not specifically identified for enabling illegal conduct. 

The Framework commits to coordination by DOJ with other federal regulators such as FinCEN, OFAC, SEC, CFTC, and the Internal Revenue Service (IRS), state attorneys general, regulatory agencies, and foreign enforcement agencies. 

Under the Framework the DOJ will focus on promoting awareness and expertise of cryptocurrency issues with its investigators and would also conduct private sector education and outreach whenever possible, including direct engagement with virtual currency operators, banks and financial institutions affected by regulation of cryptocurrencies, and cryptocurrency users. 

FinCEN Assesses Virtual Currency Tumbler with $60 Million Penalty

In October 2020, FinCEN assessed a $60 million penalty against Larry Dean Harmon, the primary operator of Helix and Coin Ninja LLC. According to FinCEN, Helix and Coin Ninja operate as virtual currency "mixers" or "tumblers," which (as discussed above in the DOJ Framework) are companies that transmit virtual currencies in a manner designed to conceal the owner of the currency. In May 2019, FinCEN issued guidance that explicitly said that these anonymizing service providers are money transmitters under FinCEN regulations, forcing them to comply with the BSA, including registering as a MSBs, implementing AML programs, and filing SARs. The penalty against Harmon was the first by FinCEN under that new guidance. FinCEN said that it could have imposed a penalty of as much as $209 million for the BSA violations by Helix and Coin Ninja. In May 2019, the DOJ indicted Harmon for money laundering violations stemming from the same conduct.

Spotlight on Colombia

Colombia was given a score of 37/100 and ranked 96/180 on Transparency International's latest Corruption Perceptions Index. Although Colombia's score has stayed relatively even in the past five years, Colombia has been developing interesting legal tools to align to international standards and combat money laundering.

Colombian AML enforcement efforts can be divided into two segments. The punitive administrative regulation is enforced by the Superintendent of Financial Institutions and the Superintendent of Corporations. The criminal law branch is enforced by Colombian prosecutors and criminal judges, and more recently, some cases are including the participation of the Colombian Tax Office (DIAN). Another relevant governmental entity is the Unit of Analysis and Financial Information (UIAF), an intelligence agency that reviews the economic and financial information provided by enforcement entities and key private actors (such as banks) to optimize and strengthen the Colombian economic system against new threats and risks related to AML/combatting the financing of terrorism (CFT).

One of the latest updates from the punitive administrative regulation side is the External Circular 027, 2020, issued by the Superintendent of Financial Institutions. This circular introduces new instructions for entities that are under the Superintendent's supervision and its Risk Management Systems for AML/CFT (Sarlaft). Some of the circular's provisions seek to enhance: (1) due diligence on Ultimate Beneficial Owners and Politically Exposed Persons; (2) countermeasures in scenarios that involve high-risk countries; (3) information requirements in international and domestic transactions; and (4) supervision in transnational correspondent activities.

Furthermore, other provisions include developments in the review of (1) low-amount contributions to voluntary retirement and disability pension funds; (2) low-amount brokerage operations in the stock market; (3) risk management rules that apply to the custody of securities; and (4) acquisition of small participations in collective investment funds. Other highlights of the new Sarlaft instructions include enhancement of technology tools and digital use, such as the adoption of the Financial Action Task Force's (FATF) Digital Identity Guide. Thus, the mentioned circular states that all the supervised entities should have policies and relevant procedures that allow the identification, verification, and confirmation of any potential client's identity, both in in-person scenarios and in virtual ones. The Superintendent of Financial Institutions published the circular and its annexes in early September 2020, addressing the mentioned key updates for all the supervised entities' legal representatives, tax auditors, and compliance officers.

From the criminal law enforcement perspective, Alex Saab's case is as an example of a current transnational case and increasingly active cooperation between Colombian and United States authorities. Last June, Mr. Saab was arrested by Cape Verde's authorities as a consequence of an Interpol red notice and the ongoing criminal proceedings in Colombia and the United States for his alleged relationship and involvement in the government of Venezuela and President Nicolas Maduro's network of money laundering and corruption. This month, the international press reported that Mr. Saab's lawyers published a statement stating that an Appellate Court in Cape Verde confirmed the approval of extradition of Alex Saab and his business partner to the United States. According to the international press, Mr. Saab's lawyers plan to appeal.

From the Colombian side, on August 10, 2020, President Ivan Duque stated on national television that the extradition of Alex Saab from Cape Verde to the United States is necessary to fully understand the illegal network. President Duque explained that the Colombian government has been actively cooperating with the United States government, sharing relevant information related to the mentioned network. Duque said that key information has been shared with the U.S. Drug Enforcement Agency (DEA), the U.S. Department of Treasury, and the Colombian Attorney General's Office to support the ongoing investigations.

On September 4, 2020, a Colombian prosecutor from the Specialized AML Office moved the case forward before a criminal judge in Barranquilla and charged Mr. Saab, mentioning his roles as the legal representative, shareholder, and member of Shatex S.A.'s Board of Directors, and explaining how he allegedly performed several maneuvers to evade tax and customs obligations, as well as giving the appearance of legality to an irregular scheme of exports and imports. Likewise, the prosecution also mentioned Mr. Mendoza Lapeira, who allegedly was the accountant in charge of structuring the fraudulent schemes. The indictment includes the following charges: money laundering, illicit enrichment of individuals, conspiracy to commit a crime, aggravated fraud, and fictitious export or import. 

Lastly, it is worth mentioning that since Law 2010, 2019 was issued, the DIAN has been more active in criminal proceedings that are related to felonies such as the omission of assets, promotion of fraudulent structures, and tax fraud or evasion. According to the law, a special request from the DIAN can initiate a criminal proceeding for the mentioned felonies. In practice, this has led to interinstitutional efforts against criminal structures that could be related to corruption and AML/CFT activities.


EditorsAnn SultanWilliam P. BarryKirby D. Behre

Contributors: Nina C. Gupta,* Ian A. HerbertIvo K. IvanovElizabeth J. JonasMaryna KavaleuskayaMargot LaporteLeah Moushey, Ricardo Rincon,** Chervonne Colón Stevenson*

*Former Miller & Chevalier attorney
**Law clerk


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