DOJ Charges Two Individuals With AML Violations Arising From International Financial Scheme

The DOJ charged two individuals involved in an international financial scheme with operating an unlicensed money-transmitting business and failing to maintain adequate AML controls.

In an indictment unsealed in the Eastern District of New York, the DOJ alleged that the individuals contemplated and carried out a scheme that brought high-risk international financial business to small financial institutions. The DOJ stated the two individuals were trained in AML compliance, and represented to a small New York-based financial institution that they would conduct appropriate AML oversight for the high-risk business they brought to the financial institution. On the basis of those representations, the financial institution permitted the individuals to "cause" over $1 billion in high-risk transactions to take place through the financial institution.

The DOJ charged both individuals with one count of operating a money-transmitting business that was not licensed by FinCEN and the New York Department of Financial Services, as required. The DOJ charged one of the individuals with (i) two counts of failure to maintain an AML program and (ii) five counts of failure to file required Suspicious Activity Reports. The DOJ is also seeking forfeiture of any property or proceeds obtained as a result of the offenses.

Commentary Christian Larson

It is notable that here, the bank that processed high-risk transactions for the defendants does not appear to have been a target of DOJ's criminal probe. Banks should nonetheless take care; regulators expect banks that provide services to money transmitting businesses to engage in thoughtful diligence of both the money transmitting business customer, and transactions that pass through the bank.

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