Los Angeles Financial Crimes Lawyer

Financial Crimes

Financial crimes, also known as white-collar crimes, are nonviolent crimes committed for financial gain.  The FBI and Homeland Security are examples of two agencies that investigate these types of crimes.  Examples of white-collar crimes include money laundering, securities fraud, embezzlement, mortgage fraud, and corporate fraud.  Other entities that investigate white-collar crime include the Securities and Exchange Commission (SEC), the National Association of Securities Dealers (NASD), and state authorities.

Important Agencies

FinCEN

The Financial Crimes Enforcement Network (FinCEN) is a government bureau whose goal is to prevent and punish criminals and criminal networks that participate in money laundering schemes and other financial crimes. FinCEN, operates both domestically and internationally and is administered by the United States Department of the Treasury.

By way of background, FinCEN was created in 1990 to support federal, state, local, and international law enforcement by analyzing the information required under the Bank Secrecy Act (BSA), one of the nation’s most important tools in the fight against money laundering. The BSA’s record keeping and reporting requirements establish a financial trail for investigators to follow as they track criminals, their activities, and their assets.  FinCen is said to be the first regulator to address the issue of virtual currency.”

FINRA

FINRA is a government-authorized not-for-profit organization that works under the supervision of the SEC.  The primary purpose of FINRA is to ensure fair financial markets. FINRA helps dealers, brokers and currency traders stay up and also makes regulatory compliance easier.

FINRA also assists small firms in fulfilling their responsibilities to establish Anti-Money Laundering compliance programs required by the Bank Secrecy Act.

https://www.finra.org/rules-guidance/key-topics/aml

FDIC

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits; examines and supervises financial institutions for consumer protection; makes large and complex financial institutions resolvable; and manages receiverships.

https://www.fdic.gov/regulations/examinations/bsa/

Other Important Information

Bank Secrecy Act (“BSA”)

The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist the United States government in detecting and preventing money laundering.  Among other regulations, it established program, record keeping and reporting requirements for depository institutions. The BSA is also one of the first laws used to fight money laundering in the United States.  One common example is the requirement that financial institutions such as banks report suspicious cash transactions over $10,000.

https://www.occ.treas.gov/topics/supervision-and-examination/bsa/index-bsa.html

Common Financial Crimes

Mortgage Fraud

Common individual mortgage fraud scams are identity theft and falsifying income/asset documentation, appraisal fraud and predatory lending.   Generally speaking, there are two distinct areas of mortgage fraud, fraud for profit and fraud for housing.

Example of Fraud for Housing:  A borrower may misrepresent income and asset information on a loan application or entice an appraiser to manipulate a property’s appraisal value

Money Laundering

Money laundering involves changing the form or the source of criminally derived proceeds so that the proceeds appear legitimate.  More broadly, money laundering also encompasses transactions that are designed to promote or facilitate criminal activities, or transactions knowingly made with the proceeds of criminal activity. Money laundering generally involves three steps: placing illicit proceeds into the financial system; layering, or the separation of the criminal proceeds from their origin; and integration, or the use of apparently legitimate transactions to disguise the illicit proceeds.

Questionable proceeds can move through banks, check cashers, money transmitters, businesses, casinos, and even be sent overseas to become clean, laundered money. The tools of the money launderer can range from complicated financial transactions, carried out through webs of wire transfers and networks of shell companies, to old-fashioned currency smuggling.

https://codes.findlaw.com/us/title-18-crimes-and-criminal-procedure/18-usc-sect-1956.html

Forms of Money laundering

• Illicit Cash: Cash transactions are particularly vulnerable to money laundering due to its anonymous and portable nature. Drug trafficking is probably the most significant source of illicit cash.
• Trade-Based Money Laundering: By definition, TBML is the process by which criminals use a legitimate trade to disguise their criminal proceeds from their unscrupulous sources. The crime involves one of many different schemes to complicate the documentation of legitimate trade transactions. This may include moving illicit goods, falsifying documents, misrepresenting financial transactions, and under- or over-invoicing the value of goods. Once individuals exchange illicit cash for trade goods, it is difficult for law enforcement to trace the source of the illicit funds. Drug trafficking organizations often use money brokers to facilitate TBML.  Recently, apparel or clothing manufacturers have been targeted by the government
• Misuse of Banks: Individuals may structure cash deposits to avoid threshold reporting requirements or seek out complicit merchants who will accept their illicit proceeds without reporting the transactions.
• Merchant Services Businesses (“MSB”) While many MSB’s such as check cashing services engage in legitimate business activities, they, too, can serve as a means for criminals to move money.
• Virtual Currency:Virtual currencies offer yet another alternative to cash. Cryptocurrency is often associated with illicit transactions and money laundering because these currencies offer potential anonymity.

Anti-Money Laundering Policies (“AML”)

Financial firms must comply with the Bank Secrecy Act and Anti-Money Laundering rules. This includes banks, cash currency traders, check cashers and cryptocurrency traders.  The purpose of the AML rules is to help detect and report suspicious activity.

FINRA Rule 3310 provides minimum standards for a firm’s written AML compliance program. The basic tenets of an AML compliance program under FINRA 3310 include the following.

1. The program must be approved in writing by a senior manager.
2. The program must be reasonably designed to ensure the firm detects and reports suspicious activity.
3. It must be reasonably designed to achieve compliance with the AML Rules, including, among others, having a risk-based customer identification program (CIP) that enables the firm to form a reasonable belief that it knows the true identity of its customers.
4. It must be independently tested to ensure proper implementation of the program.
5. A firm must submit contact information for its AML Compliance Officer through the FINRA Contact System (FSC).
6. Ongoing training must be provided to appropriate personnel.

What are the penalties for money laundering?

For a first-time offender, each transaction involving money laundering, is punishable by imprisonment for up to a year or a fine up to $250,000 or twice the value of the transaction, whichever is greater, or a combination of imprisonment and a fine. However, a second or subsequent money laundering conviction carries harsher penalties. Rather than a $250,000 maximum fine, a fine of $500,000 may imposed or five times the value of the property transacted, whichever is greater. Also, depending on the value of the transaction, the offender may be sentenced to a longer term of imprisonment.

• If between $50,000-$150,000, then a court may impose 1 additional year;
• If between $150,00-$1,000,000, then a court may impose 2 additional years;
• If between $1,000,000-$2,500,000, then a court may impose 3 additional years;
• If more than $2,500,000, then a court may impose 4 additional years.

Further, beyond the sentencing penalties a court may order. The government will seize anything remotely suspected to be involved with the unlawful transactions, including bank accounts, virtual wallets, and other personal property.

Cryptocurrency

• In simple terms, cryptocurrency is a type of digital or virtual money. Although it serves as ordinary money, such as dollars, pounds, euros and yen, it has no physical counterparts.  Cryptocurrency exists only in electronic form and ownership records are stored in a digital ledger or computerized database using strong cryptography to secure transaction record entries.   Blockchain is one example of a digital ledger.

a. Blockchain

1. 1. 1. Blockchain emerged in 2016 and was purportedly invented by a person (or group of people) using the pseudonym name Satoshi Nakamoto. In the most basic terms, it is said to serve as the public transaction ledger of the cryptocurrency bitcoin.  It is a distributed ledger technology (DLT) that allows data to be stored globally on thousands of servers while letting anyone on the network to see everyone else’s entries in near real-time.  In theory, this is supposed to make it difficult for one user to gain control or manipulate the network.
      2. Given blockchain’s decentralized nature, law enforcement agencies can often bypass a lengthy process and trace a crypto transaction straight to its source. Blockchain has the potential to make law enforcement’s job much easier by offering a way around the current subpoena system.

Prohibition of Unlicensed Money Transmitting Business

A “money transmitting” business refers to the transferring of funds on behalf of the public by any and all means, including transfers within the country or to locations abroad by wire, check, draft, facsimiles, or courier. This includes currency exchanges, as well as cryptocurrency exchanges, standard ATMs and cryptocurrency ATMs, such as Bitcoin ATMs, and online websites that transfer or exchange currencies or cryptocurrencies.  Under 18 U.S.C. § 1960, those who control, manage, supervise, direct, or owns any such money transmitting businesses must register and obtain a license to operate.  A failure to register puts the entire business at risk and violators may be fined and/or imprisoned for up to 5 years. All machines, accounts, currencies, and other personal assets suspected to be involved with the money transmitting business in question may be seized by the government.

If you are under investigation or have been arrested for money laundering, cryptocurrency fraud or another financial crime, you should contact an experience federal financial crimes lawyer.   You can call our offices and schedule an appointment.