FCPAméricas Blog
FCPA Meets AML (Part 1: What FCPA compliance officers should know about AML)
10.24.2013
The DOJ is increasingly charging violations of anti-money laundering (AML) laws in conjunction with FCPA violations. This trend appears to have started in 2007 when anti-money laundering violations were charged in the Alcatel, Willbros and Green matters. Since then, violations of AML laws have been charged against numerous individuals in connection with at least eight FCPA matters. This trend seems likely to continue – as noted in the DOJ’s FCPA Resource Guide, “many FCPA cases also involve violations of anti-money laundering statutes.” [ed. FCPAméricas has discussed Brazilian AML laws here.]
What do FCPA compliance professionals need to understand about AML principles and regulations? The following points are a place to start – subsequent posts in this series will go into more detail on specific issues.
1. Money laundering is not corruption. Money laundering is related to corruption but is not the same thing. It is the next step in the criminal process: disguising of the proceeds of crimes, like corruption, so they appear to come from legitimate sources. This allows the money launderer – who would otherwise have difficulty explaining the illicit wealth – to use the funds in the regular economy. Anti-money laundering regulations seek to detect transactions that could represent efforts to launder money.
2. There are lots of sources of dirty money. AML regulations seek to control illicit funds resulting from various illicit activities. Corruption is only one of those predicate offenses. The crime most associated with money laundering is drug trafficking, but other sources of illicit funds include financial fraud, human trafficking and tax evasion. The underlying crimes that can be the basis for money laundering offenses vary by country, but are generally consistent with the definition of “serious crime” established by the Financial Action Task Force, an international organization that sets international legal and regulatory standards to combat money laundering and terrorist financing.
3. Financial institutions are the focus. AML regulations primarily focus on the gatekeepers to the financial system: banks and “non-bank financial institutions”. The latter category includes money services businesses, insurance companies, casinos, credit card system operators and others. AML rules include requirements for all financial institutions to have AML compliance programs and conduct “Know Your Customer” due diligence (KYC) on clients. When risks are high, AML rules require enhanced due diligence and other heightened controls.
4. AML penalties are steep. Administrative penalties for AML violations are levied against banks and other financial institutions. Such penalties range from Orders to Cease and Desist to what is known as the “Death Penalty” – revocation of a depositary institution’s banking license. Even penalties less than the “death penalty” can be significant. In December 2012, HSBC entered into a $1.9 billion dollar settlement with the U.S. Department of Justice for anti money laundering and sanctions violations.
Money laundering is also a criminal offense in most countries. In the United States, criminal penalties for individuals range from up to 20 years in prison and fines of up to $500,000 for each violation. Note that these are significantly greater penalties than those established for violations of the FCPA, i.e., up to 5 years in prison and $100,000 per violation.
5. Foreign government officials can be prosecuted. Another notable contrast with the FCPA is that AML violations can be charged against foreign government officials. The DOJ’s FCPA Resource Guide states that “… foreign officials cannot be prosecuted for FCPA violations” but also notes that former government officials were convicted of money laundering violations in an FCPA case (the Cinergy case in Haiti). The DOJ also brought criminal money laundering charges against current government officials in the BANDES matter in Venezuela [ed. FCPAméricas discussed this case here].
Part II in this series will discuss the type of conduct that can lead to both FCPA and AML violations. Part III will address implications of criminally charging foreign government officials in U.S. courts for money laundering.
The opinions expressed in this post are those of the author in his or her individual capacity, and do not necessarily represent the views of anyone else, including the entities with which the author is affiliated, the author`s employers, other contributors, FCPAméricas, or its advertisers. The information in the FCPAméricas blog is intended for public discussion and educational purposes only. It is not intended to provide legal advice to its readers and does not create an attorney-client relationship. It does not seek to describe or convey the quality of legal services. FCPAméricas encourages readers to seek qualified legal counsel regarding anti-corruption laws or any other legal issue. FCPAméricas gives permission to link, post, distribute, or reference this article for any lawful purpose, provided attribution is made to the author and to FCPAméricas LLC.
© 2013 FCPAméricas, LLC
Post authored by Matthew Fowler, FCPAméricas Contributor
Comments
October 24th, 2013 at 8:27 pm
In general, I think there is far too much attention paid to money laundering — law enforcement should focus more on the underlying combating the underlying offenses.
The term “money laundering” is in fact misleading and somewhat of an anachronism. What really is the concern is moving value.
Governmental actions leading to the hiring of corporate compliance officers is a way for governments to “deputize” individuals working in the private sector, without having to raise taxes.
Note that unlike the British Bribery Act, the payment of private sector bribes is not within the scope of the FCPA.
Still, kickbacks in the private sector may be subject to prosecution under other laws (if they are uncovered and indeed result in prosecution and conviction.)
I am aware of no country where the receipt of the bribe is not a crime, but query how the term “bribe” is defined.
Large bribery cases in most non-OECD countries only occur after there is a change in governments (not usually the result of elections, unless the former ruler dies or is killed).
While billion dollar fines in the cases of money laundering are without a doubt large, the fines need to be understood within a particular context. Settling a case may save a company massive legal fees that are far greater than the fines imposed and the value of the decline in the value of the stock convicted of the crime.
Hence, we are still usually in the realm of business decisions rather than subjecting the defendants to justice.
November 7th, 2013 at 3:30 am
Excellent observation