[1]The DOJ is increasingly charging anti-money laundering (AML) violations in the context of FCPA violations. But AML laws are complex, and outside the scope of many FCPA compliance officers. How do AML problems arise in the FCPA context? Given this enforcement focus, and the significant penalties that can result from AML violations (as discussed in Part 1 [2]), FCPA compliance officials should have a working knowledge of how such violations can occur in the FCPA context.
Criminal Anti-Money Laundering Prohibitions.
When AML violations are charged in the context of FCPA cases, they generally allege criminal violations of the Money Laundering Control Act of 1986 (the “MLCA”). That Act has two parts – codified as 18 USC sections 1956 and 1957.
Section 1956 prohibits, in simplified terms:
- conducting a financial transaction involving funds generated by specified unlawful activity in order to (i) promote additional specified unlawful activity, (ii) conceal the nature, source, or ownership of the funds, (iii) evade State or federal reporting requirements, or (iv) evade taxes on the income produced by the specified unlawful activity; and
- transferring or transporting funds generated by specified unlawful activity into or out of the United States in order to (i) promote such activity; (ii) conceal the nature, source, or ownership of the proceeds; or (iii) evade State or federal reporting requirements.
Section 1957 prohibits (also in simplified terms):
- Spending or depositing more than $10,000 in money derived from specified unlawful activities.
The “specified criminal activities” referred to above is defined to include a list of State, federal and foreign crimes – a list that includes both bribery and felony violations of the FCPA.
FCPA Cases charging AML Violations
The connection between the MLCA’s criminal prohibitions and the FCPA is evident from cases that have arisen in the Americas and the Caribbean.
In BANDES [3] (Venezuela, 2013) Two U.S. executives and one Venezuelan government official were charged with violations of section 1956. All three are alleged to have transferred bribe payments internationally, with the intent to “promote” FCPA violations. The Complaint describes the specific transfers as follows:
- the U.S. persons “… caused approximately $509,250 to be wire transferred from the United States to Switzerland, to carry on the bribery scheme…” and
- one of the U.S. persons “…acting as an intermediary, caused certain funds to be sent from the Broker-Dealer in New York, New York to an account in Switzerland controlled by [the Venezuelan official], to carry on the bribery scheme…”
“Promotional” money laundering was also charged in Alcatel [4] (Costa Rica, 2007) and Latin Node [5] (Honduras, 2010). In both cases, senior managers were charged with violations of MLCA section 1956 because they made international money transfers with the intent to “promote” violations of the FCPA. In effect, they were charged with AML violations because their bribe payments were made through international money transfers.
In contrast, “concealment” money laundering was charged in Cinergy [6] (Haiti, 2009 and 2012). In that case six people – including two Haitian government officials – and one legal entity were charged with violations of MCLA sections 1956 and 1957. The 1956 violations involved financial transactions made to conceal the nature of bribe payments made in violation of the FCPA, Haitian bribery laws and wire fraud statutes. This concealment was carried out through various acts including:
- Payments made for fictional “consulting services” to intermediaries for the government officials; and
- Recording such payments as “commissions” or “consulting fees” on the financial and accounting documents of a U.S. company.
The 1957 charges were based on the size of certain transactions, since section 1957 makes simply spending or depositing tainted money in amounts greater than $10,000 a crime, regardless of “promotional”, “concealment” or other intent.
Overlap between violations of the MLCA and the FCPA
These cases show that the movement of money used to pay bribes can easily result in violations of criminal money laundering laws. This exposes the people involved to significantly greater penalties than FCPA charges alone. Other key interactions between these laws include:
- Establishing criminal penalties for misrepresenting bribes in company accounts – a type of activity generally enforced civilly under the books and records provisions of the FCPA.
- Extending jurisdiction in international bribery cases to foreign government officials, who are not subject to the FCPA.
The next post in this series will address the complications of bringing criminal money laundering charges against foreign officials in U.S. courts.
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