US presses criminals to turn in their bankers, Citigroup reaches $7 billion mortgage settlement

This week’s crime wave covers US prosecutors’ efforts to convince criminal suspects to turn over information on the financial institutions they used, new sanctions on Russian and Ukrainian individuals by the EU and Canada, a ruling by a judge that will make it easier to bring money laundering charges for Bitcoin transactions, and much more.

Money Laundering

To build cases against financial institutions, US prosecutors are seeking criminal cooperators – In an effort to follow illicit proceeds back to financial institutions, prosecutors from the US Justice Department’s Money Laundering and Bank Integrity Unit are increasingly relying on cooperation from suspects in a wide range of criminal cases. “Asking criminals the simple question ‘Who is moving your money?’ can lead the Department of Justice to a financial institution’s doorstep,” said Johnathan Lopez, the Unit’s former deputy chief, who left for the private sector last month. A Justice Department spokesperson did name specific investigations triggered by cooperators, but stated the tactic was being employed in cases ranging from Medicare fraud, to drug trafficking and organized crime. Read more here (via Chicago Tribune).

Chinese state broadcaster takes on state bank in money laundering investigative report -Australia is now involved in allegations made by  China’s state broadcaster that the state-owned Bank of China set up a money laundering channel for the nation’s wealthiest members to illegally funnel their money out of the country. The report by CCTV was followed by investigations published with Forbes Magazine and The Australian Financial Review which reported that an Australian visa scheme launched in 2012 allowed Chinese citizens to get around government controls that prohibit nationals from sending more than US $50,000 abroad each year. The visa scheme offers investors a permanent residency if they invest more than $5 million in Australia. The CCTV investigation said Bank of China legitimized fake documents needed to send their money out of the country. Read more here (via Smart Company).

Scandal-plagued Vatican bank embarks on ‘painful but very necessary’ clean-up – Amid allegations of money laundering and international pressure to improve compliance, the Vatican’s bank is undergoing a series of AML and KYC reforms. The bank, called the Institute for Works of Religion (IOR), recently blocked accounts of more than 2,000 customers, and terminated another roughly 3,000 customer relationships. Earlier this month, the bank’s two top officials resigned, and Pope Francis has said he has not ruled out closing the bank down if remediation efforts aren’t successful. Late last year, a former Vatican accountant was arrested on charges of laundering money for wealthy Italian businessmen, including an estimated $6.8 million that reportedly moved through IOR accounts. Read more here (via the


Differences remain over Iranian nuclear program with just one week left for negotiations – Iran and the US are still unclear on terms on the Iranian nuclear program, even as a deadline for a negotiation looms just a week away. The US Secretary of State John Kerry said that disputes remain between Iran and the six nations that have agreed to provide an interim agreement of six months, which will expire next week. The US, Britain, France, Germany, Russia and China are pressing Iran to roll back its uranium enrichment and nuclear proliferation program. In exchange, the powers have suspended international sanctions on Iran’s economic sector, unfreezing millions of dollars in locked accounts abroad as part of the deal. However, the sanctions may not be lifted permanently if the Iranian government does not compromise by cutting the production of nuclear weapons significantly. The interim deal expires July 20. Read more here (via Reuters).

The EU and Canada add new individuals to sanctions lists amid ongoing turmoil in Ukraine – As insurgent groups and the Ukrainian military battle for control of regions in the country’s eastern half, the European Union and Canada announced a fresh round of sanctions targeting individuals tied to armed separatist groups last week. The EU list targeted 11 rebel commanders, bringing the total to 72 sanctioned individuals in Russia and the Ukraine, along with two Crimean energy companies. The Canadian list added 14 individuals, including many of the same persons as the EU list. The sanctions are being viewed as largely symbolic, and some US and EU officials are calling for tougher measures that would see Russian industry sectors blacklisted. Read more here and here (via the Guardian and CTV News).


In investor lawsuits against Wal-Mart, information from bribery probe is source of dispute – Walmart’s lawyers argued in Supreme Court for the right to keep internal records that are relevant in a an international bribery investigation. The retailer is accused of violating the Foreign Corrupt Practices Act and breaching compliance duties by failing to investigate and covering up allegations that employees of the company bribed Mexican officials to win construction permits. The objection to turn in the documents was brought by the retailer’s lawyers who say the records are protected by attorney-client privilege. Several institutional investors have pursued lawsuits against Walmart executives and board members implicated in the alleged bribery scandal. Read more here (The City Wire).

New Orleans mayor convicted of taking bribes during office in Katrina aftermath – The former mayor of New Orleans was sentenced to ten years in prison upon conviction of bribery and money laundering charges. Ray Nagin accepted hundreds of thousands of dollars from businessmen who wanted support from the city government. Besides accepting money, Nagin also took free vacations and truckloads of free granite for his family business during his time in office. The corruption took place over 8 years of public service of mayor, including five years in the aftermath of Hurricane Katrina (The Associated Press).



US Justice Department reaches $7 billion settlement with Citigroup over mortgage-backed securities – Saying that the Citigroup engaged in “egregious” misconduct by creating and promoting securities based on questionable mortgages, the Justice Department announced a civil settlement on July 14 requiring the US financial giant to pay $7 billion in penalties. That figure includes $2.5 billion in relief to mortgage holders, as well as a record $4 billion civil penalty to the Justice Department. An additional $300 million will go to state attorneys general, and $200 million to the FDIC. Last year, JPMorgan Chase agreed to pay $13 billion to state and federal enforcement agencies over similar charges it had sold fraudulent mortgage-backed securities. Still ongoing is the US Justice Department’s probe into Bank of America, which reportedly faces a penalty of as much as $17 billion for its role in selling mortgage-backed bonds. Read more here (via Bloomberg).

Tax Evasion and Enforcement

Latest in offshore leaks exposes accounts of British celebrities, political backers and business owners – The International Consortium of Investigative Journalists has obtained another trove of documents from offshore financial centers, this time some 20,000 names of persons with accounts held in Jersey. The records from the latest leak indicate that everyone from Hollywood actors to major donors to the UK’s ruling Conservative Party use Jersey accounts as part of tax avoidance schemes. Cracking down on offshore tax evasion and improving corporate transparency have become major initiatives in the UK. Last year, Prime Minister David Cameron announced a system of automatic financial account information exchange between the UK and its territories and Crown Dependencies, which include Jersey. Read more here (via ICIJ).

Cybercrime and Virtual Currencies

Is Bitcoin money? It’s close enough, says judge in Silk Road case – After US law enforcement arrested Ross Ulbricht on money laundering charges, defense attorneys for the alleged creator of online drug bazaar Silk Road came up with a novel defense. Ulbricht can’t be charged with money laundering, they argued in April in a federal courtroom in Manhattan, because bitcoins aren’t money. Judge Katherine Forrest was not impressed with that claim, dismissing the argument in a ruling last week. “The [US] money laundering statute is broad enough to encompass use of Bitcoins in financial transactions,” she stated, noting that bitcoins were used as the sole currency for transactions on Silk Road. The IRS decision to treat bitcoins as property doesn’t affect their coverage by money laundering laws, Judge Forrest ruled. The case sets a precedent that will likely bolster current and future efforts by US authorities to prosecute money laundering through virtual currencies. Read more here (via Wired).

Large amounts of military information on weapons and tools stolen by Chinese businessman – The US is suing a Chinese businessman for allegedly stealing important US military information from the computers at Boeing. The Justice Department announced that Su Bin is being charged for corporate espionage and selling the information to companies in China. The alleged attack on a major US military contractor was orchestrated through emails with a malicious piece of code that allows hackers to enter corporate computer systems. Read more here  (The New York Times).