The Department of Justice (“DOJ”) has been very active in the Bank Secrecy Act (“BSA”) / Anti-Money Laundering (“AML”) space, as reflected by a recent series of individual prosecutions and corporate non-prosecution agreements (“NPAs”).  

In the first blog post in this series, we discussed a significant prosecution of an individual, and two related corporate NPAs, involving the gaming industry.  In our final post, we will discuss the prosecution and sentencing of a lawyer who allegedly became part of the fraud and money laundering scheme perpetrated by his crypto client.

In this second post, we will discuss two unusual prosecutions involving, respectively, an individual executive of a bank and an alleged AML specialist working with small financial institutions.  

As we previously noted, all of these cases, although all unique, are also united in certain ways – particularly in regards to the need for institutions and professionals to perform sufficient due diligence regarding the conduct and source of funds of high-risk clients and customers.

McVey

On January 17, the U.S. Attorney’s Office for the Western District of Missouri announced that Peter McVey, the former Vice President and Director of Treasury Services at a bank in Missouri, pled guilty to violations of 31 U.S.C. §§ 5318(h) and 5322(b) and (e) of the BSA and 18 U.S.C. § 2 for aiding and abetting the willful failure to implement and maintain an appropriate AML program.

McVey admitted that he was recruited by two bank officials to manage the bank’s automated clearing house processing systems for certain high-risk customers. The bank officials told him that the bank wanted to be a “billion dollar asset bank” as quickly as possible, and to achieve that goal, the bank planned to onboard and provide financial services to high-risk customers that had been pushed out of the system by other banks.  This stated goal reflects the market pressures on smaller banks and how they can attempt to enlist the business of customers that have been de-risked by larger banks – a business plan that can increase profits, but which also increases compliance risks.  It also reflects the related pressures which an institution’s upper management can place on employees to generate business.

The bank entered into a Memorandum of Understanding (“MOU”) with the FDIC concerning the bank’s compliance with the BSA at the start of McVey’s employment with the bank. Under the MOU, the bank was required to follow and comply with all BSA requirements and implement an appropriate AML program in accordance with 31 U.S.C. § 5318. Instead, according to the plea agreement, McVey and the bank sought out and onboarded numerous high-risk customers.

The factual basis for the plea agreement alleges two specific criminal schemes in which McVey and the bank engaged. First, the bank allegedly provided banking services to payday loan business that operated “rent-a-tribe” schemes, whereby non-tribal individual would issue high interest payday loans purportedly on behalf of Native American tribal businesses for the illegal purpose of evading usury laws.  McVey admitted that bank officials opened bank accounts for suspected “rent-a-tribe” schemes while the bank’s BSA officer was out of the office. He also admitted that he approved an agreement allowing a suspected “rent-a-tribe” entity to exceed transaction limits that were designed to prevent money laundering despite knowing that the signatures on the agreement were forged. Finally, McVey confessed that he willfully failed to file Suspicious Activity Reports (“SARs”) in connection with these “rent-a-tribe” accounts.

Second, McVey acknowledged that the bank provided banking services to entities engaged in high-risk, deceptive “sweepstakes” businesses that should have been considered high-risk customers by the bank. As part of this scheme, McVey admitted that he exchanged emails with individuals engaged in a deceptive sweepstakes relating to various checks that were flagged for review by the United States Department of the Treasury’s Office of Foreign Assets Control (“OFAC”). The deceptive sweepstakes was using PacNet Group for payment processing, an entity that McVey knew had been designated by OFAC as a significant transnational criminal organization. Despite other individuals at the bank flagging the PacNet OFAC order and other issues with the sweepstakes business, McVey tried to exempt the bank from having to file Currency Transaction Reports (“CTRs”) on the sweepstakes business. McVey also admitted that bank officials insisted that the sweepstakes business continue to have easy access to the bank’s financial services.

McVey’s plea agreement contains stipulations under the Federal Sentencing Guidelines which, if accepted by the sentencing court, will produce an “advisory” sentencing range prior to any potential downward or upward variances or departures to the calculation.  Interestingly, the plea agreement does not contain a stipulation regarding “acceptance of responsibility,” which a plea agreement typically contains. Merely on the basis of the agreement’s stipulations, and without accounting for other potential adjustments or variances, McVey faces an “advisory” range of six to twelve months of incarceration in the absence of a reduction for acceptance of responsibility; with such a reduction, his advisory range drops to zero to six months of incarceration. 

The sentencing court will have wide discretion and it is impossible to predict what sentence actually may be imposed, other than to observe that convictions under Section 5318 of the BSA – which are very rare – typically result in little or no prison time.  In stark contrast, money laundering convictions under 18 U.S.C. §§ 1956 or 1957 can result in lengthy periods of incarceration.

Asre

On January 31, the U.S. Attorney’s Office for the Eastern District of New York announced that Gyanedra Asre  (“Asre”) pleaded guilty for failing to maintain a sufficient AML program, in violation of 31 U.S.C. § 5318.  This is the same charge to which McVey pleaded guilty.  The government has described Asre described as an “AML specialist” who worked with the New York State Employees Federal Credit Union (“NYSEFCU”), a small financial institution covered by the Bank Secrecy Act (“BSA”) with a volunteer board that primarily serves New York state public employees.  On the same day, the Financial Crimes Enforcement Agency (“FinCEN”) announced that it had entered into a consent order with Asre in which he agreed to a $100,000 civil penalty for the same conduct at issue in his criminal case.  FinCEN’s consent order contains certain factual allegations that are more detailed than the factual allegations in the indictment against Asre.

According to the indictment, Asre, along with co-defendant Hana Ofer (“Ofer”), owned and managed the New York State Employees Federal Credit Union – Credit Union Service Organization LLC (“NYSEFCU-CUSO”), a registered money transmitting business affiliated with the NYSEFCU.  They also owned and managed DDH Group LLC (“DDH Group”), which allegedly was an unlicensed money transmitter that had not registered as such with FinCEN (although the indictment charged Asre with operating an unregistered money transmitting business, in violation of 18 U.S.C. § 1960, he did not plead guilty to that charge).   Asre served as the Compliance Officer for NYSEFCU for approximately 15 months. 

According to the indictment and the government press release regarding the guilty plea, Asre schemed to bring “lucrative and high-risk international financial business lines such as international currency trading to small, unsophisticated financial institutions.”  As part of this scheme, Asre represented to the NYSEFCU that he understood the risks associated with these high-risk business lines and would conduct appropriate AML oversight given his experience and training in BSA/AML regulations and compliance.  Instead, Asre allegedly caused the transfer of hundreds of millions of dollars from high-risk jurisdictions through while willfully failing to implement and maintain an AML program or file required SARs.

From approximately November 2014 to June 2016, an account held by NYSEFCU received over $100 million in bulk cash deposits of U.S. dollars from an entity described as “Mexican Bank 1” in the indictment. NYSEFCU then wired those funds to Mexican Bank 1’s accounts at a different U.S. financial institution. From September 2015 to June 2016, DDH Group cleared more than $110 million checks from “Mexican Bank 2” through NYSEFCU before passing them to Mexican Bank 2’s U.S. financial institution accounts. Asre also helped two different money transmitters move over a billion dollars’ worth of bulk cash deposits between their different accounts. These high-risk financial transactions for the money transmitters and the Mexican banks was done despite the fact that many of these transactions involved large volumes of cash from high-risk jurisdictions and sequentially-numbered checks from the same account to the same payee in close succession.

Consequently, the indictment alleges that Asre willfully failed to file any SARs in connection with the transactions described above.  The indictment further and more generally alleges that Asre willfully caused both NYSEFCU and NYSEFCU-CUSO to have insufficient AML compliance programs.  Likewise, the indictment alleges that Asre willfully failed to train employees at either institution on how to comply with the BSA and how to accurately complete and submit SARs and Currency Transaction Reports (“CTRs”).   

We previously blogged on the September 2022 guilty plea of Asre’s co-defendant, Ofer.  There, we observed in part that although the indictment alleges that vast amounts of potentially high-risk transactions flowed through the entities at issue, the indictment does not specify what, if any, specified unlawful activity the $1 billion represents – although the indictment implies that these transactions were “suspicious” because they involved Mexico; involved a lot of money and bulk currency; and involved multiple sequential checks cashed on the same day in round dollar amounts.

Asre now awaits sentencing.  Asre’s co-defendant, Ofer, was sentenced to two years’ probation on August 31, 2023 for his role in the scheme.  In its sentencing memorandum regarding Ofer, the government took the position that Ofer – who was sentenced under the same Sentencing Guideline provision referenced in McVey’s plea agreement – was entitled to reductions in his offense level for both “acceptance of responsibility” and for being a “minor participant” in the offense.  The government actually disagreed with the Probation Officer’s recommendation that Ofer should be subjected to a sentencing enhancement for misusing a “special skill.”  The government’s positions resulted in an advisory range of zero to six months of imprisonment, and the government advocated for the exact sentence which Ofer received: two years of probation. 

The government’s sentencing memorandum for Ofer contrasted Ofer with Asre by characterizing Aser as being more culpable than Ofer, and as being a true AML “specialist.”  Accordingly, the government presumably will take a more aggressive position at Asre’s sentencing.

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