Bank account seizures for money laundering by US law enforcement

May 2015 | EXPERT BRIEFING | FRAUD & CORRUPTION

financierworldwide.com

It is increasingly common for companies to realise that the funds in their corporate bank accounts have been seized, without any advance notice, by a Federal law enforcement agency, especially Homeland Security Investigations, US Department of Homeland Security (DHS). Typically, an account owner discovers this only when checking its account online and seeing the words ‘Seizure Warrant’, or being formally notified by letter from the local bank branch. Fortunately, there is a procedure to get your money back.

If you are not familiar with the words ‘trade-based money laundering’ or ‘Black Market Peso Exchange’, then you are certainly not alone. Unfortunately, many companies realise too late that their otherwise innocent international business transactions make their activities suspicious to law enforcement authorities. For example, companies that sell merchandise overseas and are paid for that merchandise in cash, money orders or by wire transfers from third parties are automatically targeted.

All banks are required to file a suspicious activity report known as a ‘SAR’ with the Financial Crimes Enforcement Center (FinCEN). SARs are filed whenever there appears to be a pattern of less than $10,000 cash deposits into an account, especially when the deposits have been made at multiple branches on the same day – a practice known as ‘structuring’. Structuring occurs because the depositor or bank account holder is attempting to avoid the filing by the bank of a Currency Transaction Report (CTR) with the Financial Crimes Enforcement Network (FinCEN), US Department of the Treasury (see 31 CFR 1010.314. A CTR is FinCen Form 104).

Whenever a bank suspects that its depositor or customer is depositing $10,000 or less to avoid the bank filing the CTR, the bank often instead files a Suspicious Activity Report (SAR). The SAR reports are analysed by FinCEN, and often referred to the Drug Enforcement Administration (DEA) or Homeland Security Investigations for investigation. Some of the investigations result in seizures of bank accounts as mentioned above. If wire transfers are coming from countries known for drug trafficking such as Colombia, Mexico, Venezuela and Peru, and those wire transfers are from a company which or person who was not the actual buyer of the merchandise sold and shipped from the United States, such transactions are also targeted.

The Black Market Peso Exchange is a large-scale, complex money laundering system that is used extensively by Colombian drug cartels to launder the proceeds of United States narcotics sales. The system is called the Black Market Peso Exchange (BMPE) because its purpose is to facilitate ‘swaps’ of dollars owned by the cartels in the United States for pesos already in Colombia, by selling the dollars to Colombian businessmen who are seeking to buy United States goods for export.

Once you realise the money has been seized, you should also realise the bank will not have any helpful information to assist you in retrieving the funds taken by the government. At a minimum, you must demand from the bank a copy of a document issued by a Federal Court and signed by a Federal Judge entitled ‘Search Warrant’, ‘Seizure Warrant’, or ‘Search and Seizure Warrant’. That document had to be served upon the bank in order for the bank to allow the money to be seized. The warrant identifies the bank account number, the law enforcement agency, the District Court which issued the warrant, and a court case number. It may also include the name and phone number of the law enforcement agent who served the warrant upon the bank. In any case, it is recommended that your attorney promptly contact either the law enforcement agent, or better yet, the assigned Assistant US Attorney, Asset Forfeiture Section, Civil Division, US Attorney’s Office, in the location from where the warrant was issued. For example, the warrant may have been issued by a court in New York but served upon a bank branch in Florida where the account was located. In that case, the attorney needs to contact the agent or prosecutor in New York.

Please note that this is a civil forfeiture, not criminal, matter. The account holder from whose account the funds were taken is not being charged with any crime. The allegation by the government is that somehow the seized money in the account is proceeds of some unlawful activity and subject to seizure pursuant to 18 U.S.C. 1956 and 18 U.S.C. 981. The purpose of any contact with the government representatives by your attorney is to persuade the government that the seized money was not the proceeds of any unlawful activity, and to return all of the seized funds. This may be accomplished without expensive and extensive litigation through either the administrative petition process with the seizing agency or through a Settlement Agreement with the US Attorney’s Office that is filed with the Court that issued the Seizure Warrant in the first place.

In the administrative seizure process, the account holder will be issued a Notice of Seizure which is a formal letter advising what was seized, when it was seized and the process to attempt to challenge the seizure. For example, if the Warrant was served by the Homeland Security Investigations (formerly known as Immigration and Customs Enforcement (ICE)), the Notice of Seizure will be issued by the Fines, Penalties and Forfeitures Office of US Customs and Border Protection from the service port closest to the court location from which the warrant was issued. The Notice of Seizure advises that the account holder may submit a petition within 30 days of the date of the letter to request the return of the seized funds. To be successful, the petition must argue the appropriate law and state the relevant facts, including the legitimate source of the seized funds.

Our preference is always to request a meeting with the Special Agent or the paralegal specialist from the Fines, Penalties and Forfeitures Office to maximise the communication between the petitioner and the seizing agency, to fully explain all details to persuade the agency to release the seized funds, and to expedite the release of the seized money. Often, a face to face meeting with the assigned Assistant US Attorney by the petitioner and its attorney is very helpful in these situations when arguing that the person is an ‘innocent owner’ of the seized funds. Although not legally required, a petitioner or claimant of the seized bank account funds should not meet with a Special Agent or an Assistant US Attorney without the benefit of the participation of legal counsel experienced in such matters.

The media have increasingly been reporting abuses by the Federal Government agencies in seizing merchandise and bank accounts using the civil seizure and forfeiture process. Because the government’s burden of proof is much lower in a forfeiture proceeding than in a criminal proceeding, courts may hold that property is forfeited by illegal activity even when the Federal Government cannot raise enough evidence to obtain a criminal conviction. Nevertheless, unless the US Department of Justice or the United States Congress change the policy or the laws regarding the civil seizure and forfeiture process, Federal Government agencies will continue to seize money from bank accounts which are suspected of being proceeds of illegal activities, especially regarding allegations of cash ‘structuring’ or cash ‘smurfing’ or the receipt of wire transfers from either third party companies or money exchange houses located overseas.

Peter Quinter is a shareholder at GrayRobinson and chair of the Customs and International Trade Law Group. He can be contacted on +1 (305) 416 6960 or by email: peter.quinter@gray-robinson.com.

Peter Quinter

GrayRobinson