the government seized its assets. With
more than 5. 5 million user accounts
worldwide, including some 600,000
in the U.S., there were clearly many
legitimate users whose funds were
seized as a result. To recover those
funds, users were required to satisfy
the U.S. attorney that their money was
the product of legitimate transactions.
As companies revisit their own protocols
to protect against money laundering,
they should embrace transparency.
The first step is simply making sure
that they disclose their income and file
any required account statements in
a proper and timely way. That means
reviewing what the government requires
and identifying any problem areas. The
criminal prosecution of HSBC Bank
USA N.A. illustrates the importance
of following proper procedures.
The Department of Justice accused
HSBC of willfully failing to maintain
an effective anti-money laundering
program and failing to conduct due
diligence on bank accounts. HSBC
cooperated throughout the four-year
investigation and was allowed to enter
into a deferred prosecution agreement.
One factor the court considered when
it approved the agreement was the
company’s tenfold increase in anti-money laundering staffing, from 117
full-time employees and consultants
to 1,147. The terms of the deferred
prosecution agreement also included
forfeiture of $1.26 billion and
acceptance of a corporate monitor
to ensure compliance.
The main lesson from this prosecution
is the need for transparency. A key
consideration for the court in allowing
the deferred prosecution agreement was
the change in HSBC’s due diligence.
Prior to the agreement, HSBC policies
precluded due diligence on other
HSBC affiliates. It took the approach
that HSBC “did not air the dirty linen of
one affiliate with another.” This willful
blindness made it impossible for HSBC
USA to discover key deficiencies in
HSBC Mexico’s anti-money laundering
program, which allowed hundreds of
millions of dollars of drug money to
be laundered in the United States.
When the government began its
investigation, HSBC viewed its anti-money laundering program as a cost
center that it kept lean to increase
profits. The bank, for example, did
not hire anyone to replace the North
American regional compliance officer
when he left the company in 2007.
Instead, it shifted his duties to the
North American general counsel, who
clearly was unable to do both jobs.
Companies can also require
transparency on the part of their
business partners, customers, and
clients. This will allow them to trace
the source of funds used to finance a
purchase, pay a bill, or obtain goods
offered for sale. Companies may even
Jon Barooshian is a partner at the Massachusetts
law firm of Bowditch & Dewey. He is a white-collar defense attorney with a specialty in
tax evasion, tax controversies, internal and
governmental investigations, and related criminal
and civil litigation. He has 20 years of experience
representing individuals, nonprofit organizations,
and businesses of all sizes. When necessary,
Barooshian defends clients in administrative
proceedings and at trial in state and federal courts.
want to do their own background
checks to make sure that they have
a good understanding of anyone
with whom they do business.
Corporate counsel should stay up-to-date on the Panama Papers
disclosures and other money
laundering cases. They offer a crash
course in spotting potential problems,
including the names and strategies
of popular laundering structures.
There is a seemingly endless list of anti-money laundering laws and regulations
that apply to different business entities.
The most common include the
Bank Secrecy Act of 1972; the Money
Laundering Control Act of 1986; the
Anti-Drug Abuse Act of 1988; Annunzio-Wylie Anti-Money Laundering Act of
1992; Money Laundering Suppression
Act of 1994; Money Laundering and
Financial Crimes Strategy Act of 1998;
and the USA Patriot Act of 2001.
As the Panama Papers’ revelations
continue to work their way through
the system, U.S. legislators will most
certainly be looking for new ways to
make it tougher to launder money.
Introduced in the House in 2016, the
Incorporation Transparency and Law
Enforcement Assistance Act would
require companies to disclose their
beneficial owners, providing law
enforcement with information needed
to fight corruption. This legislation,
if passed, would require the Treasury
Department to step in to collect beneficial
ownership information in cases in
which U.S. states are failing to do so.
But whether this or any other
legislation eventually passes, corporate
counsel should remember that
the U.S. government views it as a
business’s obligation to make sure
that it is operating within the law. J
Companies can also require transparency
on the part of their business
partners, customers, and clients.