Use of US Banks as Clearinghouses for Dollar-Denominated Wire Transfers Between Non-US Companies and Non-US Accounts Supported Prosecution Based on Money Laundering and Transportation of Stolen Property Even Though Defendant Claimed to be Unaware of The US Connection

The World in U.S. Courts: Summer 2017 - White Collar Criminal Law/Money Laundering | May.10.2017

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United States v. Prevezon Holdings, Ltd., US District Court for the Southern District of New York, May 10, 2017

The defendants in this criminal case were charged with money laundering arising from a US$230 million fraud in Russia that allegedly financed the purchase of property in Manhattan. Money laundering requires, among other things, proof that the defendant committed a statutorily-defined “Specified Unlawful Activity” (SUA), which in this case was transportation of stolen property in violation of 18 U.S.C. 2314. The relevant SUAs involved dollar-denominated money transfers between non-US companies and non-US bank accounts that passed through US banks. The defendants argued that Section 2314 should not be given extraterritorial effect and therefore does not reach the transactions whose only contact with the US was “incidental” and outside their knowledge.

As an initial matter, the District Court in New York agreed that Section 2314 should not be given extraterritorial effect—the statute’s simple reference to transactions in “foreign commerce” failing to be the kind of clear indication of intent to apply extraterritorially that is required under current law. But the Court observed further that international transactions might still “touch and concern” the US sufficiently to be considered US domestic, an inquiry it also described as asking whether “the conduct relevant to the statute’s focus occurred” in the US. Consistent with prior precedent, the Court concluded that the “use of correspondent banks in foreign transactions between foreign parties,” “especially where bank accounts are the principal means through which the relevant conduct arises,” satisfied the test. The Court considered it irrelevant that “no wrongdoer purposefully availed himself of the services of a U.S. bank—or knew that such banks were being used,” as a contrary ruling would undermine the remedial purposes of the statute.

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