Why Russia-probe investigators are looking at anti-money laundering database

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  • Michael Zeldin: Senate and House Intelligence Committees conducting Russia probe have gained access to financial data that is compiled by the Treasury Department
  • Investigators could use the documents to determine if there were any financial transactions that ran afoul of the law, writes Michael Zeldin

Michael Zeldin, a CNN legal analyst, has served as a federal prosecutor in the Criminal Division of the Department of Justice and was a special counsel to then-Assistant Attorney General Robert Mueller. The opinions expressed in this commentary are his own.

(CNN)It has been reported that the Senate and House Intelligence committees investigating possible ties between Trump campaign officials and the Russians have begun to receive access to financial data from the Treasury Department's Financial Crimes Enforcement Network (FinCEN).

FinCEN's mission is to safeguard the financial system from illicit use and to combat money laundering and promote national security through the collection, analysis, and dissemination of financial intelligence and the strategic use of the government's enforcement authority.
Michael Zeldin
It does this, in part, by maintaining a database of over 200 million reports of financial transactions.
    These reports come from more than 80,000 financial institutions and 500,000 individuals who maintain foreign bank accounts.
    FinCEN makes this information available to law enforcement and other government authorities for use in criminal, tax and regulatory investigations and proceedings and in intelligence and counterintelligence activities to protect against international terrorism.
    At first glance, the FinCEN data would appear to be unrelated to the central question of whether there was collusion to influence the outcome of the 2016 presidential election.
    While no evidence has been released to date that bears on this question, there are good reasons to think that House investigators and Special Counsel Robert Mueller will look closely at the FinCEN data to determine its relevance to their investigations.

    How might FinCEN data be relevant?

    The House Committee on Financial Services in its request to FinCEN for documents indicated that it is interested in the FinCEN data to assist in determining the extent of any undue influence on the President and his administration from Russian government officials, oligarchs and organized crime leaders, in connection with the 2016 presidential election.
    The committee asked for certain records that may shed light on President Trump's financial transactions with, and business ties to, Russia. That includes information about the financial accounts of President Trump, his family members, and his business associates, and any suspicious transactions relating to the Trump Organization, including the Taj Mahal Casino Resort, in which Trump retained an ownership or other financial interest from 1990 through 2014, when the casino resort was purchased by Carl Icahn.
    (The Trump Taj Mahal Casino was assessed a civil money penalty by FinCEN in 2015 for willfully violating the Bank Secrecy Act's program, reporting, and recordkeeping requirements from 2010 through 2012. Many of these violations were cited by the Internal Revenue Service in previous examinations of Trump Taj Mahal dating back to 2003. It is not publicly known whether any of the activity related in any way to the subject of the current investigation.)

    US money laundering laws

    There are two primary types of money laundering laws in the United States: (1) laws that make money laundering itself a crime, found in title 18 United State Code Sections 1956 and 1957; and (2) laws that assist in the investigation and prosecution of money laundering, terrorist financing, and other criminal activity, found in Title 31 United States Code Section 5311 and implementing regulations (also known as The Bank Secrecy Act or BSA), including requirements to report large currency transactions, suspicious activity, foreign financial accounts, and high-end residential real estate transactions.
    The Money Laundering Statutes
    Broadly speaking, under the criminal money laundering statutes, it is a crime for any person to engage knowingly in a financial transaction with knowledge that the transaction involves the proceeds of criminal activity. The courts have interpreted knowledge to include actual knowledge and willful blindness -- deliberately avoiding gaining knowledge when faced with a high likelihood of criminal activity, i.e.,ignoring red flags of suspicious activity.
    For example, if a US person were to accept payment for a condominium with knowledge that the source of the funds used in the transaction was derived from some form of criminal activity, then that person potentially could be charged with violating the money laundering statutes.
    The Bank Secrecy Act
    The Bank Secrecy Act requires certain financial institutions (for example, banks, broker dealers, and casinos) to develop, implement and maintain anti-money laundering compliance programs. Financial institutions also are required to file a number of reports and maintain a variety of records, including currency transactions reports on cash transactions over $10,000 (CTRs) and suspicious activity reports (SARs).
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    SARs generally must be filed when a financial institution knows, suspects or has reason to suspect that a transaction: (1) involves money laundering activity or a violation of the Bank Secrecy Act, including structuring of transactions to evade the CTR requirement; (2) has no business or apparent lawful purpose or is not the sort of transaction in which the particular customer would normally be expected to engage; or (3) involves the use of the financial institution to facilitate criminal activity.
    All persons, including financial institutions, other legal entities, and individuals, are required to file an annual report of their foreign financial accounts if the aggregate value in the accounts at any time during the calendar year exceeded $10,000 (FBARs).
    Therefore, if any CTRs, SARs or FBARs were filed relating to Trump, his family members, his associates, or the Trump organization, these reports would be included in the FinCEN data. This, in turn, could provide insights into the transactions and investigative leads in furtherance of Congress' and/or Mueller's investigations.

    Reporting of high-end real estate purchases

    Law enforcement agencies and congressional oversight committees have long warned of the money laundering and terrorist financing threat posed by the infusion of illicit foreign sourced money into high-end real estate in the United States.
    As one of the responses taken by law enforcement to address this threat, FinCEN, in 2016, issued Geographic Targeting Orders (GTOs) which temporarily require certain U.S. title insurance companies in a number of major geographic areas to identify the people behind legal entities used to pay "all cash" for high-end residential real estate.
    These areas include all of the boroughs of New York City; the counties of Miami-Dade, Broward, and Palm Beach in Florida; the counties of Los Angeles, San Diego, San Francisco, San Mateo, and Santa Clara in California, and the Texas county of Bexar (San Antonio).
    FinCEN's concern is that all-cash purchases -- i.e., those without bank financing -- may be conducted by individuals attempting to hide their identity and assets by purchasing residential properties through limited liability companies (LLCs) or other opaque structures.
    Donald Trump, Jr., executive vice president of development and acquisitions for the Trump real estate businesses, told the "Bridging U.S. and Emerging Markets Real Estate" conference in Manhattan in September 2008:
    "[I]n terms of high-end product influx into the United States, Russians make up a pretty disproportionate cross-section of a lot of our assets; say in Dubai, and certainly with our project in SoHo and anywhere in New York. We see a lot of money pouring in from Russia."
    The FinCEN data might shed light on the sources of these investment dollars and the identities of the people involved in the real estate purchases.
    Beyond the inquiry into the direct investment by Russians in Trump properties, there is interest in the relationship between Trump business interests and Deutsche Bank. As has been reported by Donna Borak for CNN Money, Deutsche Bank, which recently paid significant penalties relating to its involvement in an alleged Russian money-laundering scheme, is "in the crosshairs of Democrats looking into the bank's ties to President Trump."
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    Specifically, in the House committee's May 23, 2017 letter seeking access to FinCEN data, the committee raised with Treasury the need for information relating to President Trump and his alleged financial ties to Russia, and information pertaining to "President Trump's biggest lender and the only bank known to lend to the President after his bankruptcies, Deutsche Bank."

    Conclusion

    How these aspects of the overall investigation will roll out in the hands of congressional investigators and, perhaps, Special Counsel Mueller, are as-yet unknown, but looking at the level of interest by Congress and the expertise of the team of lawyers Mueller has assembled, one can expect a careful and through review of the FinCEN data. To the extent that any suspicious transactions are identified, one can be sure that the investigators will follow the money to see where the trail leads.