US Once Again Proves It’s Best Place to Launder Money

US Once Again Proves It’s Best Place to Launder Money

By Mark Nestmann • May 30, 2017

Last week, the US Department of Justice (DOJ) agreed to settle a long-standing money laundering investigation against Citigroup, one of the largest banks in the US, without bringing criminal charges.

Instead, the bank will pay $97.4 million to settle and admit to criminal misconduct. The DOJ claims that Banamex USA, a division of Citigroup, laundered billions of dollars for Mexican drug cartels. That payment is chump change for Citigroup –  less than three days of profits.

Citigroup willfully failed to file Suspicious Activity Reports (SARs) for suspected money laundering by Mexican drug cartels. The bank admitted to the following activity, according to the DOJ:

“From at least 2007 until at least 2012, BUSA [Banamex USA] processed more than 30 million remittance transactions to Mexico with a total value of more than $8.8 billion. During the same period, BUSA’s monitoring system issued more than 18,000 alerts involving more than $142 million in potentially suspicious remittance transactions. BUSA, however, conducted fewer than 10 investigations and filed only nine SARs in connection with these 18,000-plus alerts, filing no SARs on remittance transactions between 2010 and 2012.”

Citigroup has a long history of money laundering and other criminal misconduct. Given that background, it might seem reasonable to expect the DOJ would have imposed harsher sanctions.

But I wasn’t surprised. For decades, Citigroup and other “too-big-to-jail” banks have been given one slap on the wrist after another by both Democrat and Republican administrations – even after admitting to criminal misconduct.

In 2015, after another money-laundering investigation of Banamex, Citigroup paid a $140 million fine to the Federal Deposit Insurance Corporation. That same year, Citicorp, another Citigroup unit, pleaded guilty to a felony charge of rigging foreign currency trading and paid more than $1.2 billion in fines.

In 2014, Citigroup paid $7 billion to settle an investigation into the bank’s sale of mortgage-backed securities prior to the 2007-2009 global financial crisis.  The collapse of this market helped spark the bank’s collapse in 2008, leading to a $300 billion taxpayer-funded bailout.

In the 1980s and 1990s, the private banking department of Citibank, Citigroup’s commercial division, provided customized money-laundering services for well-heeled elected officials and their families. The list of clients who used Citibank’s services includes the brother of a former Mexican president; the husband of a former prime minister of Pakistan; the former president of Gabon; sons of the former military leader of the Congo; and many more.

But Citigroup is not the only US megabank that has profited from criminal enterprises. A case in point is HSBC Holdings. For decades, the US division of this banking giant provided sophisticated money-laundering services to Mexican drug cartels, Islamic terror groups, Iran, and North Korea.

Again, you would expect a DOJ investigation to result in the indictment of top-level executives, followed by long prison sentences. But that’s not what happened. No one at HSBC was charged with any criminal offense. Instead, in 2012, the DOJ announced that HSBC would pay a $1.9 billion fine. This settlement was the third in a decade in relation to HCBC’s lax money-laundering controls. The fine amounted to about a month’s worth of profits for the bank.

Standard Chartered Bank (SCB) is another too-big-to-jail bank. In 2012, it admitted to a years-long conspiracy to launder money for Iran, Sudan, and Libya, among other countries, involving at least $227 million. Rather than indict the bank or bank executives, the DOJ fined the bank the amount allegedly laundered: $227 million. That’s about two weeks of profit for the bank.

Contrast this white-glove treatment with that which the DOJ accorded to Wegelin, Switzerland’s oldest bank. In 2012, the same year the DOJ slapped SCB and HSBC’s wrists, Wegelin was indicted for allegedly conspiring to help US taxpayers open and maintain unreported foreign accounts.  The DOJ also indicted three Wegelin executives. Wegelin pleaded guilty in 2013 and paid a total of $74 million in fines and restitution. The bank also agreed to close down and shut its doors for good in 2013, after more than 270 years in business. Wegelin’s total profits from transactions involving undeclared US accounts came to about $5.2 million. That’s a tiny fraction of the profits Citigroup, SCB, and other too-big-to-jail banks have generated from their laundering activities.

These examples demonstrate that the DOJ has no intention to end money laundering by US banks. Instead, the DOJ helps too-big-to-jail banks pursue a monopoly in money laundering by holding non-US financial institutions such as Wegelin to a much higher standard than it enforces at home.

That is, unless you’re not a megabank. In that case, the DOJ will steamroll you. If you don’t believe me, just ask Georgia gun shop owner Andrew Clyde. He had the misfortune of violating an obscure 1986 law that prohibits the “structuring” of cash transactions.

The anti-structuring statute stems from the requirement of US financial institutions to file a Currency Transaction Report with the Treasury when a customer deposits or withdraws more than $10,000 in cash.  It’s illegal to convert a single cash transaction into multiple transactions to avoid this requirement. This is the crime of structuring.  If you’re found guilty, you could face a five-year prison sentence and a $250,000 fine.

The law also allows prosecutors to seize every dime in your structured bank account under ultra-lax civil forfeiture laws even if they never bother to indict you. The government can even confiscate legally earned, after-tax earnings from your business or any other source.

Andrew Clyde didn't know about the $10,000 reporting law or the structuring statute. Over a 10-month period ending in March 2013, Clyde made 109 deposits totaling $940,313. All of them were under $10,000. In April 2013, the IRS accused him of structuring those deposits to avoid the reporting law. While he was never indicted, the IRS confiscated all the funds in his account. After paying nearly $150,000 in legal fees, Clyde settled the case by forfeiting $50,000 to the IRS.

A 2017 investigation by the Treasury Department concluded that more than 90% of structuring-related civil forfeitures involved funds that were acquired legally. The only possible conclusion is that the US legal framework developed to combat money laundering is used routinely against ordinary citizens – but never against too-big-to-jail banks.

Our ongoing recommendation to go offshore isn’t a luxury. It’s a necessity if you want to preserve your assets. And with the dollar at close to a 10-year high, there isn’t a better time to begin your offshore journey.

Protecting your assets (and yourself) against any threat - from the government, the IRS or a frivolous lawsuit - is something The Nestmann Group has helped more than 15,000 Americans do over the last 30 years.

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About The Author

Since 1990, Mark Nestmann has helped thousands of clients seeking wealth preservation and international tax planning solutions. He is the author of highly acclaimed Lifeboat Strategy and other books & reports dealing with these subjects.

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