FinCEN Releases First Advisory on COVID-19 Illicit Activity, Including New Red Flags for Potential COVID-19 Fraud and Scams
On May 18, 2020, the Department of Treasury's Financial Crimes Enforcement Network (FinCEN) released its first advisory to financial institutions about detecting and preventing COVID-19 fraud. The guidance provides financial institutions with 22 red flag indicators to help identify potential illicit activity related to the pandemic, such as price gouging and hoarding medical supplies; fraudulent cures, tests, and vaccines; and non-delivery scams. FinCEN plans to issue additional advisories about financial crimes related to the pandemic in the future.
On April 17, 2020, in United States v. Costanzo, the Ninth Circuit upheld the conviction of a defendant under the â€œstingâ€ money laundering provision, ruling that the defendant's bitcoin sales to undercover agents had the requisite effect on interstate commerce as the sales used internet-enabled and cellular network connected devices.
FinCEN Imposes Civil Money Penalty on Former Bank Officer for Failing to Adequately Staff Bank's AML Compliance Function and for Capping Bank's Suspicious Activity Reports
In February, 2018, FinCEN and the Office of the Comptroller of the Currency imposed a $185 million civil money penalty on U.S. Bank N.A. for willful violations of the Bank Secrecy Act (BSA), including failing to establish and implement an adequate anti-money laundering (AML) program and failing to report suspicious activity. On March 4, 2020, FinCEN imposed a $450,000 civil money penalty on the Bank's former Chief Operational Risk Officer for his role in these failures.
False Claims Act Relators Cannot Intervene in Criminal Proceedings that Result from Relator's Disclosure to Government, Third Circuit Rules
On October 28, 2019, the Third Circuit in United States v. Wegeler addressed an issue of first impression, holding that a False Claims Act (FCA) relator whose information resulted in a criminal prosecution cannot intervene in that prosecution to pursue a whistleblower award. The court held a relator can only get a recovery by proceeding with his FCA qui tam action. In so ruling, the Third Circuit joined the Ninth and Eleventh Circuits, which are the only other circuits to have considered this issue.
The Sixth Circuit recently affirmed a business man's conviction on seventeen felony tax counts, including a tax obstruction count.
On November 14, 2018, IRS Criminal Investigation Division (â€œCIDâ€) released its Annual Report for fiscal year 2018, detailing its enforcement actions for the past fiscal year. CID is the federal enforcement agency with exclusive jurisdiction over federal tax crimes, i.e., Title 26 and 31 offenses.
Felony Tax Obstruction Statute Only Applies to Ongoing or Foreseeable Proceedings, Not to Routine Non-Compliance with Tax Code Requirements, SCOTUS Clarifies
On March 21, 2018, the U.S. Supreme Court in Marinello v. United States imposed a significant limitation on the government's ability to charge and successfully convict taxpayers for obstructing administration of the Internal Revenue Code. Section 7212(a) of the IRC makes it a felony to â€œcorruptly or by forceâ€ â€œendeavor to obstruct or impede the due administration of this title.â€ In a 7-2 decision, the Court announced a narrow interpretation of â€œdue administration of [the IRC],â€ holding that due administration referred only to a particular proceeding and not general IRS administration.
Time is Running Out to Disclose Hidden Foreign Assets and Receive Amnesty from Criminal Prosecution, IRS Says
The IRS has announced that it is ending its Offshore Voluntary Disclosure Program (OVDP) in September, 2018. The OVDP currently is the only available mechanism for U.S. taxpayers with undisclosed foreign assets to come into compliance with U.S. tax and foreign asset reporting laws and eliminate the risk of related criminal exposure. Taxpayers who still have undisclosed offshore financial accounts and other assets have roughly six months to send a completed disclosure package to the IRS; the process of crafting and submitting a disclosure can be lengthy so taxpayers should not delay.
Latvian Bank Faces Exclusion as a "Primary Money Laundering Concern" Based on North Korean Ties and Other Misdeeds
On February 12, 2018, the Financial Crimes Enforcement Network ("FinCEN"), a division of the Treasury Department charged with enforcing the anti-money laundering provisions Bank Secrecy Act ("BSA"), branded ABLV Bank, AS as a "financial institution of primary money laundering concern" and announced its intention, via a notice of proposed rulemaking, to effectively exclude ABLV Bank from the U.S. financial system by prohibiting U.S. banks from opening or maintaining correspondent accounts in ABLV Bank's name or on its behalf.
The New Tax Bill: Settlement Considerations Regarding Tax Treatment of Fines, Penalties, and Restitution
Corporations and counsel negotiating settlement agreements with the United States under the False Claims Act, or other statutes that provide for monetary damages and penalties, must be aware of the impact of the recently enacted Tax Cuts and Jobs Act on the ability to take business tax deductions for these amounts. The Act made changes to tax treatment that are effective for agreements and orders that are finalized on or after December 22, 2017.
On Monday, October 30, 2017, Special Counsel Robert Mueller unsealed the indictment against former Trump campaign chairman Paul Manafort and his business associate, Richard Gates. The majority of the indictment - 7 out of 12 counts - relates to the pair's alleged failure to file FBARs, which is a violation of Title 31, not Title 26, of the U.S. Code.
Part I of this Post discussed the background and holdings of United States v. Marinello. This post focuses on the implications of the Second Circuit's construction of the omnibus clause of section 7212(a) of the Internal Revenue Code and on the potential ways in which the Supreme Court might narrow that construction.