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.
In a letter released Thursday, April 16, 2020, the U.S. Attorney for the Eastern District of Pennsylvania called on area hospitals, health systems, and other providers to join the government's fight against coronavirus-related fraud. Hospitals, providers, and other health care institutions are on the front lines of the coronavirus pandemic and know first-hand the challenges in obtaining critical supplies. They also are in a unique position to identify COVID-19-related fraud, such as offers to sell non-existent or fake equipment and price gouging of supplies.
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.
Third Circuit: Imprisonment for Refusing an Order to Decrypt a Device Cannot Exceed 18 Months - Even When Alleged Related Criminal Conduct is Involved
On February 6, 2020, the Third Circuit ordered Francis Rawls released from confinement for civil contempt, where he has been held for over four years - since September 30, 2015.Â Rawls was imprisoned for refusing to comply with a Magistrate Judge's order that he use his password to decrypt his electronic devices, which the government claimed contained child pornography.Â Although the Third Circuit did not hold that Rawls could not be compelled to decrypt his devices, it did rule that Rawls could not be imprisoned for contempt as a "Recalcitrant Witness" for more than eighteen months.
PA Supreme Court: Grand Jury Reports Cannot Be Used Solely to Punish or Shame Individuals Accused of Child Sex Abuse and Similar Offenses
On January 22, 2020, in In re: Grand Jury Investigation No. 18, 2020 Pa. LEXIS 338, the Pennsylvania Supreme Court considered whether the report of an empaneled investigating grand jury could be made public under Pennsylvania's Investigating Grand Jury Act. The report at issue accused an individual of child sex abuse and similar serious offenses, which could not be prosecuted because the alleged conduct occurred too long ago. Relying on the Act's plain language, the Pennsylvania Supreme Court ruled that the report could not be made public because it did not fit the Act's definition of an "investigating grand jury report."
Third Circuit: Non-Disclosure Orders to Prevent Revealing Receipt of Grand Jury Subpoenas Allowed Under First Amendment
On January 10, 2020, the Third Circuit Court of Appeals considered whether a non-disclosure order, entered pursuant to the Stored Communications Act, preventing an electronic service provider from informing a third party that it received a grand jury subpoena, runs afoul of the First Amendment. In In re: Subpoena 2018R00776, No. 19-3124, the Third Circuit held that despite constituting a content-based, prior restriction on the speech of a grand jury witness - who is not typically bound by grand jury secrecy - non-disclosure orders withstand strict scrutiny given the government's compelling interest in maintaining grand jury secrecy.
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.
Signs of Increased Prosecution of Executives Illustrate the Yates Memo's Staying Power and Increased Risks for Corporate Owners and Insiders
When originally issued in September 2015, the "Yates Memo" was an effort by the U.S. DOJ and then-DAG Sally Yates to strengthen the Department's commitment to holding executives and other responsible individuals at corporations criminally liable for their companies' malfeasance. Although the Yates Memo's future under the current Administration has been at times uncertain, a series of recent prosecutions of corporate insiders suggests that the principles the Yates Memo embodies are here to stay.
On March 12, 2019, the DOJ unveiled "Operation Varsity Blues," its nationwide college admissions bribery and entrance exam cheating investigation. Critical for DOJ is evidence gathered from recorded conversations between William Singer and coaches, his clients, and others while he wore a government wire. I recently examined this aspect of the investigation in an article for PACDL's For the Defense.
Pennsylvania Supreme Court Puts Employers on Notice: You Can Be Liable When Hackers Breach Your Systems
The Pennsylvania Supreme Court has recast two key legal principles that have stood as crucial bulwarks against liability for employers and other businesses that find themselves hacked by malicious third parties. The decision, Dittman v. UPMC, has the potential to usher in a new era of data breach litigation in Pennsylvania. It stands as a strong warning to Pennsylvania employers that they should act now to review and assess the adequacy of their data security.