Case Highlights the Role of Correspondent Bank Accounts and Circumvention of AML Programs Court Order Describes Seizure as a Reckoning for Atrocities in the Ukraine
On April 4, 2022, Magistrate Judge Zia M. Faruqui of the United States District Court for the District of Columbia granted the governments Application for Warrant to Seize Property Subject to Forfeiture, finding that there was probable cause to believe that the yacht Tango, a 255-foot luxury yacht allegedly owned by sanctioned Russian oligarch Viktor Vekselberg, was subject to forfeiture based on alleged violations of U.S. bank fraud, money laundering, and sanction statutes. The Tango is located in a shipyard on the Spanish island of Mallorca, and the warrant and subsequent seizure by the United States and its allies was part of Task Force KleptoCapture, an interagency law enforcement task force designed to help deploy U.S. prosecutorial and law enforcement resources to identify sanctions evasion and related criminal conduct.
Sanctions were imposed on Vekselberg and the company he founded, the Renova Group, in April 2018 by the Treasury Department. Following Russias invasion of Ukraine, Vekselberg was hit with new penalties by the U.S. government on March 11, 2022. These sanctions were pursuant to various Executive Orders under the International Emergency Economic Powers Act (IEEPA) imposed against persons responsible for or complicit in certain activities with respect to Ukraine.
According to the affidavit supporting the seizure warrant application, Vekselberg bought the Tango in 2011 and has owned it continuously since that time. It further alleged that Vekselberg used shell companies to obfuscate his interest in the Tango to avoid bank oversight into related U.S. dollar transactions. The affidavit cited three confidential witnesses, including a manager and employee of a company that provided services during the vessels design and construction, who identified Vekselberg as the true owner.
Additionally, despite his status as an individual under sanction, Vekselberg, and those working on his behalf, continued to make U.S. dollar payments through U.S. banks for the support and maintenance of the Tango and its owners. These included a payment for a December 2020 stay at a luxury water villa resort in the Maldives, as well as mooring fees for the yacht. According to the affidavit, Vekselberg had an interest in these payments and therefore necessitated a license from the Treasury Department, which was not obtained.
The affidavit stressed the role of correspondent bank accounts, which are the primary way foreign financial institutions (or respondent banks) gain access to the U.S. financial system. By establishing a correspondent bank account, the U.S. bank may receive deposits from, or make payments or other disbursements on behalf of the respondent bank, or to handle other financial transactions related to the respondent bank. As the affidavit notes, [n]early all U.S. dollar wire transactions conducted by foreign financial institutions are processed through correspondent bank accounts held in the United States. According to the affidavit, Vekselberg and his agents transferred funds internationally through correspondent accounts held at U.S. financial institutions, using shell companies to do so in order to hide the true nature of the transactions from U.S. financial institutions, undermine KYC protocols, and present the U.S. financial institutions from issuing [Suspicious Activity Reports] related to the transactions.
When finding that probable cause supported the warrant, the Court first observed that willfully attempting to circumvent U.S. sanctions, such as trying to circumvent the anti-money laundering (AML) procedures implemented by U.S. financial institutions under the Bank Secrecy Act to prevent the misuse of correspondent bank accounts, is a criminal violation of the IEEPA. Further, deceiving banks which are trying to enforce U.S. sanctions law through their AML programs is bank fraud. Moving funds involved in such activity is money laundering.
The Court addressed jurisdiction to seize, and noted that the Treasury Departments OFAC had designated Vekselberg as part of U.S. sanctions against Russia. The Court agreed that the government had established probable cause to believe Vekselberg structured transactions involving the Tango to conceal his identity, including via use of shell companies, as part of a scheme to violate the IEEPA and commit bank fraud, as part of a related international money laundering scheme. These transactions were subject to U.S. jurisdiction because they passed through the United States via correspondent bank account transfers. The Tango therefore was subject to forfeiture under 18 U.S.C. Sections 981(a) and 982(a).
Next, the Court stated that venue for the warrant for seizure was established because Congress empowered the District Court for the District of Columbia to seize property located in a foreign country. Although the Court had rejected the governments initial request to search items located in the Tango because the Court lacked venue to issue a search warrant for property held at a foreign port, the Court nonetheless reasoned that no search warrant was necessary because the Fourth Amendment does not apply to the search of property owned by a nonresident alien located in a foreign country, and Vekselberg lacked a reasonable expectation of privacy in the Tango.
The Court concluded by discussing the Excessive Fines Clause of the Eighth Amendment, which limits the Governments forfeiture power. The Court noted that an Excessive Fines challenge at this stage was premature because Eighth Amendment issues are not ripe until after a court enters a civil or criminal forfeiture order. Nevertheless, the Court addressed the proportionality of the forfeiture to the crime and stated, Far from being grossly disproportionate to Putins murder of civilians, destruction of Ukrainian cities, and attack on Ukraines sovereignty, forfeiture of the [Tango] is wholly justified. The seizure of the [Tango] is just the beginning of the reckoning that awaits those who would facilitate Putins atrocities. Neither the Department of Justice, nor history, will be kind to the Oligarchs who chose the wrong side.
[View source.]
- Why Congress Must Reform FISA Section 702and How It Can - brennancenter.org - April 12th, 2024 [April 12th, 2024]
- CIA wants more power to spy on Americans - Washington Times - April 12th, 2024 [April 12th, 2024]
- Keyboard search warrants and the Fourth Amendment | Brookings - Brookings Institution - February 22nd, 2024 [February 22nd, 2024]
- Just Published: "Terms of Service and Fourth Amendment Rights" - Reason - February 22nd, 2024 [February 22nd, 2024]
- Can Texas police set up DWI checkpoints in Dallas-Fort Worth? Here's what to know - Yahoo News Canada - February 16th, 2024 [February 16th, 2024]
- The FBI's Lawless Raid on U.S. Private Vaults Shows Why the Founders Created the Fourth Amendment | Jon Miltimore - Foundation for Economic Education - February 16th, 2024 [February 16th, 2024]
- HCSO to release body cam footage to plaintiff alleging Fourth Amendment violation - Smoky Mountain News - December 19th, 2023 [December 19th, 2023]
- Section 702 surveillance doesn't belong in the NDAA - Defense One - December 16th, 2023 [December 16th, 2023]
- Valkyrie's Fourth Amendment for the Launch of a Bitcoin ETF - Crypto Times - December 16th, 2023 [December 16th, 2023]
- Digital justice: Supreme Court increasingly confronts law and the internet - Washington Times - December 14th, 2023 [December 14th, 2023]
- Trump and Section 3 of the Fourteenth Amendment: An Exploration ... - JURIST - October 13th, 2023 [October 13th, 2023]
- Expert Q&A with David Aaron on FISA Section 702 Reauthorization ... - Just Security - October 13th, 2023 [October 13th, 2023]
- A Constitution the Government Evades - Tenth Amendment Center - October 13th, 2023 [October 13th, 2023]
- First and Fourth Amendment Claims Over Arrest at Protest of Police ... - Reason - September 25th, 2023 [September 25th, 2023]
- Law enforcement violation of the fourth amendment - Daily Kos - September 25th, 2023 [September 25th, 2023]
- D.C. Appeals Court weighs whether phone seizures from 2020 ... - Washington Times - September 25th, 2023 [September 25th, 2023]
- Opinion: Why you shouldn't turn on your phone in church Palo Alto ... - The Daily Post - September 25th, 2023 [September 25th, 2023]
- Court attorneys group hosts CLE seminar with esteemed Justice ... - Brooklyn Daily Eagle - September 25th, 2023 [September 25th, 2023]
- Former Dona Ana County Deputy Sheriff Charged with Federal Civil ... - Department of Justice - September 25th, 2023 [September 25th, 2023]
- Editorial: Renters rights ruling | Opinion - nwestiowa.com - September 25th, 2023 [September 25th, 2023]
- U.S. Attorney's Statement Regarding Proposed Changes to Crime ... - Department of Justice - September 25th, 2023 [September 25th, 2023]
- New Jersey provides a road map for fighting racially biased traffic ... - Slate - September 25th, 2023 [September 25th, 2023]
- Animal rights advocates sue after facing ongoing censorship and ... - Foundation for Individual Rights in Education - September 25th, 2023 [September 25th, 2023]
- Gerald Jako Pleads Guilty to Two Counts of Murder in Ohio County - Wheeling Intelligencer - September 25th, 2023 [September 25th, 2023]
- Supreme Court of Appeals Visits Campus The Parthenon - MU The Parthenon - September 25th, 2023 [September 25th, 2023]
- Securities and Exchange Board of India (Listing Obligations and ... - Tax Management India. Com - September 25th, 2023 [September 25th, 2023]
- Legal Strategies For A Strong Defense Against Bribery Accusations - American Judicature Society - September 25th, 2023 [September 25th, 2023]
- Police get new images of area break-in suspect - Southwest Virginia Today - September 15th, 2023 [September 15th, 2023]
- Napolitano: Is the CIA in your underwear? | News, Sports, Jobs - Standard-Examiner - September 15th, 2023 [September 15th, 2023]
- Bulletin: Maryland Juvenile Services Head Says Violence Among ... - The Trace - September 15th, 2023 [September 15th, 2023]
- Tased horseman's excessive force claims clear bar Rhode Island ... - Rhode Island Lawyers Weekly - September 15th, 2023 [September 15th, 2023]
- The absurdity of fact-checkers | Columnists | leader-call.com - leader-call.com - September 15th, 2023 [September 15th, 2023]
- Facial Recognition Technology and False Arrests: Should Black ... - Capital B - September 15th, 2023 [September 15th, 2023]
- Letter to the editor - Southeast Iowa Union - September 15th, 2023 [September 15th, 2023]
- Petition hopes to stop US government agencies from using ... - Cointelegraph - September 15th, 2023 [September 15th, 2023]
- Passing on the legacy of 9/11 to the next generation The ... - The Duquesne Duke - September 15th, 2023 [September 15th, 2023]
- Congress Should Reauthorize a Key Intelligence Tool - Foreign Policy Research Institute - September 5th, 2023 [September 5th, 2023]
- Kansas City police made arrests based on rescinded warrants ... - Kansas Reflector - September 5th, 2023 [September 5th, 2023]
- Tased horsemans excessive force claims clear bar - Virginia Lawyers Weekly - September 5th, 2023 [September 5th, 2023]
- Ball is in AL's court - newagebd.net - September 5th, 2023 [September 5th, 2023]
- Lawsuit against police chief just the latest shoe to drop in Marion ... - Kansas Reflector - September 5th, 2023 [September 5th, 2023]
- In the wake of Idalia, residents of one Florida town are turning to ... - Poynter - September 5th, 2023 [September 5th, 2023]
- NYPD using drones to monitor NYC backyard Labor Day parties, spurring privacy concerns - NBC New York - September 5th, 2023 [September 5th, 2023]
- City of Grand Rapids dismissed, lawsuit against Christopher Schurr ... - FOX 17 West Michigan News - September 5th, 2023 [September 5th, 2023]
- OSHA's Proposed Rule Would Allow Union Walkthroughs of All ... - Fisher Phillips - September 5th, 2023 [September 5th, 2023]
- Letters From Readers, Aug. 31, 2023 | Opinion | avpress.com - Antelope Valley Press - September 5th, 2023 [September 5th, 2023]
- Where are the Noah's Park animals? - The Pike County Courier - September 5th, 2023 [September 5th, 2023]
- His hands were up: Attorney for football game shooting victim says civil rights violated - Yahoo News - September 5th, 2023 [September 5th, 2023]
- NYC voters explain why theyre voting for RFK Jr. over Biden: Going ... - 1330 WFIN - September 5th, 2023 [September 5th, 2023]
- Houston Food Not Bombs in Court over Feeding the Unhoused - The Texas Observer - September 5th, 2023 [September 5th, 2023]
- Search and seizure Equal protection Discriminatory policing - Massachusetts Lawyers Weekly - May 18th, 2023 [May 18th, 2023]
- The Timing of Computer Search Warrants When It Takes the ... - Reason - May 18th, 2023 [May 18th, 2023]
- Councilmembers Inquired About Pretext Stops By Police One Year ... - Pasadena Now - May 18th, 2023 [May 18th, 2023]
- BARINGS BDC, INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet... - May 18th, 2023 [May 18th, 2023]
- Alabama appeals court reverses murder conviction of Ala. officer ... - Police News - May 18th, 2023 [May 18th, 2023]
- Oakland narrows town manager search to five | West Orange Times ... - West Orange Times & SouthWest Orange Observer - May 18th, 2023 [May 18th, 2023]
- The Durham Report Is Right About the Need for More FBI Oversight - Reason - May 18th, 2023 [May 18th, 2023]
- Collective knowledge doctrine applies to a traffic stop - Police News - May 18th, 2023 [May 18th, 2023]
- Interpretation: The Fourth Amendment | Constitution Center - March 31st, 2023 [March 31st, 2023]
- Public Schools :: Fourth Amendment -- Search and Seizure :: US ... - January 2nd, 2023 [January 2nd, 2023]
- BSE : Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Fourth Amendment) Regulations, 2022 - Marketscreener.com - November 27th, 2022 [November 27th, 2022]
- Trump legal counsel vows 'Fourth Amendment based' challenge to Mar-a ... - October 21st, 2022 [October 21st, 2022]
- Get to Know the EFA: Digital Fourth - EFF - October 13th, 2022 [October 13th, 2022]
- Arguments heard in body in trunk case | News, Sports, Jobs - Minot Daily News - October 13th, 2022 [October 13th, 2022]
- Ormond Beach Planning Board to meet Thursday - Ormond Beach Observer - October 13th, 2022 [October 13th, 2022]
- Limiting the Power of Police in Schools - The Regulatory Review - October 13th, 2022 [October 13th, 2022]
- Letter to the Editor: What Republicans Believe - Door County Pulse - October 13th, 2022 [October 13th, 2022]
- Trump wants other presidents investigated - KRLD - October 13th, 2022 [October 13th, 2022]
- Trump Rally Speech Shows He's 'Guilty and Scared': Former Prosecutor - Newsweek - October 13th, 2022 [October 13th, 2022]
- Court Strips Immunity From Cop Who Shot A Dog Within Seconds Of Arriving On The Scene Of A Non-Crime - Techdirt - October 6th, 2022 [October 6th, 2022]
- Claiming to have 4.3 trillion readers, the Onion supports parodist and its writers' paychecks in SCOTUS brief - ABA Journal - October 6th, 2022 [October 6th, 2022]
- INHIBRX, INC. : Entry into a Material Definitive Agreement, Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet... - October 6th, 2022 [October 6th, 2022]
- PennLive goes to court for records related to U.S. Rep. Scott Perrys cell phone - PennLive - October 6th, 2022 [October 6th, 2022]
- Rusty Hardin & Associates Strengthens Litigation Team with Addition of Attorney Aisha Dennis - PR Newswire - October 6th, 2022 [October 6th, 2022]
- Vancouver City Council asked to OK $725000 deal with family of man killed by police - The Columbian - October 6th, 2022 [October 6th, 2022]
- Govt plans to auction 22 mineral blocks in 3 states within next two months - Business Standard - October 6th, 2022 [October 6th, 2022]
- Fort Worth officers sued after being accused of violating rights - WFAA.com - September 27th, 2022 [September 27th, 2022]
- LSU professors, students weigh in on constitutionality of room scans for online exams - The Reveille, LSU's student newspaper - September 27th, 2022 [September 27th, 2022]
- Solution for ideological division: Revising the Constitution? - The Christian Science Monitor - September 27th, 2022 [September 27th, 2022]
- Lawsuit says teen was thrown in solitary confinement and abused inside Maine's youth prisons - observer-me.com - September 27th, 2022 [September 27th, 2022]