| WASHINGTON, July 1
WASHINGTON, July 1 BNP Paribas' guilty plea and
agreement to pay nearly $9 billion for violating U.S. sanctions
is part of a larger U.S. Justice Department shift in strategy
that is expected to snare more major banks and other firms
across the financial food chain.
Two other major French banks, Credit Agricole and
Societe Generale, Germany's Deutsche Bank AG, and
Citigroup Inc's Banamex unit in Mexico are among those
being investigated for possible money laundering or sanctions
violations, according to people familiar with the matter and
The Justice Department and other U.S. authorities, including
the Manhattan District Attorney, are probing Credit Agricole and
Societe Generale for potentially violating U.S. economic
sanctions imposed against Iran, Cuba and Sudan, one of the
Credit Agricole and SocGen have disclosed that they are
reviewing whether they violated U.S. sanctions. SocGen said in
its latest annual report that it is engaged in discussions with
the Treasury Department's Office of Foreign Assets Control over
potential sanctions violations. The two banks could not be
immediately reached for comment.
Another source said the Justice Department's bank integrity
unit is deep into a probe of whether Citigroup's Banamex
operation failed to police money transfers across the
U.S.-Mexico border. Citigroup has said it is cooperating with
the inquiry, which also involves the Federal Deposit Insurance
Corp. Citigroup spokeswoman Molly Meiners declined comment.
Separately, Citigroup is investigating an alleged fraud
involving $565 million in loans at Banamex and as a result of
that has fired a dozen employees.
Prosecutors have also investigated potential sanctions
breaches at Deutsche Bank, according to people familiar with the
probe, though it is unclear how far that has progressed. The
bank said in its last annual report that it had received
requests for information from regulatory agencies and is
cooperating with them. It didn't immediately respond to a
request for comment.
The timing of any possible legal action or related
settlement negotiations is unclear.
The pipeline of cases has built up as U.S. prosecutors have
pivoted from focusing on specific criminals to also vigorously
pursuing the financial institutions that move money for them.
At the heart of this effort is a 12-prosecutor Money
Laundering and Bank Integrity Unit within the Justice Department
that was created in 2010. It handled the investigation into BNP
for U.S. sanction law violations, primarily involving Sudan
deals, as well as large money laundering and sanctions cases in
recent years against HSBC Holdings Plc, ING Bank N.V. and
Leslie Caldwell, who leads the criminal division at Justice
Department, said in an interview that the unit has its sights
set on a range of firms potentially involved in illicit money
"I think that we'll probably see other financial
institutions, regional banks, maybe some smaller banks, and I
think we're also going to be seeing, as we have already started
to see, more online activity," Caldwell said during an interview
on Friday, speaking of cases in the pipeline.
She declined to name specific firms or confirm any
BANK SECRECY ACT
Historically, prosecutors have used money laundering laws to
go after low-level money mules, said Caldwell, in reference to
lower level employees and others who weren't playing critical
roles in instigating or allowing the money laundering.
The Justice Department about five years ago decided to
switch tactics and to more aggressively exploit the Bank Secrecy
Act, which dates back to the 1970s, and was expanded to include
criminal penalties in the wake of the September 11, 2001
The law, which requires financial institutions to have
robust anti-money laundering programs, was little used for
criminal prosecutions until the Money Laundering and Bank
Integrity Unit - known internally as "mlbiu" - was created in
2010 to focus on enforcing it.
"This is a way to attack that problem in a much bigger and
more effective way," said Caldwell, a prosecutor for 17 years
who was confirmed to her current post in May. "The old-school
way of attacking money laundering ... really didn't get at the
problem, which was that many banks did not have adequate
controls in place to prevent those transactions from happening."
The shift has put the financial industry on watch, after
prosecutors failed to land high-profile criminal cases stemming
from the financial crisis and turned their attention to other
types of criminal activity within the financial industry. Banks
have responded by hiring thousands of new compliance experts and
spending millions of dollars to improve their programs.
"I would put the investigation of financial institutions for
laundering proceeds of official corruption pretty high on the
list of risks," said Michael Dawson, who coordinates the global
compliance practice at the consulting firm Promontory Financial
Group. "After you look at the sanctions cases, official
corruption looms large as a risk on the horizon."
MOVING DOWN THE FOOD CHAIN
As the unit finishes a series of money-laundering and
sanctions cases against some of the world's largest banks,
prosecutors fear that criminals have shifted to using mid-level
financial institutions and other types of companies who may not
have the controls that large institutions now have.
Sources said the unit is increasingly investigating actors
across the two dozen types of companies covered by the Bank
Secrecy Act. Among the sectors covered by the act are
broker-dealers, jewelry and auto dealers, casinos, insurance
companies, and shipping companies.
The Justice Department has already gone after a handful of
such institutions, including check cashers in Brooklyn,
Philadelphia and Los Angeles who assisted healthcare fraudsters
by failing to report $50 million in transactions, and money
transfer company MoneyGram whose agents were allegedly involved
in $100 million in fraud schemes targeting the elderly.
MoneyGram agreed to forfeit $100 million and enter a deferred
prosecution agreement over the conduct in November 2012. It said
at that time that it takes compliance seriously and had created
a new anti-fraud program.
Virtual currencies have also emerged as a major focus, in
the wake of the unit's 2013 indictment of digital currency
exchange Liberty Reserve, its founders and other employees who
allegedly helped criminals launder more than $6 billion in
Attorneys from the Justice Department's asset forfeiture and
money laundering section, which oversees the mlbiu unit, have
also worked closely with a new FBI unit to help trace the assets
of corrupt foreign leaders, traveling to Ukraine to help recover
assets allegedly stolen by former president Viktor Yanukovich's
Those efforts could also unearth information about which
banks may have looked the other way to move proceeds of
corruption, or may not have had required procedures in place,
(Reporting by Aruna Viswanatha; Editing by Karey Van Hall and