Jan 16 (Reuters) - Two companies that sell bulk orders of fake hair products agreed to pay $15 million to resolve claims they could have been conduits for dirty money, in a rare case based on an anti-money laundering law used more often to target big banks.
In recent years, some of the world’s largest financial firms, including HSBC Holdings plc and JPMorgan Chase, have paid hundreds of millions of dollars for their failure to comply with the Bank Secrecy Act. The law requires banks to monitor transactions for questionable activities and report any suspicious activity to federal authorities.
In a sign of how widely U.S. anti-money-laundering efforts have spread, federal prosecutors at the U.S. Attorney’s office in New Jersey filed a case on Thursday that used the same law to penalize the two wholesale companies for allegedly allowing customers to structure payments in a way to avoid triggering federal reporting requirements.
Shake-N-Go Fashion and Model Model Hair Fashion, which distribute hair extensions, wigs and other hair accessories and share the same owners, allowed customers to deposit payments directly into the companies’ bank accounts, prosecutors said.
They also allowed customers to break up the payments so that each deposit was under $10,000, even if the total order was larger, the government said.
Businesses that receive more than $10,000 in cash in one or related transactions are required to report that information to the IRS.
Some of the companies’ employees knew about the structured deposits but did not correct the problem and failed to file appropriate reports, prosecutors said in court documents.
In a civil settlement, the two companies, based in Port Washington, New York, said they did not dispute the allegations.
A lawyer for the two companies, Alex Lipman at the law firm Nixon Peabody, said they are glad to put the matter behind them and praised the U.S. Attorney’s office for what he described as its professionalism in handling the case.
New Jersey U.S. Attorney Paul Fishman said in a statement, “It doesn’t matter what your business is; you are required to follow the financial reporting requirements of the United States.”
The companies had over $300 million in sales in 2012, around $80 million of which came in cash deposits, according to court documents.
In order to resolve the claims, the companies agreed to forfeit $15 million and improve its anti-money laundering compliance program. (Reporting by Aruna Viswanatha; Editing by Karey Van Hall and Jonathan Oatis)