Risk Update

AML & Allegations — Are Lawyers Kleptocrats’ “Best Friends”?

I recently discovered an amazing podcast. I love story podcasts and would listen constantly back when I had a commute, back when people worked in offices — and this one is addictively well crafted. From Foreign Policy Magazine, I Spy has it all, drama, tension, amazing historical details, and star moderator — renowned character actress Margo Mardindale.

What am I telling you this? Well, I’m not quite branching out into general media taste making. I have no instagram feed to hype, risk or otherwise. But it did lead me to a relevant story in the magazine itself: “U.S. Lawyers Are Foreign Kleptocrats’ Best Friends” —

  • “And the problem appears to be getting worse as law firms expand the scope of their work, which the case of former Ukrainian President and kleptocrat Viktor Yanukovych illustrates. In 2019, a series of DOJ filings revealed the lengths to which Gregory Craig, a senior partner at a white-shoe U.S. law firm, would go to bolster the international image of a foreign corrupt autocrat—and how many services these firms now provide.”
  • “…the senior Skadden partner, was indicted but in 2019 was found not guilty of making false statements to the Justice Department’s FARA unit about his Ukraine-related work. Skadden—which had failed to register much of its work the DOJ and whose efforts for their Ukrainian clients the new DOJ filings detail—eventually settled for $4.6 million and agreed to register retroactively as an agent of Ukraine.”
  • “What, then, can be done to encourage more responsible representation by U.S. lawyers implicated in these transnational money- and reputation-laundering schemes? We spy two needed remedies.”
  • “First, there needs to be far more understanding and scrutiny of the roles U.S. lawyers play in transactions on behalf of clients. A good place to start would be the implementation of the FATF recommendations mentioned above, which require both reasonable and meaningful due diligence obligations and suspicious activity filings for lawyers regarding things like bank accounts, financial transactions, or even the purchase of real estate on behalf of their clients. This can, and should, be part of a far broader effort from Washington to expand anti-money laundering requirements in the Bank Secrecy Act (recently extended to encompass virtual currency transactions and antiquities dealers as well as allow for the subpoena of foreign banks’ financial records that hold correspondent accounts with U.S. institutions) and to end, or at least limit, the two-decade-old anti-money laundering exemptions in the Patriot Act.”
  • “In addition, we should consider introducing—if not through legislation, then updated ethical guidance—demands that attorneys disclose their sources of direct and indirect compensation, in particular when clients engage with any public authorities or the media. In doing so, U.S. lawyers would hopefully begin to think twice before helping kleptocratic clients open secret bank accounts, purchase high-end real estate, or aid their clients in dodging the United States’ patchwork anti-money laundering regime.”
  • “On the reputation-laundering side, one solution is clear: In addition to beefing up FARA enforcement, the DOJ should consider ending its exemption for lawyers. FARA registration isn’t exactly strenuous, requiring little more than filing basic paperwork with the department. The DOJ should issue clear guidelines, such an exemption permits—and should illustrate a clear willingness to enforce such limitations.”

And, similar drama of the Better Call Saul variety: “Afternoon Briefs: Lawyer accused of laundering cash from undercover agent; Justice Barrett lists home for nearly $900K” —

  • “Prominent Dallas lawyer Rayshun “Ray” Jackson of the Jackson Law Firm has been charged with laundering money acquired from an undercover agent who said the money came from drug trafficking.”
  • “Jackson allegedly suggested setting up a shell corporation and a cash business like a coin laundry or car wash that would make it difficult to track proceeds, prosecutors alleged. He allegedly negotiated a 4% fee, plus a bonus.”
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