AML Scandals that Flew Under the Radar in '15
Regulators and institutions appear far apart when it comes to so-called "de-risking," in which banks drop businesses for fear of enhanced regulatory scrutiny, even while policymakers are stepping up their scrutiny of terrorist financing prevention in the wake of recent attacks.December 30
A lack of access to financial services, particularly the inability to transfer funds overseas, can prevent lifesaving work from being carried out and has touched the refugee crisis in Europe, where many aid groups are delivering assistance.November 4
Banks are facing enhanced scrutiny from examiners, causing them to sever ties with businesses they view as high-risk, but regulators are also pressuring them not to close those accounts, fearing financial disenfranchisement.November 17
In addition to anti-money-laundering scandals involving global banks and worldwide organizations such as FIFA that grabbed headlines last year, there were plenty of damaging laundering convictions and accusations in 2015 that went unnoticed but still took a heavy toll on midlevel banks.
Money laundering is a crime that occurs more often than the general public realizes, and in most sectors of our economy. In the past year alone, charity officials, a mortuary owner, a church director and a doctor providing chemo treatments were at the center of appalling cases you probably never heard about.
Here is my top 10 list for unheralded yet just as disturbing money laundering stories from 2015:
1. Tayfun Karauzum, of Newport Beach, Calif., was sentenced to five years in prison for distributing $1 million to $2.5 million of Potion 9, which contained a solvent that metabolizes in the body to become gamma-Hydroxybutyrate, or GHB, a known date-rape drug. He then laundered the proceeds.
2. Charles and Diana Muir were sentenced to 48 and six months in prison, respectively, and forced to return the $1.1 million they stole from a 140-year-old college scholarship charity in Louisville, Ky. — the Woodcock Foundation — that was run by Charles Muir. The couple then laundered the proceeds through Diana Muir's dental business.
3. Scott Gruber of Indianapolis was sentenced to four years in prison and forced to pay over $1 million in restitution for setting up two fundraising organizations designed to collect money for veterans and then failing to turn the money over to its designees. Of the $1 million collected for two separate veterans' charities, less than 1% was given back. The rest was laundered.
4. Farid Fata, a Michigan doctor, was sentenced to 45 years in prison and forced to pay $17.5 million in restitution for defrauding Medicare and other insurers by forcing over 550 of his patients to undergo unnecessary chemotherapy treatments. He then attempted to launder the proceeds.
5. Brian Brown, former president of National Relief Charities, and a co-conspirator, William Peters, were sentenced for stealing $4 million from the organization. There were sentenced to 18 and 37 months in prison, respectively, and forced to pay $4 million in restitution, for using their positions with the charity to force it to fund scholarships for Native American students and using the money for personal purposes instead. The pair attempted to launder the proceeds through tax returns.
6. Edward J. MacKenzie Jr. was sentenced to 12 years in prison and forced to pay $754,569 in restitution for scheming his way into a lucrative job at a Boston church, looting its coffers and then laundering the money to pay for cars, gifts to friends and family members and to cover his legal bills. MacKenzie has claimed to be a former enforcer for mob boss Whitey Bulger.
7. John "Richard" Ceroni and Adale "Marie" Cernoni, founders of Carnegie Career College, were sentenced to 69 months in prison and 55 months in prison, respectively. They were ordered to pay $2.3 million in restitution for bilking the U.S. Department of Education for that amount in student financial aid and then laundering the proceeds to pay for property, vacations and jewelry.
8. Katherine Le, a Houston socialite and jewelry designer, whose collection was once sold at Neiman Marcus, was arrested last October on charges of money laundering in connection with a Houston game room. Le, along with alleged six co-conspirators, is accused of laundering over $6 million in proceeds. The maximum sentence for this charge is life in prison.
9. Robert L. Keys, an Oregon businessman, was sentenced to 70 months in prison and required to pay $1.1 million in restitution for committing wire fraud, money laundering and bankruptcy fraud. As the owner of the Private Consulting Group investment firm, Keys bilked one of his top clients, an elderly widow, for over $1 million and then tried to launder the proceeds.
10. Claus Hansen, owner of Affordable Casket and Moanalua Mortuary in Hawaii, was sentenced to 30 days in jail, 300 hours of community service and $50,000 in restitution fees for pocketing a total of $85,886.18 that was supposed to go to survivors of Medicaid recipients. He then attempted to launder the proceeds.
After analyzing the data we found that the median of the top 10 unnoticed money laundering cases (minus Le's, who has yet to go to trial) was $1.1 million laundered, $1.1 million paid in restitution and five years in prison. That might seem small compared with the whole of AML cases. The estimated amount of money laundered globally in one year is between 2% and 5% of global GDP, according to the United Nations Office on Drugs and Crime.
But even though the amount of money laundered by the criminals on the list pales in comparison to the cases making national and international headlines, these are hardly victimless crimes. Those cases that slipped through the national media's radar last year likely had a dramatic effect on the people and communities where those crimes took place.
Richard Paxton is the founding partner and CEO of Alacer Group, a consulting firm and technology solutions provider.