The US Department of Justice has issued a statement at a hearing to combat laundering before the US Senate’s banking, housing and urban affairs committee.
The statement was made by acting Deputy Assistant Attorney General M Kendall Day of the Criminal Division of the US Department of Justice on 17 January 2018.
These are a couple of excerpts from the statement for the hearing on “Combating money laundering and other forms of illicit finance: Administration perspectives on reforming and strengthening BSA enforcement”.
Specific money laundering threats
Purchase of real estate and other assets
Criminals may also convert their illicit proceeds into clean funds by buying real estate and other assets. Foreign government officials who steal from their own people, extort businesses, or seek and accept bribery payments, in particular, have used this method to funnel their illicit gains into the US financial system.
Recent investigations and prosecutions have revealed that corrupt foreign officials have purchased various US assets to launder the proceeds of their corruption, from luxury real estate and hotels to private jets, artwork, and motion picture companies.
The flow of kleptocracy proceeds into the US financial system distorts our markets and threatens the transparency and integrity of our financial system. For example, when criminals use illicit proceeds to buy up real estate, legitimate purchasers — businesses and individuals — are foreclosed from buying or investing in those properties.
Moreover, kleptocracy erodes trust in government and private institutions, undermines confidence in the fairness of free and open markets, and breeds contempt for the rule of law, which threatens our national security.
The Department’s efforts to combat the threat
In the Malaysia matter – the largest single action ever brought under the Initiative – the Department filed a complaint in 2016 to forfeit and recover assets associated with an international conspiracy to launder more than $4.5bn stolen from the country’s sovereign wealth fund, known as 1Malaysia Development Berhad, or 1MDB.
The Malaysian government created 1MDB to promote economic development through international partnerships and foreign direct investment, with the ultimate goal of improving the lives of the Malaysian people.
However, corrupt 1MDB officials treated this public trust as a personal bank account. Between 2009 and 2015, those corrupt officials and their associates took more than $4.5bn from the development fund in four phases.
These funds were laundered through a complex web of opaque transactions and fraudulent shell companies with bank accounts in countries around the world, including Switzerland, Singapore, Luxembourg, and the United States.
The funds were then used to purchase approximately $1.7bn in assets that the Department seeks to recover, including a $261m, 350-foot yacht; a $35m jet; masterpieces by Van Gogh, Picasso, and Monet; and a motion picture company that used the funds to finance, among other things, the production of the films The Wolf of Wall Street, Daddy’s Home, and Dumb and Dumber Too.
MLARS and the US Attorney’s Office in Los Angeles filed civil complaints targeting assets that, according to court documents, were misappropriated and diverted by Malaysian officials and their associates from 1MDB.
In June 2017, the Department announced additional steps to forfeit and recover assets, bringing the total assets subject to forfeiture in this case to more than $1.7bn.
If the United States is successful in court, we will forfeit this more than $1.7bn in property, liquidate it, and, ultimately, return as much as possible to the citizens of Malaysia.
The full statement can be found here.