28 Mar 2017
Stefan Cassella of Asset Forfeiture Law, LLC, comments on a case involving the forfeiture of funds from a bank’s correspondent account in the United States. Under Section 981(k), a foreign bank lacks standing to contest the forfeiture of funds seized from its correspondent account to the extent that its customer has funds on deposit in any account at the bank. That the customer’s funds are not traceable to the crime giving rise to the forfeiture and are in a different account from the one that contained the tainted funds does not matter.
[United States v. $1,879,991.64 Previously Contained in Sberbank of Russia’s Interbank or Correspondent Bank Account, 2017 WL 396542 (D.N.J. Jan. 30, 2017).]
Defendant pled guilty to money laundering and to violating the International Emergency Economic Powers Act (IEEPA) in connection with exporting restricted items to Russian purchasers, and to laundering the proceeds through shell companies. Upon learning that one of the shell companies had transferred $1.8 million in proceeds to Defendant’s bank account at a Russian bank, the Government obtained a seizure warrant and seized $1.8 million from the Russian bank’s correspondent account in the United States pursuant to 18 U.S.C. § 981(k).
In the ensuing civil forfeiture action, the Russian bank filed a claim contesting the forfeiture, but it refused to provide any evidence that Defendant’s $1.8 million in criminal proceeds was no longer on deposit in his foreign account – a necessary condition to the bank’s having standing to seek the release of its funds. Instead, it cited Russian laws barring the disclosure of a customer’s bank account information.
The court held that the bank could not rely on foreign law to avoid its obligation under U.S. law to establish standing. If the bank could not show that Defendant’s funds had been withdrawn from his accounts, the court said, the bank would not have standing to contest the forfeiture.
The bank then discovered a provision of Russian law that allowed it to make the required disclosure. Defendant, the bank said, had approximately $800,000 remaining in the accounts he used to commit the offenses giving rise to the forfeiture. The Government responded by moving to strike the bank’s claim in its entirety.
The court readily agreed that the bank lacked standing to contest the forfeiture of the $800,000 that the bank now acknowledged was still on deposit in Defendant’s accounts. It was less sure, however, regarding its standing to contest the forfeiture of the remaining $1 million.
If Defendant no longer has $1 million remaining on deposit at the Russian bank, the bank will have standing to contest the forfeiture of that amount from its correspondent account. The Government claimed, however, the Defendant does have at least another $855,000 on deposit in a savings account at the bank.
The court agreed with the Government that as long as Defendant had funds in any account at the Russian bank, the bank would not have standing to contest the forfeiture of funds in that amount under Section 981(k). That the funds are not in the account that was used to commit the offense giving rise to the forfeiture and were not traceable to the offense is irrelevant.
But the court found that there was a material issue of fact regarding the existence of the savings account and the balance in it, and accordingly denied the Government’s motion for summary judgment as to the remaining $1 million without prejudice.
Comments: The key point in this decision is the court’s agreement with the Court of Appeals for the First Circuit that a foreign bank lacks standing under Section 981(k) to the extent that its customer has funds on deposit in any account at the foreign bank. That the funds held by the customer are in a different account from the one used to commit the offense giving rise to the forfeiture makes no difference. See United States v. Union Bank for Savings and Investment (Jordan), 487 F.3d 8, 17 (1st Cir. 2007). But see United States v. Sum of $70,990,605, 128 F. Supp.3d 350, 360 (D.D.C. 2015) (declining to follow Union Bank; foreign bank is disqualified from contesting the forfeiture only if it can make itself whole by debiting the tainted funds from the customer’s account or funds traceable thereto; that the customer has other funds on deposit is irrelevant).
In this case, if it turns out that the defendant does have another $855,000 on deposit in a savings account at the foreign bank, the bank will lack standing to contest the forfeiture of the funds seized from its correspondent account to the extent of that $855,000. That is because the defendant’s funds will remain available to reimburse his bank in the event the seized funds are forfeited. That they are not traceable to the crime giving rise to the forfeiture is irrelevant.
So the only question that remains is whether there is in fact $855,000 on deposit in Defendant’s savings account. Because the evidence is dispute on that point, the Government’s motion for summary judgment was denied, but the issue remains open, and the Government may renew its motion as the evidence becomes more clear.
Stefan Cassella, Asset Forfeiture Law, LLC
You can claim CPD minutes for reading this article, by signing up to our CPD WalletFREE CPD Wallet