Thank you, Jamal. I am delighted to be here and want to thank my friend, Under Secretary David Cohen, for inviting me to this important event. The proposed rulemaking we are here to discuss is critically important, and I am here to tell you that the Department of Justice strongly and unequivocally supports it. We believe that this rule will assist us in preventing criminals from using the United States financial system to commit crimes.
A public hearing such as this one on the proposed regulation is very valuable. We want to advance an effective rule, so having representatives from the financial industry here today is so very important. Indeed, financial institutions are often law enforcement’s first line of defense. Protecting the financial system requires close collaboration between law enforcement and the private sector, and the proposed customer due diligence rulemaking would also require working closely together.
I am aware that there may be some concern in this room about the potential burdens of the proposed rulemaking. So I want to take this opportunity to explain why the rule is so important to law enforcement.
We know that a key way in which criminals launder the proceeds of their crimes is through the use of shell companies. They open bank accounts in the name of a shell company, for example, and then use that shell company to conduct business transactions that appear legitimate. In short, these individuals use the United States financial system to commit, or facilitate, crimes.
We have seen this occur with respect to corrupt officials, health care fraudsters, organized criminal groups in the United States and abroad, Mexican drug cartel members, and many others. And without access to the shell company account’s beneficial ownership information, law enforcement is often stymied in what it can accomplish. If financial institutions were required to collect beneficial ownership information, however, that would go a long way toward helping us to fight money laundering.
In the Criminal Division, the Asset Forfeiture and Money Laundering Section is at the forefront of our anti-money laundering efforts and has been a strong advocate for the proposed rulemaking. One area in particular in which we have seen very extensive use of shell companies is that of kleptocracy.
Over the past two years, we in the Criminal Division have been building up our Kleptocracy Asset Recovery Initiative, through which we bring civil suits to forfeit the proceeds of foreign official corruption.
We have recently had our first successes in this area, each of which involved the use of shell companies. Last month, we announced that we had forfeited over $400,000 in assets traceable to Diepreye Solomon Peter Alamieyeseigha, or DSP, a former governor of the oil-producing Bayelsa State in Nigeria. We allege that DSP’s official salary for the entire period that he was governor was approximately $81,000, and that he had a total declared income during that period of approximately $248,000, but that he nevertheless accumulated millions of dollars in wealth at the same time – through corruption. We allege that DSP used shell companies to launder his corruption proceeds and, indeed, he pleaded guilty in Nigeria to money laundering violations on behalf of certain of those shell companies. In addition to the money that we recently forfeited, we are also seeking to forfeit, in a separate action, $600,000 worth of property held in the name of one of his shell companies.
A second example involves James Onanefe Ibori, the former governor of the oil-producing Delta State in Nigeria. Last week, we announced that we had secured a restraining order against more than $3 million in corruption proceeds related to Ibori. Ibori was convicted in the United Kingdom on money laundering and fraud charges and sentenced to 13 years in prison. We allege that he used shell companies and bank accounts in the United Kingdom and the United States to hide his money.
There are many more examples of criminals using shell companies to hide their illicit gains outside the kleptocracy area. For example, last month, we announced charges against seven individuals and four check cashing businesses for schemes to violate the Bank Secrecy Act. A key aspect of our allegations with respect to those charges is that certain defendants allegedly used shell companies that appeared to be health care related in order to conceal their illegal activity.
For every shell company scheme that we uncover, however, there are many we of course never find out about. In part, that is because financial institutions are not routinely collecting beneficial ownership information as part of their customer due diligence programs. This has significant effects on our domestic law enforcement efforts because it deprives us of critical information.
The lack of beneficial ownership information also affects our ability to provide information in response to requests from our foreign allies, who are conducting their own investigations.
The proposed customer due diligence rulemaking under consideration will help us to address these challenges, and hopefully discourage criminals from using the United States financial system to commit crimes.
The concerns some of you may have about the proposed rulemaking should be considered as the rule is finalized. But we should not let those concerns obscure the key point – that the collection of beneficial ownership information will help law enforcement bring money launderers to justice.
This rulemaking presents an important opportunity to close a gap in our financial regulations that makes it easier for criminals to move illicit proceeds through the United States financial system. Today’s hearing is an important step in the rulemaking process.
Thank you for having me here. I wish you a productive hearing today and look forward to working with my colleagues at the Treasury Department and others as this rulemaking progresses.