Justice News

Assistant Attorney General Leslie R. Caldwell Delivers Remarks at the 26th Annual Association of Certified Fraud Examiners Global Fraud Conference
Baltimore, MD
United States
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Monday, June 15, 2015

Good morning and thank you for that kind introduction. 

I am honored to be here today and to receive this year’s Cressey Award from an organization that is dedicated to the detection, deterrence and prevention of fraud and corruption around the globe.  

The late Dr. Donald Cressey was known for his work in addressing financial fraud, corruption and organized crime.  Those are critical missions to which I have dedicated much of my professional career, making this award all the more meaningful.

Although I appreciate the personal honor of this award, the fight against financial fraud, corruption and organized crime is a team effort.  Throughout my career, I have been lucky to work side-by-side with dedicated and skilled prosecutors, law enforcement officers, forensic examiners and fraud fighters from around the world.  This award is due in large part to our collective efforts and accomplishments over the years.  I have been privileged to be part of—and to lead—many great teams over the course of my career.  To all of my dedicated and talented colleagues, I owe a debt of gratitude.

Most recently, I have been honored to lead a division of truly talented federal prosecutors and staff who share my ideals in the fight against fraud and corruption of all stripes.

For the past year, I have had the pleasure of leading the Justice Department’s Criminal Division, which includes approximately 600 attorneys from 17 sections and offices.  The Criminal Division handles a wide variety of federal criminal matters, including fraud, public corruption, cybercrime, child exploitation, transnational organized crime, international drug trafficking, human rights violations and criminal appeals.  We also work on capacity building in the justice sector in countries throughout the world.

The investigations handled by the Criminal Division are increasingly global in nature, and our Office of International Affairs plays a significant role in helping us gather evidence and secure the return of fugitives from around the world. 

In reviewing your agenda for this conference, I noticed that your sessions cover topics that we are addressing every day in the Criminal Division: from anti-money laundering and forfeiture to cyber security and enhancing corporate compliance, these are the critical issues facing 21st century law enforcement.  Today, however, I would like to focus my remarks on two related topics—both of which are also on your agenda later in this conference—transnational organized crime and global corruption and corporate crime.

As reflected in your agenda and the growing international contingent in this audience, we are dealing with a new era of crime on a global scale.  During my first tour of duty at the Department of Justice, it was the exceptional case that involved international criminal groups or worldwide fraud schemes.  Today, transnational criminal enterprises and global corporate misconduct are the new standard.  There’s an old saying in Washington that ‘all politics is local.’  Today, the opposite is true in the world of law enforcement: ‘all organized crime is global.’

The increasingly international nature of crime is driven by a variety of factors.  Two primary causes, however, are (1) the worldwide use of the Internet; and (2) the global expansion of the footprint and market participation of U.S. and foreign companies, and the growing interdependency of our economy and those of nations around the world. 

The Criminal Division is poised to meet the challenges of these emerging shifts in crime.  We are adapting to the technological advances of today’s criminals.  And, to address crime on a global scale, we are forging deep coalitions with our international enforcement and regulatory partners.  Our evolving approaches are already yielding significant successes.   

To start, the Internet has turned what were once localized criminal elements into global criminal enterprises.  All facets of the criminal underworld rely on the Internet, for crimes ranging from computer hacking and data theft to extortion and online child exploitation.  The rise of the Internet has allowed foreign criminals access to domestic victims without ever having to enter the United States. 

Cybercriminals use increased computing power, the global availability of high-speed Internet, the spread of virtual currencies and technologies such as encryption and anonymizing software to steal financial information, personal health data and other things that we all expect would remain private.

Rather than rob a single bank, with the risk of violence and capture, a hacker sitting in his basement can rob the equivalent of thousands of banks in a few minutes, with a keystroke rather than a gun. 

Hackers steal personal information located in one country, they remove the data to servers in another country and they count their profits in a third.  And the evidence needed to identify and apprehend these criminals is dispersed in countries around the world.

In sum, the Internet has changed the face of crime on all levels.  Gone are the days of the organized criminal syndicates written about by Dr. Cressey, which relied upon intimate—frequently familial—relationships, and which required some level of geographic proximity.  Organized criminal enterprises of today have members spread about the globe, some of whom have likely never met in person, and many of whom likely do not even know the true names of their co-conspirators.  In fact, they thrive on this anonymity. 

The Carder.su case being prosecuted by the Criminal Division’s Organized Crime and Gang Section and the U.S. Attorney’s Office of the District of Nevada provides a good illustration of this point. 

Carder.su was an Internet-based, international criminal enterprise whose members trafficked in compromised credit card account data and counterfeit identifications, and committed money laundering, narcotics trafficking and various computer crimes.  The web forums were largely hosted in former Soviet Union countries, and the organization’s membership was a melting pot of American, Russian, Eastern European, African and Asian criminals.  In July 2011, experts estimated that there were over 5,500 members of the organization worldwide.   

The group made significant efforts to protect their anonymity and security from rival organizations and law enforcement by communicating through secure and encrypted forums, such as private chat rooms, encrypted email, private messaging systems, proxies and encrypted virtual private networks.  Similar to the Mafia, gaining membership in the group required the recommendation of current members in good standing.  And disloyal members were stripped of membership and barred from the websites.

Like most criminal organizations, the members of Carder.su had different and defined roles.  But in the place of traditional organized crime vernacular, Carder.su utilized Silicon Valley corporate speak.  Names like Vinny “the Chin” Gigante and Vinny “Gorgeous” Basciano gave way to “SirCharlie57,” “Kilobit” and “G5.”  Gone were the Dons and Capos of La Cosa Nostra fame.  In their place, Carder.su was led by “Administrators,” who handled day-to-day management, determined who could be members, bestowed rewards and meted out punishment.  In the place of Consiglieris, Carder.su named “Moderators” to monitor and police the websites, and mediate disputes between members.  Carder.su “vendors” advertised and sold contraband and illegal services through its websites; “reviewers” examined and tested these illegal products and services; and “members” used the websites to engage in illegal transactions and share criminal schemes.

All of this was conducted from disparate areas of the globe, cloaked in the perceived anonymity of the Internet. 

But despite its best efforts to hide from law enforcement, the group was vulnerable to a tried and true mob-busting technique: infiltration by an undercover agent.  In the end, 55 organizational leaders, significant members and their associates were charged in four separate indictments with a variety of federal crimes, including racketeering.  To date, more than 26 defendants have been located, brought to U.S. courtrooms and convicted, and many have received sentences exceeding 10 years in prison.

Despite the success of the Carder.su case and other international organized crime prosecutions, we cannot address the problem by just attacking the individual organized crime groups themselves.  New criminal enterprises are formed to fill the void, and our resources are such that we cannot individually prosecute them out of existence.  A successful enforcement model requires a more comprehensive strategy.

We must combat the conditions that allow groups like Carder.su to flourish.  Given the international nature of crime, sophisticated organized criminals take advantage of international borders and differences in legal systems, hoping—often with good reason—that our investigators will not be able to identify them, or to obtain evidence from abroad, or that their home countries will neither prosecute them domestically nor extradite them to face justice in the United States.

Criminals are especially prone to hide behind the international borders of countries where corruption may have undercut the power or inclination of government authorities to deal with them.  And, as we have seen time and again, such countries become the breeding grounds and safe havens for terrorist groups and criminals of all stripes who threaten the security of the United States.

Stated differently, in today’s world, criminals are able to launch attacks on Americans from countries that they have sought to corrupt or destabilize. 

The threats posed by international corruption cannot be overlooked.  Corruption renders countries less safe and less stable.  Corruption thwarts economic development, traps entire populations in poverty and undercuts credible justice systems.

International corruption also inhibits the ability of American companies—and others—to compete overseas on a level playing field.  Once bribery and corruption take hold, fair and competitive business practices are eliminated.

A timely example of how corruption can infect international business practices is the FIFA case recently charged by the U.S. Attorney’s Office of the Eastern District of New York.  In that case, nine FIFA officials and five corporate executives have been charged with various offenses, including racketeering conspiracy, in connection with a 24-year scheme to enrich themselves through the corruption of international soccer.  The Criminal Division’s Office of International Affairs has worked closely with the lead FIFA prosecutors to obtain evidence from numerous countries across the globe.  Swiss authorities have opened a separate, parallel probe into FIFA, relating to the selection of World Cup hosts.  We are sharing evidence and collaborating closely with governments around the world in connection with the ongoing investigation.  This worldwide effort is a profound illustration of the success that can be achieved through a truly global coalition.

In many ways, the FIFA case is very much like the Foreign Corrupt Practices Act (FCPA) cases the Criminal Division is regularly investigating and prosecuting to attack illegal conduct in the global marketplace.  These cases protect markets from corruption and the artificial influences of bribery, and ensure that American companies—indeed, all companies—can compete fairly and freely across international boundaries.

But make no mistake: fighting corruption is not some service we provide to the global community; this is a fight in which we have critical international allies.  Far from acting as the world’s corruption police, the United States is part of a formidable and growing coalition of international enforcement partners who together combat corruption around the world—at home as well as abroad—that threatens each of our nations.

It is not just the United States that is recognizing the importance of foreign bribery laws.  There is a growing chorus of countries voicing support for the fight against this type of corruption.  More and more countries are joining international bodies—like the Organisation for Economic Co-operation and Development—that provide uniform standards for the criminalization of bribery of foreign public officials in international business transactions.  This type of collaboration is critical if we are going to have a meaningful impact on international corruption.

Our criminal prosecutions, however, are only one part of our efforts to combat fraud and corruption on a global scale.  We also partner with our foreign counterparts to build international law enforcement capacity around the world.  The Criminal Division’s Office of Overseas Prosecutorial Development, Assistance and Training, and the International Criminal Investigative Training Assistance Program work with law enforcement, prosecutors, judicial personnel and government officials in other countries that seek to develop and sustain effective criminal justice institutions.  These efforts bring about tangible results to the benefit of citizens of those countries and the United States.  In fact, I know that a few of our longstanding partners from Albania—particularly in the area of fighting cybercrime—are in the audience here today, and I am sure there are others here as well.

At the same time that we work to combat corruption overseas, we are also increasing our efforts to ensure that American borders do not protect criminals or their assets.  In this regard, the Justice Department launched the Kleptocracy Asset Recovery Initiative in 2010.  The initiative relies on the use of U.S. civil forfeiture actions to recover the proceeds of foreign official corruption that pass through the United States.

More simply, it takes the monies and assets stolen by foreign despots and kleptocrats and returns them to the people harmed.  This initiative protects the integrity of the U.S. financial system from use by corrupt officials and denies those officials the ability to enjoy luxuries purchased in the United States at the expense of the populations they purport to serve.

In many ways, the Criminal Division’s FCPA enforcement program and our Kleptocracy Initiative are really two sides of the same anti-corruption coin.  We bring those who pay bribes to justice, no matter how rich and powerful they are.  But by itself, that is not enough.  We also attack corruption at its source, by prosecuting and seizing the assets of the corrupt officials who betray the trust of their people.

That said, international corruption takes many forms in many locations.  It is not just despots in unstable countries looting their citizens and creating zones of lawlessness in which other criminals—like sophisticated cybercriminal organizations—may seek refuge.

Corruption openly threatens our global corporate institutions and the integrity of our international financial markets.  Misconduct that occurs overseas can and does affect investors and consumers in this country.  As a result, we have increasingly joined with our international enforcement and regulatory partners to investigate criminal activity by global financial institutions and corporations.

The most recent demonstration of this collaborative approach to the fight against financial fraud occurred just weeks ago when five major financial institutions from the United States and overseas—Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc and UBS AG—admitted to manipulation of the foreign exchange spot market.  Four of those banks pleaded guilty to antitrust charges and the fifth pleaded guilty to separate charges.  To summarize the complex scheme, currency traders at the conspiring banks used an exclusive private Internet chat room to coordinate their trading of U.S. dollars and euros to manipulate the benchmark exchange rates.  In keeping with the theme of Dr. Cressey’s work, the currency traders engaged in the market manipulation called themselves “The Cartel.”

This successful investigation and prosecution required not only collaboration among U.S. regulators and law enforcement, but a broad coalition of international law enforcement partners, including the U.K.’s Financial Conduct Authority and Serious Fraud Office, as well as the Swiss Financial Market Supervisory Authority.  Including penalties and fines paid to regulators around the world, when all is said and done, the banks will have collectively paid nearly $9 billion.  This is another demonstration of a successful international partnership addressing international organized crime.

This prosecution also follows on the heels of the successful international prosecution of financial institutions and individuals for the manipulation of the London Interbank Offered Rate or LIBOR.  LIBOR is the primary benchmark for short-term interest rates all over the world.  It is used as a reference rate for many interest rate contracts, mortgages, credit cards, student loans and other consumer lending products used by Americans and by individuals and institutions around the world. 

Very similar to the foreign exchange case, traders from the colluding banks in the LIBOR case were manipulating the banks’ LIBOR submissions to benefit their own trading positions.  Given LIBOR’s benchmark, this manipulation had truly worldwide consequences.

To date, six global financial institutions have resolved their respective roles in the criminal manipulation of LIBOR with the U.S. Justice Department.  Collectively, they have paid over $6.5 billion to the Justice Department and regulators.  Together with the U.K.’s Serious Fraud Office, we have charged 21 individuals in the United States and United Kingdom.  Four have pleaded guilty, and the first defendant is in the midst of trial in the United Kingdom. 

This is all to say that cybercrime, organized crime, corruption and financial fraud are now international problems that can be effectively addressed only by international enforcement partnerships. 

The United States is not going to overcome the threat posed by global corruption and international organized crime by going it alone.  The Department of Justice is never going to serve as the world’s global police force.  But we can—and I believe we should—lead by example: by vigorously investigating and prosecuting international corruption and organized crime when it violates U.S. laws, and by sustaining and increasing our commitment to international collaboration in our nations’ shared struggle to safeguard our markets, our networks and our citizens.

Under my leadership, the Criminal Division will remain steadfastly committed to forging and growing our international partnerships as we fight the scourge of international corruption and organized crime.

Thank you for inviting me to speak with you all today.  And thank you again for the honor of receiving this year’s Cressey Award.

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Updated June 15, 2015