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U.S. Attorney General Issues Notice that UK-US CLOUD Act Takes Effect July 8, 2020

March 3, 2020 by Bruce Zagaris Leave a Comment

On March 3, 2020, U.S. Attorney General William Barr, in accordance with the Clarifying Lawful Overseas Use of Data Act (“CLOUD Act”), relating to an executive agreement governing access by a foreign government to electronic data, gave notice that he has determined, and has submitted a written certification of such determination to Congress, that the U.S.-U.K. CLOUD Agreement satisfies the requirements of the CLOUD Act.

On November 27, 2019, the Attorney General certified that he had determined that the U.S.-U.K. CLOUD Agreement satisfies the requirements of the CLOUD Act. On January 10, 2020, the Attorney General completed the process of providing his certification to Congress. The U.S.-U.K. CLOUD Agreement will enter into force not earlier than July 8, 2020, unless Congress enacts a joint resolution of disapproval, in accordance with the CLOUD Act.

On March 23, 2018, the CLOUD Act was signed into law. Public Law 115-141, Div. V, 132 Stat. 1213-25. The CLOUD Act removes certain restrictions under U.S. law on companies disclosing electronic data, in response to qualifying, lawful orders in investigations of serious crime, directly to a qualifying foreign government with which the United States has entered into an executive agreement governing access by the foreign government to covered data. Id. at 132 Stat. at 1213-17.

Before an agreement can go into effect, the Attorney General, with the concurrence of the Secretary of State, must determine that the considerations outlined in 18 U.S.C. 2523(b) have been met. The Attorney General must then submit a written certification of his determination to Congress, including an explanation of each consideration required by 18 U.S.C. 2523(b), not later than 7 days after the date on which the Attorney General certifies the executive agreement. 18 U.S.C. 2523(d) (1).

The executive agreement will enter into force not earlier than 180 days after the date the Attorney General notifies Congress, unless Congress enacts a joint resolution of disapproval, in accordance with the CLOUD Act. 18 U.S.C. 2523(d)(2). Under 18 U.S.C. 2523(g), the Attorney General’s determination or certification under 18 U.S.C. 2523(b) must be published in the Federal Register..

Determination and Certification Pursuant to Section 2523(b)

On October 3, 2019, the Home Secretary of the United Kingdom and the Attorney General of the United States signed the U.S.-U.K. CLOUD Agreement. A copy of the U.S.-U.K. CLOUD Agreement is available at: https://www.justice.gov/dag/cloudact. On November 27, 2019, the Attorney General certified his determination that the U.S.-U.K. CLOUD Agreement satisfies the requirements of 18 U.S.C. 2523(b). The Attorney General’s determination was based on the considerations in paragraphs (1), (2), (3), and (4) of 18 U.S.C. 2523(b), as explained in the “Explanation of Each Consideration in Determining that the Agreement Satisfies the Requirements of 18 U.S.C. 2523(b),available at: https://www.justice.gov/dag/cloudact. Secretary of State. Pompeo concurred with the Attorney General’s determination.

The Department of Justice (“Department”) transmitted the U.S.-U.K. CLOUD Agreement certification to the Committee on the Judiciary and the Committee on Foreign Relations of the Senate on December 4, 2019. Due to a clerical error the Committee on the Judiciary and the Committee on Foreign Affairs of the House of Representatives did not receive notice until January 10, 2020.

Non-Reviewable Determination and Certification

In accordance with 18 U.S.C. 2523(c), the determination and certification by the Attorney General described in this notice are not subject to judicial or administrative review.

The Way Forward

The U.S. has also signed a CLOUD Act Agreement with Australia. The U.S. and the Ministers of Justice of the European Union have held discussions over a CLOUD Act Agreement. The U.S. hopes to sign many CLOUD Act Agreements.

Many privacy groups, such as Electronic Privacy Information Center, and human rights groups have opposed the CLOUD Act agreements. They oppose it, among other reasons, because it gives foreign authorities access to information without any judicial authorization, no notice is given to the data subject and no remedies, and unequal minimization and targeting protections exist for U.K. and U.S. citizens

U.S. Court of Appeals for D.C. Circuit Rules Congress Lacks Standing on Emoluments Case

February 8, 2020 by Bruce Zagaris Leave a Comment

On February 7, 2020, the United States Court of Appeals for the District of Columbia Circuit in a per curiam ruling decided the 215 Members of Congress did not have standing to sue President Donald Trump over alleged violations of the U.S. Constitution’s Foreign Emoluments Clause (Clause).[1]

The opinion reverses the district court’s decision, denying President Trump’s motion to dismiss.

Complaint

On June 14, 2017, the Members filed their complaint. They seek declaratory and injunctive relief against the President in his official capacity. The Members allege that President Trump “has a financial interest in vast business holdings around the world that engage in dealings with foreign governments and receive benefits from those governments” and that “[b]y virtue of that financial interest, [he] has accepted, or necessarily will accept, ‘Emoluments’ from ‘foreign States’ while holding the office of President.”

They allege the President’s failure to seek and obtain congressional consent has “completely nullified,” the votes they are authorized to case to approve or disapprove his acceptance of foreign emoluments.

Because the Foreign Emoluments Clause allegedly requires the President to obtain ‘the Consent of the Congress’ before accepting otherwise prohibited ‘Emoluments,” Plaintiffs, as members of Congress, must have the opportunity to case a binding vote that gives or withholds their ‘Consent’ before the President accepts any such ’Emolument.’” They further allege that the Clause is “unique.”

First, the Clause imposes a procedural requirement (obtain “the consent of the Congress” that federal officials must satisfy before they take a specific action (accept “any” emolument from “any…foreign State”). U.S. Const. art. I, § 9, cl. 8. The failure to obtain Congressional before accepting emoluments deprives the plaintiffs of their right to vote on whether to consent to its acceptance.

Plaintiffs claims that, because President Trump is violating the Clause through his private businesses, without the need for government funds or personnel, Congress cannot use its power of the purse to stop him.

The President moved to dismiss, arguing that (1) the Members lack standing; (2) no cause of action authorized their lawsuit; (3) they failed to state a claim upon which relief could be granted; and (4) the requested relief, an injunction against the President in his official capacity, violates the Constitution.

District Court Decision

The district court bifurcated the issues, addressed standing first. It held that the Members “sustained their burden to show that they have standing to bring their claims. Blumenthal v. Trump, 335 F. Supp. 3d 45, 54 (D.D.C. 2018). The President then moved to certify the district court’s standing order for interlocutory appeal under 28 U.S.C. § 1292(b), which motion was denied on June 25, 2019, Blumenthal v. Trump, 382 F. Supp. 3d 77, 83 (June 25, 2019). During the pendency of the certification motion, the district court denied the remainder of the President’s motion to dismiss. The district court held that the Members had an implied equitable cause of action for injunctive relief and that they had stated a claim under the emoluments clause. Blumenthal v. Trump, 373 F. Supp. 3d 191, 207-09 (D.D.C. 2019).

Appellate Court Decision

The President then petitioned the Court of Appeals for a writ of mandamus. The appellate court granted the interlocutory appeal.

The appellate court explained that “[n]o principle is more fundamental to the judiciary’s proper role in our system of government than the constitutional limitation of federal-court jurisdiction to actual cases or controversies. Standing to sue is a doctrine rooted in the traditional understanding of a case of controversy.” Spokeo Inc. v Robins, 136 S.Ct. 1540, 1547 (2016) (quoting Raines v. Byrd, 521 U.S. 811, 818 (1997). Only 29 Senators and 186 Members of the House of Representatives brought the case. They do not constitute a majority of either body and hence do not have power to approve or deny the President’s acceptance of foreign emoluments. As a result, the appellate court found the plaintiffs lack standing.

The current issue of the IELR will discuss the case in more detail.

[1] Richard Blumenthal v. Donald J. Trump, U.S. Court of Appeals for the District of Columbia Circuit, No. 19-5237 (Feb. 7, 2020).

Civil Society Groups File Lawsuit Challenging Trumps “Safe Third Country” Agreements

January 24, 2020 by Bruce Zagaris Leave a Comment

On January 15, 2020, the American Civil Liberties Union, National Immigrant Justice Center, Center for Gender & Refugee Studies, and Human Rights First filed a federal lawsuit challenging the Trump administration’s policies concerning so-called “safe third country” agreements with Guatemala and other Northern Triangle countries that force individuals seeking asylum in the U.S. to apply for asylum in the same dangerous region from which they have fled.

The agreements and policies deprive asylum applicants from ever receiving an opportunity to apply for asylum in the U.S. Instead, they are sent to Guatemala – and soon to El Salvador and Honduras, even though the publications of the U.S. government state these countries are suffering from epidemic violence, instability and ill-equipped asylum systems.

U.T. v. Barr, the lawsuit, was filed in U.S. District Court in Washington, D.C. It cites violations of the Refugee Act, Immigration and Nationality Act, and Administrative Procedure Act. Plaintiffs are asylum applicants who fled to the U.S. and were unlawfully removed to Guatemala, as well as organizations that service asylum seekers.

Plaintiffs

U.T. is a gay man from El Salvador who fled his country for the U.S. after being threatened by an MS-13 gang member. He fears he will be attacked or killed for his sexual orientation if he tries to live openly as a gay man in his home country. He traveled through Guatemala on his way to the U.S. He was subjected to homophobic harassment in Guatemala. When he arrived to the U.S., border officials said he was being removed to Guatemala, where he also fears homophobic persecution.

M.H. is a Honduran memo who fled to the U.S. with her young daughter. Her common-law husband and her sister-in-law worked in the transportation business in Honduras and were forced to pay local gangs in order to work. They were both murdered. Fearing for their safety after being threatened, M.H. and her daughter fled to the U.S.

A plaintiff is Las Americas Immigrant Advocacy Center, a nonprofit legal services organization based in El Paso, Texas. It is dedicated to serving the legal needs of low-income immigrants, including asylum seekers.

Another plaintiff is the Tahirih Justice Center, the largest national direct service and policy advocacy organization focused on assisting immigrant women and girls fleeing violence.

Allegations in the Complaint

The complaint states that noncitizens who arrive or are physically present in the U.S. may apply for asylum, subject to three narrow exceptions. One of those exceptions is that noncitizens may be denied the opportunity to apply for asylum in the U.S. Instead the U.S. can remove them to seek protection elsewhere pursuant to a “safe third country” agreement. The exception only applies if strict statutory requirements are not met, including that the asylum applicant would have a full and fair opportunity to seek asylum in the “safe third country” and would not face persecution or torture there.

Last summer the U.S. signed three new “asylum cooperative agreements” (“ACA”) with Guatemala, Honduras, and El Salvador – all extremely dangerous, refugee-producing countries with asylum systems that are skeletal at best.

On November 19, 2019, the U.S. government issued an Interim Final Rule titled “Implementing Bilateral and multilateral Asylum Cooperative Agreements Under the Immigration and Nationality Act” (the “Rule”). It establishes procedures for the removal of asylum seekers to Guatemala, Honduras, and El Salvador, and to any other countries with which the U.S. signs future ACAs. The Rule’s goal is to allow the “distribution of hundreds of thousands of asylum claims” to other countries. 84 F.R. at 63,994.

On November 20, the government issued written guidance implementing its ACA with Guatemala and started removing non-Guatemalan asylum seekers there.

The lawsuit challenges the Rule, as well as agency guidance implementing the Guatemala ACA *the “USCIS Guidance”),. The lawsuit claims the ACA and Guidance unlawfully deprive asylum seekers of the right to right for asylum in the U.S. and sending them to dangerous countries where they have no chance to find refuge. The Rule has already the plaintiffs in the case, and others like them, in harm’s way by removing them too Guatemala and forcing them to decide between remaining there, where they fear for their lives, and returning to the countries from which they fled persecution.

The complaint alleges that the government’s willingness to sign ACAs with these countries illustrates that its true goal is not to promote burden sharing while ensuring the safety of refugees. Instead, the Rule and ACAs turn away asylum seekers and require the signatories of the ACAs to ensure them due process, care for them, and enable them to have a fair hearing on their asylum application.

Relief Sought

The plaintiffs seek a declaration that the Rule and USCIS Guidance are contrary to law, arbitrary and capricious, and/or unconstitutional. They seek an injunction prohibiting the implementation or enforcement of the Rule and USCIS Guidance. They seek an order vacating the removal orders issued to the individual plaintiffs and an order paroling those individual plaintiffs into the U.S. for the duration of their removal proceedings.

The February issue of the IELR will have additional discussion of the complaint.

DISTINGUISHED PROFESSOR OF INTERNATIONAL CRIMINAL LAW PASSES AWAY

December 18, 2019 by Bruce Zagaris 1 Comment

On December 9, 2019, Distinguished University and Law Professor Emeritus at the Washington College of Law, American University Nicholas Kittrie passed away. Below is a memorandum from Mary L. Clark, Deputy Provost and Dean of Faculty.

For those of us who had the privilege of knowing Professor Kittrie, he was a great scholar, a fantastic teacher, a very kind human being, and had a love of the field of international criminal and comparative criminal law. The community of international and comparative criminal law will miss him dearly.

“TO: American University Faculty and Staff

FROM: Mary L. Clark, Deputy Provost and Dean of Faculty

SUBJECT: WCL Distinguished University and Law Emeritus Nicholas Kittrie

I write with the sad news of the passing of Distinguished University and Law Professor Emeritus Nicholas Kittrie. Professor Kittrie earned an LL.B. and M.A. from the University of Kansas and an LL.M. and S.J.D. from Georgetown University School of Law. Professor Kittrie joined AU’s Washington College of Law in 1964 and served on the faculty for over 50 years before his retirement in 2017. While at WCL, Professor Kittrie rose through the academic ranks quickly and ultimately served as WCL’s Dean. He also played a major role in the planning and development of the then Criminal Justice Department in the School of Public Affairs. In recognition of his service, WCL’s Faculty Lounge – “The Nicholas N. Kittrie Faculty Lounge” – was dedicated in his honor in 2016.

Professor Kittrie was a leading expert in American and international public and criminal law. He authored or edited more than fifteen books, numerous articles, and gave scores of presentations at universities throughout North America, Europe, Asia, and Africa. Professor Kittrie frequently appeared in the media to discuss topics as varied as war crimes, terrorist activities, political offenders, extradition, and criminal sentencing. Professor Kittrie chaired the United Nations Alliance of NGOS on Crime Prevention and Criminal Justice, served as president of the American Society on Criminology, and served as a legal consultant to the United States Vice President’s Commission on Terrorism. Most recently, Professor Kittrie was honored with the Albert Nelson Marquis Lifetime Achievement Award in recognition of his work as a legal scholar, educator, and legal practitioner in the U.S. and abroad.

Information regarding a service in honor of Professor Kittrie will follow. Condolences or acknowledgments on his behalf may be made to the American Friends of Yemin Orde Youth Village in Bethesda, M.D.”

U.S. Appropriations Bill Carries More Sanctions and Asset Recovery on the Maduro Regime

December 17, 2019 by Bruce Zagaris Leave a Comment

By Bruce Zagaris and Dale Eppler

The House-Senate Appropriations bill, which is expected to pass this week, has several provisions on Venezuela (at around page 1270 in the 1783 page text), including a new requirements on asset recovery and coordination of economic sanctions with other countries. In April, Senator Robert Menendez (D-N.J.) introduced the “Venezuela Emergency Relief, Democracy Assistance, and Development (VERDAD) Act of 2019 with broad bipartisan support. It directs a new strategy for Venezuela in coordination with Congress, and earmarks substantial funds to support it. We understand there also were very high level meetings in the Executive branch during the past week on Venezuela but, thus far, no word from the White House on any change in the direction of U.S. policy.

The language in the bill is as follows:

Subtitle E—Supporting the 8 Reconstruction of Venezuela

SEC. 151. RECOVERING ASSETS STOLEN FROM THE VENEZUELAN PEOPLE.

(a) RECOVERING ASSETS. —The President, acting through the Secretary of State and in consultation with the Secretary of the Treasury, shall advance a coordinated international effort—

(1) to work with foreign governments—

(A) to share financial investigations intelligence, as appropriate;

(B) to block the assets identified pursuant to paragraph (2); and

(C) to provide technical assistance to help governments establish the necessary legal framework to carry out asset forfeitures; and

(2) to carry out special financial investigations to identify and track assets taken from the people and institutions of Venezuela through theft, corruption, money laundering, or other illicit means.

(b) STRATEGY REQUIREMENT.—

(1) IN GENERAL.—Not later than 180 days after the date of the enactment of this Act, the President, acting through the Secretary of State and in consultation with the Secretary of the Treasury, shall submit a strategy for carrying out the activities described in subsection (a) to Congress.

(2) ADDITIONAL ELEMENTS.—The strategy required under paragraph (1) shall—

(A) assess whether the United States or another member of the international community should establish a managed fund to hold the assets identified pursuant to subsection (a)(2) that could be returned to a future democratic government in Venezuela; and

(B) include such recommendations as the President and the Secretary of State consider appropriate for legislative or administrative action in the United States that would be needed to establish and manage the fund described in subparagraph (A).

Subtitle F—Restoring the Rule of Law in Venezuela

SEC. 161. DEVELOPING AND IMPLEMENTING A COORDINATED SANCTIONS STRATEGY WITH PARTNERS IN THE WESTERN HEMISPHERE AND THE EUROPEAN UNION.

(a) STRENGTHENING SANCTIONS CAPACITY IN LATIN AMERICA AND THE CARIBBEAN.—The Secretary of State, in consultation with the Secretary of the Treasury, shall offer to provide technical assistance to partner governments in Latin America and the Caribbean to assist such governments in establishing the legislative and regulatory frameworks needed to impose targeted sanctions on officials of the Maduro regime who—

(1) are responsible for human rights abuses;

(2) have engaged in public corruption; or

(3) are undermining democratic institutions and 18 processes in Venezuela.

(b) COORDINATING INTERNATIONAL SANCTIONS.

— The Secretary of State, in consultation with the Secretary of the Treasury, shall engage in diplomatic efforts with partner governments, including the Government of Canada, governments in the European Union, and governments in Latin America and the Caribbean, to impose targeted sanctions on the Maduro regime officials described in subsection (a).

(c) STRATEGY REQUIREMENT.—Not later than 90 days after the date of the enactment of this Act, the Secretary of State, in consultation with the Secretary of the Treasury, shall submit a strategy for carrying out the activities described in subsection (a) to: (1) the Committee on Foreign Relations of the Senate; (2) the Committee on Appropriations of the Senate; (3) the Committee on Banking, Housing, and Urban Affairs of the Senate; (4) the Committee on Foreign Affairs of the House of Representatives; (5) the Committee on Appropriations of the House of Representatives; and (6) the Committee on Financial Services of the House of Representatives.

It is not clear yet how the executive branch, working with Congress, will implement the proposed sanctions and asset recovery program. We expect Treasury and State will lead the coordination with other governments. Presumably, the U.S. and its partners will furnish technical assistance to smaller jurisdictions in the region that are willing to help them find, freeze, and even forfeit assets that are the proceeds of crime. Until now, one potential challenge is that some small jurisdictions, especially those that have maintained friendly relations with Chavez and Maduro, and that benefited from PetroCaribe, do not want to take steps inimical to the Maduro regime. Another problem is that governments are much better at freezing accounts than they are at identifying and tracking the proceeds of corruption.

The next issue of the IELR will have a more comprehensive discussion of the provisions.

U.S. and Australia Start Negotiations over CLOUD Act Agreement and Host Roundtable on Trusted Technology Ecosystems

October 8, 2019 by Bruce Zagaris Leave a Comment

On October 7, 2019, the United States and Australia announced they have entered into formal negotiations for a bilateral agreement under the U.S. Clarifying Lawful Overseas Use of Data Act (the CLOUD Act). The two governments also hosted a roundtable on trusted technology ecosystems.

Negotiations of a CLOUD Act Agreement

United States Attorney General William Barr and Australian Minister for Home Affairs, Peter Dutton, announced the negotiations during a meeting.

Supported by Australian legislation yet to be introduced, a bilateral CLOUD Act agreement would enable Australian law enforcement to serve domestic orders for communications data needed to combat serious crime directly on U.S.-based companies, and vice versa.

The announcement of U.S.-Australian negotiations of a CLOUD Act Agreement provides additional momentum to the U.S. government efforts of having an expedited process for directly obtaining access to electronic evidence from the platform providers.

Roundtable on Trusted Technology Ecosystems

Also on October 7, Attorney General William P. Barr and Australian Minister for Home Affairs Peter Dutton hosted a government-industry roundtable discussion titled, “Shaping a Trusted Technology Ecosystem,” with more than a dozen representatives from the tech-industry landscape.

A Department of Justice press release characterized the dialogue as a critical step in jointly addressing complex supply chain challenges faced by both nations. The collaborative discussion presented an opportunity for industry, Australia and the United States to work together on solutions to ensure an open marketplace, achieve a diverse range of secure technology options, and enhance global technology markets characterized by trust, transparency, and fair competition. One issue is whether to try to prevent Huawei from developing for the Western countries and the world in general the 5G network. The U.S. does not trust Huawei from a national security perspective because it believes that the Chinese government will control Huawei’s practices and enable the Chinese government to obtain surveillance periodically. Until now, Australia has cooperated with the U.S. on the initiative to block Huawei even though Australia is increasingly subject to Chinese economic and foreign policy pressure due to China’s growing role in Australia and the region. The issue of trusted technology ecosystems also concerns the Internet and data privacy.

U.S. and U.K. Sign Cross-Border Data Access Agreement for Cross-Border Enforcement and Warn Facebook on Proposed Encryption

October 4, 2019 by Bruce Zagaris Leave a Comment

On October 3, 2019, the United States and United Kingdom concluded the first ever CLOUD Act Agreement. It will permit U.S. and British law enforcement agencies, with appropriate authorization, to demand electronic data concerning serious crime, including terrorism, child sexual abuse, and cybercrime, directly from tech companies based in the other country, without legal barriers. Simultaneously, both governments and Australia’s Minister for Home Affairs published an open letter to Facebook, asking it to stop plans to implement end-to-end encryption across its messaging services

The CLOUD Act Agreement

The agreement will broadly remove restrictions for a wide category of investigations, not targeting residents of the other country, and assure providers that disclosures through the Agreement are compatible with data protection laws. Each signatory commits to obtain permission from the other before using data gained through the agreement in prosecutions concerning a Party’s essential interest – specifically, death penalty prosecutions by the U.S. and U.K. cases implicating freedom of speech.

The agreement will accelerate investigations by removing legal barriers to timely and effective collection of electronic evidence. The Agreement allows law enforcement, when armed with appropriate court authorization, to directly compel tech companies based in the other country to give access to their electronic data, rather than going through governments, which can take many months and even years.

The agreement will accelerate dozens of complete investigations into suspected terrorists and pedophiles.

The U.S. will have reciprocal access, under a U.S. court order, to data from U.K. communication service providers. All requests for access to data will be subject to independent judicial authorization or oversight.

In March 2018, Congress passed the CLOUD Act, authorizing the U.S. to conclude bilateral executive agreements with rights-respecting partners that remove each party’s legal barriers to the other party’s access to electronic data for certain criminal investigations. The enactment in the U.K. of the Crime (Overseas Production Orders) Act 2019, which received Royal Assent in February of this year, authorized the U.K. to conclude the agreement

U.K. and U.S. Ask Facebook to Stop Plans to Encrypt Messaging Services

The U.K. Home Secretary Priti Patel, U.S. Attorney General William P. Barr, Acting U.S. Homeland Security Secretary Kevin McAleenan, and Australia’s Minister for Home Affairs Peter Dutton sent an open letter to Facebook, expressing serious concerns with Facebook’s plans to implement end-to-end encryption across its messaging services.

The letter asks Facebook to stop the proposals, unless the company can give assurances that no reduction will occur in Facebook’s ability to keep its users safe and enable law enforcement access to content in exceptional circumstances in order to protect the public.

Analysis

The U.K.-U.S. CLOUD Act Agreement opens the door for the U.S. and the European Union to conclude a CLOUD Act Agreement. The two parties are currently negotiating such an agreement.

The current issue of the IELR will have more information on the U.S.-UK Agreement and the open letter to Facebook.

8 Senators Introduce ILLICIT CASH Act to Improve Corporate Transparency and International Aspects of AML and CFT

September 27, 2019 by Bruce Zagaris Leave a Comment

On September 26, 2019, Senate Banking Committee members, U.S. Sens. Mark R. Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL), Mike Rounds (R-SD), Bob Menendez (D-NJ), and John Kennedy (R-LA), Catherine Cortez Masto (D-NV), and Jerry Moran (R-KS) today introduced bipartisan legislation to improve corporate transparency, strengthen national security, and help law enforcement combat illicit financial activity being carried out by terrorists, drug and human traffickers, and other criminals.

This post highlights the major provisions in the bill and then the international provisions.

The Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act (S.2563) would, for the first time, require shell companies to disclose their true owners to the U.S. Department of Treasury. It would also update decades-old anti-money laundering (AML) and combating the financing of terrorism (CFT) policies. The bill provides Treasury and law enforcement new tools they need to fight criminal networks. This includes improving overall communication between law enforcement, financial institutions, and regulators, and facilitating the adoption of critical 21st century technologies.

Salient Provisions

Specifically, this legislation would:

Establish federal reporting requirements mandating that all beneficial ownership information be maintained in a comprehensive federal database, with strict privacy protections, accessible by federal and local law enforcement. (Sec. 401) and expand FinCEN geographic targeting order authority to commercial real estate (Sec. 402).

Help recruit and retain top talent at the Financial Crimes Enforcement Network (FinCEN) by putting employees on a pay scale comparable to that of federal financial regulators. (Sec. 102)

Create a hub of financial expert investigators at FinCEN to investigate potential AML-CFT activity in collaboration with federal government agencies. (Sec. 103).

Facilitate communications between the Treasury and financial institutions by establishing a Treasury financial institution liaison to seek and receive comments regarding AML-CFT rules, regulations, and examinations. (Sec. 104)

Require the Department of Justice (DOJ) to provide the Treasury Department with metrics on the usefulness of AML-CFT data from financial institutions for law enforcement purposes, as well as data on the past and current trends identified by DOJ in the AML-CFT landscape. (Sec. 201)

Require law enforcement to coordinate with financial regulators to provide periodic feedback to financial institutions on their suspicious activity reports. (Sec. 202)

Prioritize the protection of personally identifying information while establishing a clear path for financial institutions to share AML-CFT information for the purposes of identifying suspicious activity. (Sec. 303)

Ensure the inclusion of current and future payment systems in the AML-CFT regime by updating the definition of “coins and currency” to include digital currency. (Sec. 308)

International Provisions

Some of the provisions are designed to strengthen the international aspects of AML/CFT laws:

Prevent foreign banks from obstructing money laundering or terrorist financing investigations by requiring these banks to produce records in a manner that establishes their authenticity and reliability for evidentiary purposes, and compelling them to comply with subpoenas. This legislation would also authorize contempt sanctions for banks that fail to comply and increase penalties on repeat BSA violators. (Sec. 306);

Start a pilot program for information sharing between a financial institution and its foreign branches and affiliates that are located in OECD jurisdictions (Sec. 305).

Require the Treasury to work with foreign counterparts, including through the Financial Action Task Force, the International Monetary Fund, the World Bank, and the United Nations, to promote stronger AML frameworks and enforcement of AML laws.

Require the Treasury Department to carry out a study on the extent and effect of illicit finance risk relating to the Government of the People’s Republic of China and to develop a strategy to combat money laundering through Chinese firms.

Require the Treasury Department to conduct a study and submit to Congress a report that considers how authoritarian regimes in foreign countries and their proxies use the financial system of the U.S. and to conduct political influence operations, sustain kleptocratic regimes, export corruption, and otherwise undermine democratic governance in the U.S.

A section-by-section analysis of this bill is available here. A one-pager is available here.

A press release from Senator Warner’s office is available.

Federal Judge Overturns Rafiekian’s Conviction and DOJ Ends Investigations of Podesta and Van Weber, Causing a Blow to FARA Enforcement Efforts

September 25, 2019 by Bruce Zagaris Leave a Comment

On September 24, 2019, Judge Anthony J. Trenga of the U.S. District Court Eastern District of Virginia issued a 39-page opinion, overturning the conviction of Bijan Rafiekian, the former business partner of Michael Flynn, the first national security adviser of United States President Donald J. Trump. On September 23, the United States Department of Justice notified Tony Podesta, a Democratic power broker, and Vin Weber, a Republican former congressman, of the closing of its investigation for violations of the Foreign Agents Registration Act.

Rafiekian Opinion

On July 23, 2019, after a six-day jury trial, Rafiekian was convicted for conspiracy under 18 U.S.C. § 371 and acting in the United States as an unregistered agent of a foreign government, namely the government of Turkey, in violation of 18 U.S.C. § 951.

On September 12, 2019, the Court held a hearing on Rafiekian’s Motion for Judgment of Acquittal Under Federal Rule of Criminal Procedure 29 and Motion for a New Trial.

Judge Trenga granted the Motions for Acquittal and conditionally granted the Motion for New Trial.

With respect to the conviction for acting as an unregistered agent of Turkey, Judge Trenga found there is no substantial evidence that Rafiekian agreed to operate subject to the direction or control of the Turkish government. Additionally, Judge Trenga found no evidence of any actual or implied agreement between Rafiekian and the government of Turkey or any official of the government of Turkey.

A contract existed between the Flynn Intel Group (“FIG”) and Alptekin, a Turkish businessman who is the owner of Inovo, BV, a Dutch company located in the Netherlands. Alptekin was previously the Chairman of the Turkish-American Business Council.

On September 8, 2016, Flynn, on behalf of FIG, and Alptekin, on behalf of Invovo, entered into a written agreement, titled “the Independent Advisory Services Agreement.”

The work was to focus on Fethullah Gulen, including his ideology, influence, and relationships with American political leaders. The government of Turkey had tried unsuccessfully to persuade the U.S. government to extradite Gulen.

On September 19, 2016, Alptekin arranged a meeting in which Rafiekian, Flynn and others participated. Also participating was then-Turkish Minister of Energy and Natural Resources Berat Albayrak, President Erdogan’s son-in-law. The meeting mostly consisted of the Turkish officials expressing their negative opinions concerning Gulen.

On November 2, 2016, Rafiekian prepared an op-ed to be published under Flynn’s name. On November 6, 2017, Flynn returned the op-ed to Rafiekian “with substantive changes.” The op-ed was published under Flynn’s name in The Hill newspaper. It was entitled Our Ally Turkey Is In Crisis and Needs Our Support.

Following the publication of the op-ed, the FARA Registration Unit of DOJ sent Flynn a letter, asking about the op-ed and FIG’s relationship with Alptekin and Inovo, so it could determine whether FIG, Flynn, or anyone else should file a registration statement under FARA. After Covington, the lawyers for FIG, conducted an investigation, Covington ultimately decided to file a complete FARA registration statement . The statements listed Inovo, and not the government of Turkey, as the foreign principal.

On December 1, 2017, Flynn pled guilty in a separate case to unrelated charges. He agreed to cooperate with the government.

Section 951 Conviction

Judge Trenga’s opinion observed that mothering about the structure of GIG’s contracts with Inovo and Alptekin or the payments made pursuant to those contracts gives rise to a reasonable or rational inference that Rafiekian had acted or agreed to act as an agent of the Turkish government. The evidence at trial was insufficient to conclude that Rafiekian had agreed or act subject to Turkey’s director or control. The opinion reasons that no evidence exists that the Turkish government required the op-ed, either directly or through Alptekin.

Conspiracy Conviction

The opinion finds insufficient evidence to convict Rafiekian of conspiracy to (1) act as an unregistered agent of a foreign government in violation of Sec. 951; and (2) make willful and material false statements and omissions in a FARA filing in violation of 22 U.S.C. § 618(a)(2). The opinion underscored Rafiekian’s efforts to comply with any registration or notification requirements, including his consultations with two law firms concerning FIG’s registration obligations, FIG’s filing under the Lobbying Disclosure Act on the advice of a lawyer, and his voluntary disclosure to U.S. authorities on September 28, 2016 concerning the FIG engagement arranged through Alptekin “as a business contact” who had “senior level contracts in the Turkish government.”

Notice of Closing the Investigation of Podesta and Weber

The decision to end the investigation of Podesta and Weber followed weeks after a federal jury found former White House counsel Gregory B. Craig not guilty of lying to the DOJ about his media contacts concerning his Ukrainian work. The investigation of Podesta and Weber grew out of the investigation of Manafort and Craig. The Podesta Group and Mercury, for whom Vin Weber worked, reported on their FARA filing that they had represented the European Center for Modern Ukraine, a Brussels-based nonprofit group. Prosecutors alleged the real client was the government of Ukraine.

The current issue of the IELR will discuss in more detail the implications of the Rafiekian acquittal and the close of the investigations against Podesta and Weber.

U.S.-El Salvador Sign Agreement to Force Asylum Seekers to El Salvador

September 23, 2019 by Bruce Zagaris Leave a Comment

On September 20, 2019, the United States and El Salvador governments signed a Protection Cooperative Agreement. The Acting Secretary of the U.S. Department of Homeland Security, Kevin K. McAleenan signed on behalf of the United States. The Minister of Foreign Affairs, Alexandra Hill Tinoco signed on behalf of El Salvador.

According to a joint statement, the Agreement recognizes El Salvador’s recent decision to join the Comprehensive Refugee Response Framework. It states it will use U.S. and international best practices to “enhance collaboration on building protection capacity and increase protection options closer to home for vulnerable populations.”

The two governments commit to responding to “the issue of irregular migration in a joint and humane way that will contribute to greater prosperity and security of the region.” The Agreement shows the partnership between both governments “to discourage dangerous irregular migration across Central America toward the U.S. and to combat transnational criminal organizations, strengthen border security, and reduce human trafficking and smuggling.”

Once the Agreement becomes effective, it will further expand the capacity of protection systems in the region. The joint statement does not state when the agreement will take effect and what will be required. The U.S. and Guatemala signed a similar agreement in July in the waning days of the Jimmy Morales Administration. However, the Guatemala Constitutional Court ruled that the Parliament must approved the policy before it takes effect.

The Cooperative Agreement follows the Letter of Intent signed by Acting Secretary McAleenan with the Government of El Salvador last month in San Salvador to intensify bilateral cooperation in key areas.

A leading journal in El Salvador observes that the country with the most asylum applicants in 2018 has now agreed to accept asylum applicants that Trump rejects.

The joint statement expresses that “(i)n recent months, Acting Secretary McAleenan has also forged partnerships with Mexico, Guatemala, El Salvador, Honduras and Panama to disrupt human and drug smuggling operations and address the crisis at the U.S.-Mexico border.”

While the agreement aligns with the administration’s “third country” asylum rule, that term was not used in the press conference between the two signatories announcing the agreement.

The obligation for asylees to look for refuge in the countries from which they flee contradicts what travel warnings of the U.S. Department of State. As of January 28, 2019, the State Department issued a travel advisory with respect to El Salvador, advising:

“Reconsider travel to El Salvador due to crime…Violent crime, such as murder, assault, rape, and armed robbery, is common. Gang activity, such as extortion, violent street crime, and narcotics and arms trafficking, is widespread. Local police may lack the resources to respond effectively to serious criminal incidents.”

Various international human rights organizations observe that a country with the sixth highest number of persons seeking asylum in 2018 does not meet the conditions to protect asylees in its territory.

Charanya Krishnaswami, the advocacy director for the Americas at Amnesty International USA, criticized the agreement, stating: “This agreement makes a mockery of the right to asylum. People should not be forced to seek safety in countries where they will not be safe. She continued that “El Salvador has one of the highest rates of violence in the world, including gender-based violence so rampant that Amnesty International declared it one of the most dangerous countries in the world to be a woman. It is not safe for its own citizens, much less for asylum-seekers.”

The October issue of the IELR will have additional information on the agreement and the El Salvador initiative to strengthen patrolling of its borders, which the United States government is partially financing.