IELR Blog

On December 2, 2020, the UN Commission on Narcotic Drugs voted with 27 States in favor, 25 against, and one abstaining, to remove cannabis from its list of Schedule IV Narcotic drugs.  Cannabis has been listed as a Schedule IV drug for sixty years under the Single Convention on Narcotic Drugs of 1961.

Schedule IV Narcotics

The UN CND recommends the strictest controls for Schedule I and Schedule IV narcotics. Schedule I includes drugs that are addictive and pose a high risk of abuse, while Schedule IV includes “certain drugs listed in Schedule I that are highly addictive and highly liable to abuse and rarely used in medical practice.” Cannabis and heroin were listed together as Schedule IV narcotics prior to the vote on December 2, 2020.

The recommended control measures and prohibition of cannabis were never binding for States party to the Convention. However, the United Nations’ official stance against the use of cannabis for medical research has potentially influenced national laws and research into the drug. Therefore, the removal of cannabis from Schedule IV means that states may initiate or expand research into the effects and medical uses of cannabis in the future. Ecuador, which voted in favor of removing cannabis from Schedule IV, stated that, moving forward, cannabis production, sale and use, should have “a regulatory framework that guarantees good practices, quality, innovation and research development.”

Michael Krawitz, executive director for the US advocacy group Veterans for Medical Cannabis Access, suggested that the move could open opportunities for cannabis use as a pain reliever and ultimately reduce the use of opiates for the same purposes.

The UN’s stance on cannabis has also been influential in shaping nations’ laws on the criminality of cannabis possession and use. Now that the UN no longer classifies cannabis as a Schedule IV narcotic, many states may move forward with the decriminalization of marijuana, which would significantly decrease prosecutions for individuals’ possession or use of marijuana.

States across the globe have already begun decriminalizing the possession of cannabis derivatives, a trend that will likely continue following the CND’s decision. Mexico is the latest state to loosen its legal controls on cannabis. The Mexican Senate approved a landmark bill in November 2020 that decriminalizes the possession of up to 28 grams of marijuana. Meanwhile, Canada legalized the use of marijuana for recreational purposes in October 2018. There are many states around the world, a number of whom voted on this proposal in the CND, where cannabis use is already decriminalized if not fully legalized.

Still, the CND’s decision may not push all countries to loosen its controls on the drug. The Netherlands, which decriminalized marijuana in 1976, may soon see tighter controls in its capital Amsterdam. The city is currently considering a law that would limit recreational use to its own citizens, in response to the impact of drug tourism on organized crime in the country.

The Process of Removal

The process of removing cannabis from the list of Schedule 4 drugs began in January 2019, when the World Health Organization released six recommendations concerning the classification of cannabis in international drug control treaties. The WHO’s Expert Committee on Drug Dependence was responsible for the investigation behind these proposals.

The UN CND first viewed the proposals in May 2019. Since then, member States have been reviewing their positions in preparation for the decision made last month. The UN CND rejected five of the six recommendations.

The WHO’s failed proposals included inter alia recommendations to move the psychoactive components of cannabis, including dronabinol and its stereoisomers (delta-9-tetrahydrocannabinol) and tetrahydrocannabinol (six isomers of delta-9-tetrahydrocannabinol), to Schedule I of the 1961 Convention, which already includes cannabis and cannabis resin; to delete extracts and tinctures of cannabis from Schedule I of the 1961 Convention; and to add a footnote to Schedule I of the 1961 Convention to read “Preparations containing predominantly cannabidiol and not more than 0.2 per cent of delta-9-tetrahydrocannabinol are not under international control”; and to add certain preparations of dronabinol to Schedule III of the 1961 Convention.

Looking Forward

The WHO recommended that cannabis remain listed as a Schedule I narcotic. The CND did not remove this classification in its recent vote, nor did it vote to reconfirm the classification, which would be unnecessary for it to remain classified thus. Proponents of looser regulations may continue to push for cannabis’ removal from this schedule in the future.

However, the recent decision of the CND may encourage many states to create or expand research programs into the effects and uses of cannabis in the future. Advocates for legalization of the drug also hail this decision as a step in the right direction.

On January 1, 2020, the Senate voted to override President Trump’s veto of the annual military policy bill (the National Defense Authorization Act – NDAA).  Division E of the Act is the Anti-Money Laundering Act of 2020 (the AMLA or Act), which contains a number of international enforcement elements.  This post discusses selected international enforcement aspects.

Increased Authority to Issue and Enforce Correspondent Account Subpoenas

The Act increases the ability of the Department of Justice (DOJ) and Treasury’s authority to issue and enforce correspondent account subpoenas under 31 U.S.C. § 5318(k).  Before, the DOJ and Treasury could issue such subpoenas to any foreign bank with a correspondent account in the United States and could “request records related to such correspondent account.”[1]  The Act widens this authority to permit DOJ to request “any records relating to the correspondent account or any account at the foreign bank, including records maintained outside of the United States,” if the records are the subject of an investigation concerned a violation of U.S. criminal laws, a violation of the Bank Secrecy Act (BSA), a civil forfeiture action, or a Section 5318A investigation.[2]

If a foreign financial institution does not comply, the Act authorizes the Attorney General to seek contempt sanctions from a court, and the Attorney General or Secretary of the Treasury may direct covered U.S. financial institutions to end their correspondent relationships with the non-compliant foreign financial and impose penalties on those institutions that fail to do so.[3]

Pilot Project to Share SAR Information Internationally

FinCEN has promulgated guidance allowing sharing of Suspicious Activity Reports (SARs) information internationally with foreign parent organizations or U.S. affiliates in other countries.[4]   The Act requires the Treasury within one year after the enactment of legislation to issue rules that establish a pilot program for financial institutions to share information related to SARS “with the institution’s foreign branches, subsidiaries, and affiliates for the purpose of combating illicit finance risks.”[5]

The Act allows the Secretary of the Treasury to prohibit sharing with certain jurisdictions, such as state sponsors of terrorism, states subject to sanctions imposed by the U.S. government, or those the Secretary has determined cannot reasonably protect the security and confidentiality of such  information.[6]

Provisions on Cryptocurrency and Antiquities Dealers, Advisors, and Consultants

The Act adds to the definition of financial institution and money transmitting businesses under the BSA, which are subject to anti-money laundering due diligence, businesses engaged in the exchange of transmission of “value that substitutes for currency.” [7]   The Act also expands the definition of financial institution to include antiquities dealers, advisors, and consultants.

The Act requires Treasury to prepare a study within one year that evaluates money laundering and terrorist financing through the art trade, including the markets that should be subject to regulation, the extent to which the regulations, if any, should target high-value trade in works of art, and “the need, if any, to identify persons who are dealers, advisors, consultants, or any other persons who engage as a business in the trade in works of art.”[8]

Foreign Financial Intelligence Unit Liaisons (FFIUL)

• 6108 of the Act requires the appointment of not more than six FFIULs, co-located in a U.S. embassy, U.S., or a foreign government facility, among other things, to facilitate capacity building and outreach on AML/CFT regulatory and analytical frameworks; and coordinate with representatives of the DOJ at US Embassies.[9]

International Coordination

• 6112 of the Act requires the Secretary of the Treasury to work with foreign counterparts, including bilateral contacts, the Financial Action Task Force, the IMF, the World Bank, the Egmont Group of FIUs, the OECD, the Basel Committee on Banking Supervision, and the UN, to promote stronger AML frameworks.

Financial Services De-Risking

• 6213 of the Act states Congress supports effective measures to stop the flow of illicit funds and promote AML/CFT and sanctions goals, and AML/CFT and sanctions policies that do not unduly hinder or delay the efforts of legitimate humanitarian organizations to fulfill the needs of humanitarian crisis, prevent or alleviate human suffering. § 6213(c) requires the GAO to conduct a de-risking analysis and evaluate the effect of AML/CFT on individuals and entities, including charities, embassy accounts, money-service businesses, and correspondent banks that have been subject to categorical de-risking by financial institutions operating in the U.S. and or otherwise have difficulty accessing or maintaining certain financial services in the U.S. and evaluate the consequences of financial institutions de-risking entire categories of relations with individuals and entities mentioned above in this section. The GAO should propose changes to those requirements resulting in de-risking.

GAO Study on Fighting Illicit Networks and Detecting Human Trafficking and Drug Trafficking

• 6504(c) of the Act requires the GAO to study how a range of payment systems and methods, including virtual currencies in online marketplaces, are employed to facilitate human trafficking and drug trafficking.

Treasury Study and Report on Trade-Based Money Laundering

• 6505 of the Act requires Treasury to conduct a conduct a study, in consultation with appropriate private sector stakeholders, academic and other international trade experts, and Federal agencies, on trade-based money laundering and proposed strategies to combat trade-based money laundering.

Treasury Study and Strategy on Money Laundering by the PRC

• 6506 of the Act requires the Treasury to conduct a study, relying substantially on information obtained through the trade-based money laundering analyses of the GAO, on, inter alia, the extent and effect of illicit finance risk relating to the PRC Government and Chinese firms, and a strategy to counter Chinese money laundering.

Treasury Study on Efforts of Authoritarian Regimes to Exploit the Financial System of the U.S.

• 6507 of the Act requires the Treasury Secretary and Attorney General, in consultation with the heads of other relevant national security, intelligence, and law enforcement agencies, to conduct a study for Congress on how authoritarian regimes in foreign countries and their proxies use the financial system of the U.S., inter alia, to: “(1) conduct political influence operations; (2) sustain kleptocratic methods of maintaining power; (3) export corruption; (4) fund nongovernmental organizations, media organizations, or academic initiatives in the United States to advance the interests of these regimes; and (5) otherwise undermine democratic governance in the United States and the partners and allies of the United States.” The study should make recommendations for legislative or regulatory action, or regulatory action, or steps to be taken by U.S. financial institutions that would address exploitation of the financial system of the U.S. by foreign authoritarian regimes.

Kleptocracy Assets Recovery Reward Act

• § 9701-03 of Division H of the NDAA establishes the Kleptocracy Asset Recovery Rewards Program in the Department of the Treasury, and authorizes appropriations for the purpose of paying rewards under the program.

Combating Russian Money Laundering

• § 9711-9714 of Division H of the NDAA requires a report if the Secretary of the Treasury determines that certain institutions, transactions, or money laundering activities require domestic financial institutions or domestic financial agencies to take special measures described in 31 U.S.C. § 5318A(b), and permit implementation of such special measures.  These provisions would enable Treasury to impose special measures on transactions emanating from Russia, certain Russian financial institutions, and/or certain categories of transactions.

The current issue of the IELR will have a more comprehensive discussion of the AMLA and related provisions.

[1]    31 U.S.C. § 5318(k)(3)(A).

[2]    AMLA, § 6308 (31 U.S.C. § 5318(k)(3)(A)(i) as revised).

[3]    AMLA, § 6308 (31 U.S.C. §5318(k)(D), as revised).

[4]    FinCEN, FIN-2010-G006, Sharing Suspicious Activity Reports by Depository Institutions with Certain U.S. Affiliates (Nov. 23, 2010), https://www.fincen.gov/sites/default/files/shared/fin-2010-g006.pdf.  FinCEN, Interagency Guidance on Sharing Suspicious Activity Reports with Head Offices and Controlling Companies, January 20, 2006 https://www.fincen.gov/resources/statutes-regulations/guidance/interagency-guidance-sharing-suspicious-activity-reports.

[5]    AMLA, § 6212 (adding 31 U.S.C. § 5318(g)(8)(B)(i).

[6]    AMLA, §6212 (adding 31 U.S.C. § 5318(g)(8)(C).

[7]    AMLA, § 6102(d).

[8]    AMLA, § 6111(e).

[9]    AMLA, § 6108, adding  31 U.S.C. § 310(h).

On December 10, 2020, , the Supreme Court ruled unanimously in the case of Tanzin vs. Tanvir that the three plaintiffs Muhammad Tanvir, Jameel Algibhah and Naveed Shinwari can seek monetary damages from the FBI agents who placed them on no-fly lists after they refused to spy on fellow congregants at their mosques in New York. The case hinged on the Court’s interpretation of the Religious Freedom Restoration Act (RFRA), which prohibits the government from placing an undue burden on an individual’s practicing of religion.

Origins of the Case

The case originated when FBI agents asked the plaintiffs in separate incidents to spy on fellow mosque-goers in New York. After the men refused, the FBI placed them on the no-fly list, which prohibited the plaintiffs from taking commercial flights in the U.S. Tanvir, Algibhah, and Shinwari all had relatives living overseas, so flight restrictions were particularly harmful to them.

Ramzi Kassem, a lawyer for the three men, said in court, “Federal agents put my clients on the no-fly list because they refused to spy on innocent co-religionists in violation of their Islamic beliefs. My clients lost precious years with loved ones, plus jobs and educational opportunities.”

The plaintiffs also described a range of other harassment from FBI agents. Tanvir said that his passport was confiscated and later returned to him, he was accused of being a member of the Taliban, threatened with arrest, and promised immigration benefits for his wife overseas.

The Decision

Homeland Security removed the men from the no-fly list after they filed a lawsuit against the FBI agents. As a result, a federal district court ruled that the lawsuit was moot. However, the 2^nd Court of Appeals reversed that decision, sending the case to the Supreme Court. The Supreme Court’s unanimous 8-0 ruling upheld the decision of the 2^nd Court of Appeals. Justice Clarence Thomas delivered the opinion.

He stated that the FBI’s actions violated the RFRA, which prevents the government from placing an undue burden on an individual’s religious practice. There is an exception if the burden “furthers a compelling governmental interest; and is the least restrictive means of furthering that compelling governmental interest.” Neither circumstance applied in this case.

The basis for the lawsuit was the RFRA’s provision that individuals can “obtain appropriate relief against a government” for causing an undue burden on their religious practice. Moreover, the individuals can sue the government agents, in this case FBI agents, in their personal capacities.

In reference to the same provision, Justice Thomas stated that monetary compensation is not only appropriate under the circumstances, but that it is the only way of remedying the injuries that the FBI’s actions caused to the three men for the cost of plane tickets and lost job opportunities. He stated, “A damages remedy is not just ‘appropriate’ relief as viewed through the lens of suits against government employees. It is also the only form of relief that can remedy some RFRA violations. For certain injuries, such as respondents’ wasted plane tickets, effective relief consists of damages, not an injunction.”

Implications of the Case

The Supreme Court overruled the federal district court’s decision, which stated that the lawsuit was moot once the FBI removed the men from the no-fly list. An amicus brief filed by The Becket Fund for Religious Liberty stated that the decision will no longer permit the FBI to avert lawsuits in the future through such means.

Senior counsel Lori Windham said, “We’re glad the Supreme Court unanimously emphasized that the government can’t expect to be let off the hook by simply changing its tune at the last second.”

The case may also have widespread implications for the Muslim-American community and aliens of Muslim faith visiting the U.S.. Since 9/11, the FBI has often targeted mosques as a focal point for surveillance measures, causing serious issues regarding religious freedom, as was the case in Tanzin vs. Tanvir. The risk that FBI agents now face for placing undue burden on their religious worship may deter the harassment of Muslim citizens across the country.

 

Multimillionaire pastor Shepherd Bushiri, who has a warrant out for his arrest, disappeared from South Africa and reappeared in his home country Malawi in mid-November, sparking an international conflict between the two countries. Bushiri has been charged with fraud and money laundering charges along with his wife, Mary, and two co-defendants for allegedly conducting a fraudulent investment scheme that earned them $6.6 million USD. Bushiri’s trial is scheduled for May 2021.

Shepherd Bushiri

Shepherd Bushiri is a wealthy pastor from Malawi who claims to have cured people from HIV, changed the fortunes of impoverished people, and walked on air. None of these claims have any scientific basis. He is the leader of the Enlightened Christian Gathering, which was founded in Pretoria, South Africa, and now has several branches in other African countries.

Bushiri and his wife released a statement on November 14, 2020 announcing their appearance in South Africa.

“There have been clear and evident attempts to have myself, my wife and my family killed and despite our several attempts to report to authorities, there has never been State protection,” the statement reads. “Our coming to Malawi, hence, is a tactical withdrawal from the Republic of South Africa solely meant to preserve our lives.”

Bushiri enumerated a list of demands in his statement, which included assurance that his and his wife’s bail would not be revoked and demanding that the officers involved in his arrent recuse themselves from the case.

A Diplomatic Challenge

According to a regional extradition treaty signed by both South Africa and Malawi, any decision regarding the extradition of Bushiri would need to be made by the Malawian Ministry of Justice and then approved by President Lazarus Chakwera. Chakwera was elected to his position in June 2020. The treaty requires that any individual extradited receive a fair trial, which Bushiri claims is not guaranteed for him in South Africa.

Some have speculated that a member of President Chackwera’s entourage helped Bushiri escape when Chackwera was in South Africa in early November. Malawian and South African officials have denied the claim, but suspicions around Bushiri’s escape are fueling tensions between the two countries.

Malawian authorities confirmed the receipt of an extradition request from South Africa, which South Africa said was available for delivery on November 26, 2020.

New Charges

The receipt of the extradition request comes after new charges were leveled against Bushiri and his wife. Prosecutors seeking to extradite Bushiri informed  the Malawi Government of further charges, including rape of minors as young as 16 and violating the Suppression of Witchcraft Act in South Africa. The Act provides for the suppression of witchcraft and similar practices. Bushiri’s wife is also wanted in connection with eight accusations of rape by young women. The women allege that Bushiri groomed them with favors like money and attention and then threatened them afterwards.

In response, Bushiri claimed that the allegations were baseless and insisted that they were part of an extortion scheme within the Hawks, South Africa’s Directorate for Priority Crime Investigation.

Bushiri’s lawyer, Wapona Kita, declined to comment on the extradition order or the additional charges leveled against his client.

It has been five years since that iconic character from my daughter’s favorite childhood movie, the Dread Pirate Roberts, was sentenced to life in prison for the piratical life he led. Not really. But it has been five years since Ross Ulbricht, a/k/a “The Dread Pirate Roberts,” a/k/a DPR, was sentenced to life in prison for operating the Silk Road, a darknet market website where illegal narcotics, firearms and other forms of contraband were bought and sold using a secure web browser known as Tor. The website, with Ulbricht as its master, operated for several years, selling goods worth billions of dollars before the government seized the website and arrested Ulbricht. Following a jury trial, Ulbricht was convicted on multiple counts of a federal Indictment.

 

The aftermath of the Ulbricht prosecution has spawned a number of interesting prosecutions.  In addition to the prosecution of the normal assortment of co-conspirators, two members of the federal task force investigating the Silk Road were also charged with criminal conduct involving the Silk Road. Shaun Bridges, a former Secret Service Agent, was sentenced to nearly six years in prison for stealing nearly $800,000 in Bitcoin from the Silk Road. Another federal agent responsible for investigating the Silk Road, Special Agent Carl Force of the Drug Enforcement Administration, received a six and one half year sentence for taking payments from Ulbricht to misdirect the investigation.

It now appears that corrupt government agents were not the only ones stealing from Ulbricht. On November 3, 2020, the U.S. Attorney for the Northern District of California filed a civil complaint seeking the forfeiture of over $1 billion dollars in Bitcoin connected to the New Silk Road. According to the Complaint, over 100,000 customers used the Silk Road generating vast amounts of revenue in the process. The government was able to identify one transaction on April 9, 2013, where a Bitcoin addressee that received the 70,411.46 Bitcoin from Silk Road sent 69,471.082201 (approximately $14 million at the time of transfer) to address 1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx (hereafter “1HQ3”). Later in April, a small fraction of the funds was provided to BTC-e, a Bitcoin services company. The remainder of the funds was left untouched from 2013 until the government’s seizure of the funds in 2020.

Although not directly related to the case, it is noteworthy that in 2017, the owner of BTC-e,   Alexander Vinnik, a Russian citizen was arrested in Greece. Following his arrest, the United States, the Russian Federation and France all sought his extradition to face criminal charges in each country. In the United States, he is charged with operating an unlicensed money exchange, conspiracy, and unlawful currency transaction. In January of 2020, he was extradited to France where he remains.

According to the government’s investigation, 1HQ3 was owned or controlled by a hacker identified in the Complaint as Individual X. In 2013, Individual X hacked into the New Silk Road and was able to divert over 70,000 Bitcoin from the Silk Road into his or her own account. Despite threats from Ulbricht, Individual X did not return the Bitcoin, and it remained untouched on the account until seized by the U.S. government. Today, the Bitcoin is worth over $1 billion.[1] According to the Complaint, Individual X has agreed to forfeit the Bitcoin to the government.

It is not known how much money was transferred during the time of the Silk Road’s operations between 2011 and 2013, but the amounts involved were vast and remain, in large measure, untraced. The Silk Road was seized by the U.S. government several years ago, but the U.S. government and other governments around the world continue to attempt to penetrate its secrets. Even as these attempts continue, persistent press reports point to new versions of the website dubbed Silk Road 3.0 and Silk Road 3.1. The battle continues.

[1] As of the date of publication, a single Bitcoin is worth approximately $18,000.  See, https://markets.businessinsider.com/currency-converter/btc_united-states-dollar.