IELR Blog

Jun Wei Yeo, also known as Dickson Yeo, pled guilty to one count of acting within the United States as an illegal agent of a foreign power without notifying the Attorney General, in violation of 18 U.S.C. § 951. The announcement of Yeo’s plea was made on July 24, 2020 by John C. Demers, Assistant Attorney General; Michael R. Sherwin, Acting U.S. Attorney for the District of Columbia; Timothy R. Slater, Assistant Director in Charge of the Federal Bureau of Investigation’s (FBI) Washington Field Office; and Alan E. Kohler, Jr., Assistant Director of the FBI’s Counterintelligence Division.

FBI Washington Field Office Assistant Director in Charge Timothy R. Slater said, “The tactics Mr. Yeo used to target cleared individuals on professional networking social media sites are just one facet of the full court press China employs on a daily basis to obtain non-public U.S. government information. The FBI urges citizens, especially those holding security clearances, to be cautious when being approached by individuals on social media sites with implausible career opportunities. We are committed to holding those accountable who attempt to work for Chinese intelligence and other adversaries to the detriment of our national security.”

Assistant Attorney General for the Justice Department’s National Security Division John C. Demers in a statement said, “The Chinese Government uses an array of duplicity to obtain sensitive information from unsuspecting Americans. Yeo was central to one such scheme, using career networking sites and a fake consulting firm to lure Americans who might be of interest to the Chinese government. This is yet another example of the Chinese government’s exploitation of the openness of American society.” .

Yeo submitted his plea via videoconference in the U.S. District Court for the District of Columbia before the Honorable Tanya S. Chutkan. The plea announcement comes five weeks after an indictment of Yeo was unsealed, accusing him of acting illegally as an agent of an unspecified foreign government. According to 18 U.S.C. § 951, he is facing up to ten years in prison. He will be sentenced on October 9, 2020.

Yeo admitted to establishing a fake consultancy that used the same name on LinkedIn as a prominent U.S. consulting firm that specializes in government and public relations; a professional networking application, publishing job roles under that company name; and sending resumes of interest that he received from U.S. military and government officials with high security clearances to Chinese intelligence operatives. He paid these officials to write reports and solicited them for non-public information, never informing them that the information they provided was intended for the Chinese government.

Yeo began working with Chinese intelligence officers as early as 2015. He initially targeted other Asian countries but later focused on the United States.

Yeo’s conviction raises concerns that citizens of Singapore, which has an ethnic Chinese majority, could be regarded with increased suspicion by the U.S. government. Although analysts believe the spying case is unlikely to have a major impact on Singapore’s ties with the U.S. or China, most agree that the island’s efforts to maintain a diplomatic balance between the two countries will add to the rapid deterioration of U.S.-China relations in the lead up to the U.S. Presidential election in November.

On July 30, 2020, a Swiss special prosecutor initiated criminal proceedings against Gianni Infantino for alleged collusion with Michael Lauber, the attorney general of Switzerland who was overseeing the investigation into FIFA.

Infantino is the successor to Sep Blatter, who resigned in 2016 after revelations of corruption at FIFA caused a global media storm for soccer’s global governing body.

The special prosecutor who announced the investigation, Stefan Keller, described the meetings between Infantino and Lauber as “abuse of office,” “breach of official secrecy,” and “assisting offenders.”  Keller is requesting the Swiss government lift Lauber’s immunity from criminal proceedings.

Rinaldo Arnold, who is a regional prosecutor in Switzerland and a childhood friend of Infantino, set up the meetings between the two men.  Arnold is also under investigation, though he has not been charged.  Lauber subsequently lied about those meetings. Emails concerning the meetings appeared on the platform “Football Leaks” over a year ago, but both Infantino and Lauber claimed they were unable to remember what had taken place at the meetings.

After the emails came to light, a supervisory body was convened to look into Lauber’s relationship with Infantino.  The panel announced, “Lauber intentionally made a false statement… and knowingly concealed the third meeting with Infantino.”  The supervisory body cut Lauber’s salary by 8 percent in March 2020 as  punishment but restored it shortly after.

Lauber later resigned from his position, after a federal court upheld the accusations against him.

Infantino responded to the accusations against himself, saying, “To meet with the Attorney General of Switzerland is perfectly legitimate and it’s perfectly legal. It’s no violation of anything.  On the contrary, it is also part of the fiduciary duties of the President of FIFA.”

FIFA has been embroiled in accusations of money laundering and corruption since 2015.  Infantino, who ran unopposed in an internal election in 2016, has claimed that the organization no longer suffers from a culture of corruption.  But high level officials in FIFA remain subject to investigations for various accusations of financial wrongdoing and corruption.  The head of African soccer, Ahmad Ahmad, has been under investigation by French financial prosecutors for over a year.

Nevertheless, the proceedings against Infantino suggest that authorities are responding more swiftly to problems at the organization than they did in 2014 when FIFA first complained about money laundering in the 2018 and 2022 World Cup bidding campaigns. The organization will be under heightened scrutiny for the foreseeable future.

On July 29, 2020, the Senate Permanent Investigative Subcommittee issued a report detailing how a prominent family of Russian oligarchs, sanctioned by the U.S. since Russia’s annexation of the Crimea, has used the opacity of the U.S. art industry to evade sanctions.

The Rotenbergs

The report traced over $18 million in purchases from U.S. art sellers, including auction houses and private dealers, to Arkady and Boris Rotenberg, who derive their wealth from energy and construction. President Barack Obama placed sanctions the Rotenbergs in 2014, following Russia’s annexation of the Crimea, due to the family’s close relationship to President Putin.  They often received large government contracts, including some for the Sochi Olympics.

However, three different shell companies, Highland Business Group Limited, Highland Ventures Group Limited and Advantage Alliance, obscured the identity of the Russian buyers behind the high value purchases.

Gregory Baltser, a U.S. citizen and an art dealer based in Moscow, served as the buyer and middleman for the Rotenberg.  Baltser used a shell company named Steamort Limited to transfer art purchases made in the U.S. to the Rotenberg’s shell companies.  His attorneys denied wrongdoing on his part, saying, “Baltser Limited’s compliance program has relied, and will continue to rely, on the United States Department of Treasury’s own Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals and Blocked Persons List (SDN). According to the OFAC list, Baltser has acted appropriately and responsibly.”

Optimal Conditions for Money Laundering

As the largest unregulated legal market in the U.S., the art industry is extremely vulnerable to money laundering. Even though the Treasury Department of Foreign Asset Control (OFAC) forbids U.S. people and entities from transacting with sanctioned persons, the Bank Secrecy Act (BSA), which establishes certain AML and anti-terrorism financing controls for U.S. entities, does not apply to the art industry.

Senator Tom Carpenter, who is Vice Chair of the Committee on Investigations, said, “It is alarming and completely unacceptable that common sense regulations designed to prevent money laundering and the financing of terrorism do not apply if someone is purchasing a multi-million dollar piece of art. As a result, criminals, terrorists and wealthy Russian oligarchs like the Rotenbergs are able to use an unregulated art industry, as well as real estate and other investments, to hide assets, launder funds, and evade sanctions.”

Rotenberg purchased some pieces from auction houses including Christies and Sotheby’s, both of which have voluntary AML policies in place.  However, the auction houses treat the buyer, whether it is an agent, or dealer as the sole subject of interest when conducting due diligence research. Therefore, neither house detected Baltser’s connection to the Rotenbergs.

Sotheby’s and Christies representatives explained that Baltser paid out of his own bank account, leaving them no reason or right to question further the source of the money.

The Recommendations

                The report made a number of recommendations, the first being that Congress should amend the Bank Secrecy Act to add businesses handling transactions involving high-value art.  This recommendation is based on the European Union’s policy requiring businesses handling art transactions of €10,000 or more to comply with AML law.

More broadly, it stated that Treasury Department should be required to collect beneficial ownership information for companies formed or registered to do business in the United States. This possibly would have included some of the shell companies that ultimately linked U.S. dealers to the Rotenbergs.

It also recommended that OFAC “issue comprehensive guidance on the steps auction houses and art dealers should take to ensure they are not doing business with sanctioned individuals or entities.”  Such guidance would ideally prevent auction houses from confusing middlemen, such as Baltser, with their buyers.

The virtual event “Good Governance and Corruption in the Caribbean,” presented by Global Americans, the Embassy of the United States in Suriname, and the Youth Education and Leadership Foundation, will be taking place from July 30 to July 31, 2020.  Registration for the event is required at https://forms.gle/HnuiA1ep7xPeoDzPA.  Alternatively, listeners may RSVP with jgalindo@theglobalamericans.org.

The first part of the event “Good Governance and Corruption in Suriname and Guyana” takes place on July 30, 2020 from 10:AM to 11:15AM.  The second part “Corruption, Oil, and the role of External Agencies in the Caribbean” is scheduled for July 31, 2020 from 10:00 AM to 11:15 AM EDT.

On July 13, 2020, ICE’s Homeland Security Investigations (HSI) Detroit and the U.S. Attorney’s Office for the Eastern District of Michigan announced the seizure of an internet domain located at https://lafoauto.com/ pursuant to an international arms trafficking investigation into gun silencers from China. HSI Detroit led the investigation with assistance from U.S. Customs and Border Protection (CBP), and the Bureau of Alcohol, Tobacco, Firearms and Explosives. Visitors to the site will now see a seizure notice bearing law enforcement shields.

HSI determined that more than 350 silencers were seized by law enforcement. The silencers were smuggled from China into the United States and disguised as automotive parts. The website advertised the silencers as automotive components, but the images on the website clearly resembled firearm components.

“This website, operated from China, blatantly disregarded our customs laws, smuggled illegal silencers into our country, and placed the American public at risk,” Vance Callender, the Homeland Security special agent in charge for Michigan and Ohio, stated. “By shutting this website down, we keep illegal silencers off the streets and protect our communities from harm.”

HSI’s practice of seizing websites involved in illicit activity is relatively new and helps suppress illegal commerce from entering the United States. Using a Court order, HSI redirected the suspect website to one controlled by HSI, which posts a banner with a public service announcement warning against consumer purchase of illegal goods. The seizure of https://lafoauto.com/ is the first instance in which a website wholly dedicated to illegal arms deals has been seized by the agency.

Silencers, also known as suppressors, reduce the sound and muzzle flash from gunshots. Purchasing a silencer without a proper license is illegal in many states. Silencers were regulated under the 1934 National Firearms Act (NFA). Before purchasing a silencer, the NFA requires buyers to submit identification materials and answers background questions, as well as pay a $200 tax to the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF). An amendment to the NFA in 1986 regulates parts intended for use in the assembly or fabrication of a silencer. The activities of https://lafoauto.com/ fall under this amendment. It will be interesting to see if the HCI’s success in this case leads to future investigations and seizures of websites illegally trafficking arms or other goods in the U.S.