Recent activities by the U.S. Department of Justice (DOJ) point to an increased interest in Nigeria and other West African and Central African countries. For decades, the DOJ has been aware of frauds emanating from Nigeria, with one group of enterprising fraudsters going so far as to use FBI letterhead to perpetrate a fraud. For the most part, however, organized crime groups operated with relative impunity for years. In our practice, we have seen a few lower-level fraudsters located in the U.S. arrested for their roles in frauds, but DOJ seemed to be unable to move up the latter to fraudsters residing outside the United States.
That may be changing now. In just the past two weeks, DOJ has announced the Indictment of two Nigerian nationals located in Nigeria and the extradition of three other Nigerian nationals from the United Kingdom to stand trial. These cases and the accompanying press releases suggest a greater effort to look into Nigerian based organized crime and target individuals inside Nigeria itself. The indictments in these cases suggest that DOJ has gathered substantial information from sources inside Nigeria and is developing better techniques for the prosecution of these individuals.
Both cases allege business email compromise (BEC) fraud schemes, a form of “cyber-enabled financial fraud”. The defendants are alleged to have targeted key employees within companies throughout the United States with access to company finances or who worked with suppliers or who were involved in wire transfers. They also are alleged to have targeted real estate purchasers, the elderly, and others. The essence of the scheme was that they would impersonate another company or individual causing victims to wire funds to accounts under the control of the alleged perpetrators. According to the DOJ, these two cases resulted in losses over $30 million dollars.
The indictments allege violations of the Wire Fraud, 18 U.S.C. 1343, and Aggravated Identity Theft, 18 U.S.C. 1028A. Wire Fraud, in this circumstance, involves, at a minimum, the use of emails over the internet to perpetrate a fraud. Fraud involves a false statement intended to mislead a victim and which does, in fact, mislead the victim, causing the victim financial loss. Aggravated identity theft involves the use of a “means of identification of another person or a false document” in connection with the commission of another felony.
As always, there is a danger in assuming that DOJ press releases are true, especially at the indictment stage. Sometimes cases based upon evidence received from sources overseas, even foreign government sources, can be unreliable. In a wire fraud and controlled substances case we handled in the U.S. District Court for the District of Columbia based upon evidence received from Pakistan, the government’s case collapsed when it was discovered that many of the documents received from the government of Pakistan had been forged or altered. In another case, an Indian national arrested in the U.S. was arrested based, in part, on information supplied by the Indian government. Eventually, that indictment was dismissed when it was discovered that evidence from India was inaccurate and not reliable. It could be dangerous to jump to any conclusions in these cases.
Money-Laundering Risks to Individuals, Financial Institutions and Company
Wire fraud cases are certainly significant and do cause reputational damage to Nigeria; however, a greater danger may be lurking under the surface for the Nigerian financial system and the bankers, lawyers, accountants, and others who are part of it. In early August, a Nigerian national pled guilty to Money Laundering in the U.S. District Court for the Southern District of West Virginia. A week later, a citizen of Ghana was convicted of Money Laundering and other charges stemming from a fraud scheme. Money laundering, 18 U.S.C. 1856, involves taking money—like the proceeds of fraud—and moving it through banks or other financial institutions to give it the appearance of legitimacy.
There are, of course, individuals and institutions that are corrupt and will intentionally engage in money laundering, but there are two aspects of U.S. law that should cause financial institutions, and anyone involved in the financial services industry, especially attorneys and accountants, to be wary. In the United States, it is a crime to “aid and abet” a violation of the law. Aiding and abetting are broad concepts that can be applied to anyone who has assisted a fraudster. Unfortunately, the prosecution of bankers, accountants, and attorneys in the United States for aiding and abetting Money Laundering is not unusual.
“Willful Blindness” is another invention of U.S. courts that causes significant risk to any individual or company who deals with a fraudster. It allows a court to convict a defendant of money laundering even if the defendant did not know he, she, or it, was laundering money. This doctrine is confusing, especially for juries in a criminal case, but basically it allows for a conviction if the defendant intentionally avoided gaining knowledge of a client or customer’s fraud. How does the government prove this? Often through a non-existent, ineffective, or failed compliance program.
The U.S. has been aggressive in pursuing foreign banking institutions for money laundering and violations of U.S. sanctions. BNP Paribas, the largest bank in France, paid a $8.9 billion civil penalty for violating U.S. law. At least one U.S. based company paid a $100 million civil penalty for its role in facilitating the Nigerian fraud schemes. The Nigerian financial system has, thus far, remained largely untouched, but if history has any validity, then those entities the U.S. considers to be facilitators of the fraud will be the next targets of U.S. law enforcement.
The Extra-Territorial Reach of U.S. Law
Although the U.S. Supreme Court has placed limits on the use of U.S. courts to hear civil cases where the cause of action occurs outside the United States, there are very few limits on the application of U.S. criminal law—perhaps only that the crime have an effect on the United States, however indirect. Thus, DOJ in the FIFA corruption case pursued foreign sports officials around the globe for bribes and corruption that had virtually no connection to the U.S. This is not to suggest that anyone who is charged with or who is under investigation for a violation of U.S. law should simply surrender and accept the inevitability of trial in the U.S.; however, the risk of prosecution in the United States should not be discounted.
In previous articles published in the International Enforcement Law Reporter, we examined the arrest of the Former Mexican Defense Minister and the former President of Honduras. The significance of these two cases is that both individuals had enormous political support in their home countries, and all of the activities they allegedly undertook occurred outside the United States. The potential for investigation by the DOJ is not something that should be ignored.
It should be noted that the potential target of an investigation by the DOJ or any other U.S. law enforcement is not a time to just sit and wait to see what happens. Whenever someone learns that he or she or the company may be under investigation, that is the appropriate time to hire a U.S.-based white collar criminal defense lawyer, preferably one experienced in international and transnational crimes and investigations. There is a lot a white-collar defense lawyer can do to avoid an indictment or mitigate the damage that may result if an indictment is filed. Generally speaking, the sooner one retains counsel, the better the chance of a successful result.
Finally, some brief comments on extradition are in order. Occasionally, individuals under investigation by U.S. authorities will ignore the investigation, believing that even if they are charged with a crime, they will not be extradited to the U.S. to stand trial. It could be a mistake.
First, Nigeria does have a long-standing, if little used, Extradition Treaty with the U.S., and the government could choose to honor a U.S. extradition request if it wanted to. Matters concerning extradition from Nigeria to the U.S. are matters for the Nigerian criminal justice system, and any questions concerning how it applies should be answered by a Nigerian attorney; however, there are countries that have refused to honor U.S. extradition requests for violations of financial crimes (Canada, for example) because of the draconian sentences imposed by U.S. courts. At the end of 2021, for instance, a Cameroonian citizen extradited to the U.S. was sentenced to 80 years in prison for a financial fraud. Whether this is significant or not is a question best answered by a Nigerian attorney.
Even if someone were not extradited directly from Nigeria, that does not mean they would be safe to travel outside of Nigeria. European countries, particularly the United Kingdom, routinely extradite anyone traveling into or through the U.K. to the U.S. We represented an individual whose plane was flying from Mexico City to Madrid with an hour’s layover in London. When the plane landed at Heathrow, he was arrested, removed from the aircraft, and extradited to the U.S. The arrest in the U.K. on a U.S. warrant and the subsequent extradition to the U.S. occurs routinely.
U.S. arrest warrants may be sealed, meaning they are not public. It is common for the U.S. government to lure someone from a country where they have sanctuary to a third country to be arrested and turned over to the U.S. This practice does not violate U.S. law. Therefore, a person can be arrested on a U.S. warrant even though he or she had no idea an investigation was even underway. INTERPOL Red Notices are different in that they are available to the public and there is a process to challenge them.
The International Emergency Economic Powers Act.
No discussion of international frauds or money laundering would be complete without mentioning the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. 1701. IEEPA allows the President, by Executive Order, to prevent U.S. companies and individuals from conducting any form of business with an individual or entity determined to be a threat to the U.S. or its economy. These sanctions are administered by the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC). OFAC, in turn, maintains lists of individuals and entities that have been sanctioned (referred to as “Specially Designated Nationals” or “SDNs”) under any one of a number of sanctions programs. Entities and individuals found to have engaged in international frauds or money laundering can be sanctioned.
Placement on a sanctions list effectively cuts an entity off from the international banking system and makes it difficult to do business anywhere in the world. There is no due process associated with being placed on a list, meaning there is no notice or opportunity to be heard. Under some circumstances, it is possible for a sanctioned entity to obtain a special or general license to conduct business, but they are not granted routinely. It is also possible to be removed from the SDN list, but, again, this is not common or routine.
It is likely that entities in Nigeria will face increased scrutiny from OFAC as U.S. law enforcement activities in Nigeria increase.
The Need to Understand U.S. White Collar Practice and Defense.
Of course, like many areas of the law, the white-collar offenses mentioned in this article are complex and nuanced, each having its own elements and defenses. As the U.S. increases its law enforcement efforts in Nigeria and the surrounding area, it is important to understand U.S. white-collar criminal practice and how it might apply to any given circumstance. We at Boyle & Jasari are here to assist.