A series of recent federal enforcement actions targeting weaknesses in Bank Secrecy Act/anti-money laundering (BSA/AML) compliance programs continued on March 16, when U.S. Gold refinery Elemetal LLC, based in Dallas, Texas, pled guilty in U.S. District Court for the Southern District of Florida to a single-count information charging failure to maintain an adequate BSA/AML program.
Elemental admitted that from August 2012 through November 2016, it purchased and refined billions of dollars of gold from countries around the world, but willfully failed to develop, implement, and maintain an adequate BSA/AML compliance program, despite the high risk of gold-based money laundering. The international gold trade is recognized as a common method for laundering illegally mined gold, narcotics and other criminal proceeds.
Federal prosecutors alleged and Elemetal admitted that they had:
- Accepted gold from persons and entities in foreign countries without requesting or obtaining identification and information regarding those persons or the source of their gold, as required by the BSA know your customer provisions;
- Accepted gold from foreign gold suppliers of questionable legitimacy without requesting or obtaining adequate information as to the source and origin of the gold;
- Accepted gold from countries and customers that an adequate BSA/AML screening program would have alerted as likely involving suspicious or illegal activity, including smuggling and the use of illegitimate shell companies, without obtaining adequate information as to the source of the gold;
- Failed to conduct adequate, and in some instances any, customer due diligence regarding the source and origin of gold they received from specific customers and suppliers, as required under the BSA, despite indications that the gold was criminally derived.
Under the terms of the plea and forfeiture agreement, Elemetal agreed to forfeit $15M to the United States, develop and maintain an effective compliance and ethics program, cooperate with the government on related investigations, and be subject to a 5-year term of probation. Elemetal also will be prohibited from purchasing precious metals from outside the United States during that 5-year period. Sentencing has not yet been scheduled.
In earlier but related cases, individuals pled guilty to conspiracy to commit money laundering. While public enforcement actions and criminal charges brought by regulatory agencies and prosecutors for BSA/AML violations have focused on large banks over the past several years, there is a growing trend toward investigations of other financial institutions under the BSA, including casinos, virtual currency exchanges and other money services businesses, brokers or dealers in securities, loan and finance companies, and dealers in precious metals – as this case illustrates.