U.S. Money Laundering Charges Stemmed from Foreign Bribes to Foreign Official by Foreign Companies

On August 25, a U.S. District Court Judge for the Southern District of New York sentenced former Guinea Minister of Mines and Geology, Mahmoud Thiam, to seven years in prison, followed by three years of supervised probations, for laundering $8.5 million bribes paid to him by China Sonangol International Ltd. and China International Fun, SA (CIF).  The judge also entered an order for the forfeiture of the full of $8.5 million of laundered funds.  The sentence followed Thiam’s conviction by a jury in May 2017 of money laundering.

Although the alleged money laundering transactions charged in the indictment involved wire transfers from foreign banks to bank accounts held in New York City, all of the bribery which produced the illicit proceeds at issue in the money laundering charges occurred entirely overseas. As we will discuss, this case serves as a reminder that the offense of money laundering centers on a discrete financial transaction, not the underlying illegal activity. This case also illustrates the willingness of the U.S. Department of Justice (“DOJ”) to pursue cases primarily involving conduct which occurred abroad, and also how the DOJ may use the money laundering statutes – assuming that there is a U.S. jurisdictional hook – to pursue certain individuals who would be untouchable under the Foreign Corrupt Practices Act: the foreign officials themselves who are receiving the bribes.

The Charges, Trial and Sentencing

Thiam, a naturalized U.S. citizen, served as Minister of Mines and Geology for the Republic of Guinea from 2009 to 2010. The evidence at trial demonstrated that during this time Thiam abused his position to influence the Guinean government to enter into agreements with the Chinese conglomerates that provided the companies with lucrative mining rights in Guinea. The complaint, which offers more details about the alleged transactions than the indictment, indicated these agreements formed a joint venture with the Chinese companies owning 85% of the joint venture and the Guinean government owning the remaining 15%. The agreements further required the Guinean government to create a national mining company, grant the Chinese companies the right be the first and strategic shareholder, and to use the mining company “as the vehicle to won all existing and future exploration and operating mines in which the Republic of Guinea has full ownership and control.”  In exchange for influencing the Guinean government to enter these agreements, Thiam received $8.5 million in bribes in violation of the Guinean Penal Code, which he laundered through banks in Hong Kong and New York City; the wire deposits into the U.S. bank accounts formed the basis of the two-count indictment returned against Thiam.

Thiam proceeded to trial. While on the stand, Thiam admitted to lying to the banks regarding the source of his income, telling them he was a private consultant and concealing his status as a public official. According to the indictment, the proceeds of the bribe were used fund Thiam’s lavish lifestyle in the United States, including buying a multi-million dollar estate and paying for private schools for his children.  The allegations of illicit money used to buy high-end real estate in the U.S. echo what is now a familiar concern being articulated by U.S. enforcement officials.

Following the sentencing, an official for the FBI that “the FBI will not stand by while individuals attempt to live by their own rules and use the United States as a safe haven for their ill-gotten gains.” Although the money laundering counts against Thiam rested directly upon the use of U.S. banks to receive illicit proceeds, it is notable that none of the alleged bribery had any nexus whatsoever with the United States; it occurred entirely overseas, and involved a former foreign official and foreign companies. As we previously have blogged (here, here, here, and here), allegations regarding schemes perpetrated almost entirely outside of the United States seem to be an increasingly common fact pattern as cross-border cases proliferate and U.S. enforcement actions more often involve conduct occurring largely overseas.

The DOJ had pushed for a prison sentence within the Sentencing Guidelines range of 151 to 188 months, arguing Thiam’s conduct was the “very form of rampant official corruption that has contributed to dire poverty in Guinea and elsewhere in Africa, despite the vast natural resources those countries possess.” The DOJ also emphasized Thiam’s repeated deceptions and alleged obstruction of justice during the trial. The judge imposed a less stringent sentence, commenting that she did not believe Thiam – who had lived in Europe and the United States before returning to his native Guinea – set out to break the law when traveled to Guinea, which was suffering a financial crisis at the time, but that ultimately he did succumb to corruption. However, the judge also noted that Thiam had lied during his trial testimony and had shown little remorse: “I even sense a whiff of entitlement[.]” Thiam’s lawyers have stated that they plan to appeal.

The Money Laundering Statutes: A “Supplement” to the FCPA?

The case and sentencing highlight the use of the money laundering statutes, 18 U.S.C. § 1956 and § 1957, to prosecute foreign officials for receiving bribes, conduct which is not actually punishable under the Foreign Corrupt Practices Act of 1977 (FCPA), 15 U.S.C. § 78dd-1, et seq.

The FCPA generally prohibits individuals and businesses from paying bribes to foreign officials to assist in obtaining or retaining business.   However, “foreign officials” cannot be charged under the FCPA or with conspiracy to violate it.  Therefore, a foreign official could not be prosecuted for his conduct in soliciting or receiving bribes under the FCPA.

By comparison, the money laundering statute provides criminal punishment against whoever “conducts or attempts to conduct” a financial transaction knowing the transaction involves proceeds from some unlawful activity.” 18 U.S.C. § 1956(a).  The section specifies that this prohibition refers to situations where the person knew the property involved in the transaction represented proceeds from some activity that constitutes a felony under State, Federal, or foreign law. 18 U.S.C. § 1956(c)(1).  Thus, a violation of a foreign law, such as the Guinean Penal Code, can serve as the predicate “unlawful activity” for the money laundering scheme.  Section 1956 also specifically includes in the list of “specified unlawful activity,” or SUAs (that is, offenses which can produce “proceeds” involved in money laundering transactions), the bribery of a public official. 18 U.S.C. § 1956(c)(7)(B)(iv).

Therefore, the money laundering statute can be used to supplement the FCPA in pursuing participations in schemes to bribe foreign officials, including the officials themselves even though they would escape liability under the FCPA. For example, in 2015 U.S. Court of Appeals for the Eleventh Circuit affirmed in United States v. Duperval a money laundering conviction and nine year prison sentence of a former official of Haiti’s state-owned telecommunications company who had received and laundered bribes from a Miami-based telecommunications firm.

In addition to providing clear statutory grounds for prosecuting the recipient of bribes, the money laundering statute carries potentially harsher criminal penalties than the FCPA, imposing up to 20 years in prison for each money laundering count as compared to only five years on each FCPA count.  As Thiam’s case demonstrates, the DOJ is likely to continue to use the money laundering statute complement to the FCPA in prosecuting bribes of foreign officials.