The Bank Secrecy Act (BSA) of 1970introduced a number of monetary

transaction reporting requirementsdesigned to prevent criminal organizationsfrom exploiting the U.S. financial system bymoving and stockpiling their illicit funds.These reporting requirements are invaluabletools for law enforcement and are the back-bone of the United States’ anti-money laun-dering program. Each reporting require-ment provides a layer of defense, and theCurrency Transaction Report (CTR) is thefirst line of that defense.

The August 2005 Cornerstone Report focusedspecifically on Suspicious Activity Reports(SARs). In this article, we will explore froma law enforcement perspective the value ofCTRs and their role in preventing anddetecting illicit financial transactions. Whilethis article will only provide a snap shot ofhow CTRs are used by ICE and benefit theUnited States, we feel it is important.

Financial institutions are required to file a CTR for cash transactions of more than$10,000.The placement of funds into the financial system is recognized by lawenforcement as the criminal’s most vulner-able stage of the money launderingprocess, and CTR reporting requirements

play a major role in combating the infu-sion of illicit proceeds into our legitimatefinancial system. Drug dealers, arms traf-fickers, alien smugglers and countless othercriminal organizations know about CTRreporting requirements—forcing them tooperate outside of legitimate business prac-tices which raise “red flags” in the finan-cial and law enforcement communities,making them vulnerable to detection.

To avoid these red flags, criminal organiza-tions sometimes establish cash-intensivebusinesses in an attempt to legitimize thefiling of CTRs by financial institutions ontheir illegitimate cash transactions. However,once law enforcement becomes aware ofthese criminal organizations throughsources of information or other investigativeleads, these CTRs become invaluable andestablish a trail that documents the move-ment of their illicit funds. Being able to fol-low the trail of illegal money helps lawenforcement discover criminals they mightnot have otherwise known about. Requiredfinancial reporting also unveils the widerrange of illegal activities in which knowncriminals may be engaged, as well as otherswho may also be criminally associated.

continued on page 2

Inside tthis IIssue

Safeguarding AAmerica TThroughFinancial AAnd TTrade IInvestigations

www.ice.gov/cornerstone

Toll-FFree TTip LLine: 1-8866-DDHS-22-IICE

Cornerstone is U.S. Immigration andCustoms Enforcement’s (ICE)comprehensive investigative initiativefor fighting financial crime, tradefraud and intellectual property crime.

The Cornerstone Report is aquarterly bulletin highlighting keyissues related to ICE financial andtrade investigations.

Drug Traffickers Launder Profits Through Casinos. . . . . . . . . . . . . . . . . . . . . 2

Two Americans Convicted In China For DVD Piracy . . . . . . . . . . . . . . . . . . . . . . 3

ICE Gets Its Message Out To The Gaming Industry At The G2E Expo . . . . . . 3

ICE Dismantles International Money Laundering And Check Fraud Organization . . . . . . . . . . . . . . . . . . 4

Cornerstone Calendar . . . . . . . . . . . . . . . . 4

Volume II: No. 3 • December 2005

The Currency Transaction Report: Controversial To Some—Essential To All

$4.7 million in seized smuggled currency—some still in their Federal Reserve wrappers. BSA reporting requirements force criminals to use risky and vulnerable methods to move and store their proceeds.

Nine members ofthe Gabriel

Gomez drug traffick-ing organization wereexposed and convicted

largely through evidence collected pur-suant to the Bank Secrecy Act (BSA) andother financial records.

Charles Roybal was known as the “money-man” of the Gomez drug traffickingorganization and was responsible for laun-dering the group’s illegal proceeds fromdrug sales. He was a known gambler, but amodest one.That is until Gomez hired himto launder the group’s profits. Both themoney Gomez paid Roybal for his services,and the large sums of money put into hispossession to be laundered, allowed him totrade in his low-budget gambling style forthat of a high roller.

Roybal would recruit third parties at thecasino to purchase or cash in chips forhim, paying them a nominal fee to do so.Presumably unbeknownst to them, the

chips were being purchased with illegaldrug profits. After spending some timegambling, Roybal would cash some of thechips back out again, claiming they werehis gambling winnings, and thereby fabri-cating a source for the Gomez group’s rev-enue other than drug trafficking, success-fully “laundering” the money.

But every time he cashed-out more than$10,000 in chips, his activities were beingrecorded on Currency Transaction Reports-Casinos (CTRCs). According to those CTRCs,Roybal’s total chips purchased equaledapproximately $117,000, and total chipsredeemed, $430,000, a difference of$313,000.When this amount was comparedto the recorded winnings in the pit area, thenumbers did not add up.

The reports provided other evidence insupport of money laundering chargesagainst Roybal and his group.Twenty-fourof the CTRCs recording his activitiesrevealed the use of aliases and multiplesocial security numbers. On numerous

other CTRCs, he had refused to provide asocial security number.

In addition to money laundering, he wascharged with Structuring Transactions toAvoid Reporting Requirements.

In the face of the evidence against them,eight of the nine defendants in this casepleaded guilty to a 68 count supersedingindictment charging distribution of mari-juana, money laundering and structuringtransactions to avoid reporting require-ments. Criminal forfeitures in the caseincluded $15 million in bank accounts,multiple properties and automobiles. $

Page 2 of 4Volume II: No. 3December 2005

• Unknown casino customer purchasing/redeeming large amount of chips.

• High-dollar casino customer refusing to provideidentification at tables (refusal of comps).

• Customer’s sudden/unexplained change ingambling habits (traditionally low or moderategambler placing high-stakes bets).

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Drug Traffickers Launder Profits Through Casinos

Bank Secrecy Act Of 1970, continued

The CTR As Evidence

CTR queries have long been a routineinvestigative tool utilized by ICE.They helpinvestigators detect illegal activity, developleads and expand existing investigations.CTR databases are readily accessible to lawenforcement and provide a wealth of iden-tifying information related to a subject,including full name, address, date-of-birth,social security number, passport number,driver’s license information, alien registra-tion number, primary and secondary bankaccount information, and related businessesand business addresses—information inves-tigators can use to help identify subjects.

ICE special agents utilize CTRs to establishlinks between individuals and businesses,and to identify co-conspirators and poten-tial witnesses.This information is often uti-lized to meet the “probable cause” require-ment necessary to obtain search, arrest andseizure warrants. CTRs also provide critical

information relating to asset identification.The identification and seizure of a criminalorganization’s assets can be devastating tothe organization and is an important toolfor law enforcement.

ICE conducts approximately 1 million recordchecks of BSA data each year; CTRs are rou-tinely queried at the initiation and through-out an investigation.With current data min-ing technology and techniques, law enforce-ment agencies can now utilize CTRs in pow-erful ways to identify trends and patterns,and to identify individuals operating outsideof these legitimate business practices. Forexample, ICE utilizes CTRs to identify trade-based money laundering schemes that can beused to launder millions in illicit proceeds,which can adversely impact the United Stateseconomic security, and devastate the econo-my of our international trading partners.

SARs and CTRsThe CTR requirement is part of a processwhich limits the criminal’s options to

move and store their illicit funds.Individuals and businesses conductinglegitimate transactions have no reason to avoid the filing of CTRs. However,criminals are forced to make a choicebetween appearing to be a legitimatecustomer, thereby exposing their assets and money movements through BSAreporting requirements, or engaging in risky, illegal actions to conceal themovement of their funds. Suspiciousattempts to avoid the filing of a CTR by structuring cash deposits (making aseries of deposits just under the $10,000reporting threshold over a number of days) is a significant red-flag indicator of criminal activity and one of the mostfrequent triggers for the filing of a SAR.With the development of a world economyand the move to a cashless society, the importance of the CTR willcontinue and grow, not just for the bank-ing community but for ICE and their lawenforcement partners. $

AChinese courtconvicted

Randolph HobsonGuthrie III, 38, andAbram Cody Thrush,

30, on criminal charges of illegally sellingand distributing more than $840,000worth of pirated motion picture DVDs viathe Internet to buyers in more than 20nations, including the United States. TwoChinese accomplices were also recentlyconvicted and sentenced in the case.Chinese authorities also located anddestroyed three warehouses that werebeing used to store those DVDs.

Guthrie and Thrush were arrested inShanghai in July 2004. Chinese prosecutorsmaintained that, since October 2002,Guthrie had illegally sold some 180,000pirated DVDs around the globe via theInternet.The Motion Picture Association ofAmerica believes that Guthrie was the largestdistributor of pirated DVDs in the world.This investigation represents the first jointIntellectual Property Rights (IPR) investiga-tion by ICE agents and Chinese authorities.

On April 18, that case reached its conclu-sion when Guthrie and Thrush—both U.S. citizens—were convicted and sen-tenced in a Shanghai court. Guthrie wassentenced to a jail term of two years andsix months in China, and a fine equivalent to approximately $60,000.Thrush wassentenced to a jail term of one year inChina, and a fine equivalent to approxi-mately $1,200. Both Guthrie and Thrushwere expelled from China upon the com-pletion of their sentences. Guthrie was re-arrested upon arrival in the United States,and currently faces an 18-count indictment for various U.S. charges, including criminal

copyright infringement and money-laundering violations.

Launched in Sept. 2003 by the ICE residentagent-in-charge office in Gulfport, Miss.,the investigation grew to include the ICEoffices in Beijing, China and Houston, aswell as the National IPR Center inWashington, D.C.The case illustrates thetruly global nature of IPR crime, whichrequires, in turn, a global response on thepart of U.S. law enforcement agencies andtheir foreign counterparts. $

Randolph H. Guthrie taken into custody byICE agents following his extradition to the U.S.

Page 3 of 4Volume II: No. 3December 2005

Two Americans Convicted In China For DVD PiracyFirst Joint Undercover Investigation Between ICE And Chinese Law Enforcement

For IPR Industry• Subject selling products not sanctioned by

copyright holder.• Subject selling products not presently authorized

for sale (DVD movies still in theatres).For Consumers

• Prices significantly below market value.• Seller making disclaimers on product seized by

law enforcement.

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This September, the American GamingAssociation held its 5th annual Global

Gaming Expo (G2E) at the Las VegasConvention Center. As in the four previousyears, it was well attended by thousands ofindustry vendors, casino executives, gamingenforcement officials and the public at large.In all there were over 26,000 attendees from99 countries. On display was everything onemight expect at a gaming convention, fromthe latest slot machines and robotic card-dealers to high-tech security and cash vend-ing systems.This year, however, there was anew exhibitor—U.S. Immigration andCustoms Enforcement (ICE).

The G2E was attended by agents from theICE Office of Investigations’ Financial andTrade Investigations Division’s CornerstoneUnit, as well as the ICE Office ofInvestigations’ Las Vegas field office. ICE’s

goal was to educate the internationalcasino and gaming industry on thevulnerabilities of money launderingthrough casinos and the importanceof strong anti-money launderingprograms. Agents ran an informationbooth and interacted with the public.

ICE agents also participated in paneldiscussions and lectures, where theyaddressed ICE’s mission in combat-ing international financial and tradecrimes, the effectiveness of BankSecrecy Act reporting requirements inhelping to identify criminal activity, andthe Cornerstone initiative, a major private-sector outreach program of ICE.

By the conclusion of the Expo, ICE hadmade many new contacts with security andcompliance personnel from the gaming

industry and gaming enforcement officials.Overall, ICE succeeded in getting itsdesired message out to the gaming com-munity: Like other cash-based industries,casinos need to remain vigilant in the fightagainst exploitation by criminal organiza-tions. And, since 2003, they have a dedicat-ed ally in that fight—ICE. $

ICE Gets Its Message Out To The Gaming Industry At The G2E Expo

Opening day at 5th annual Global Gaming Expo

Recent events include:

• September 28, 2005—OI Director Marcy M. Forman made two presentations at the Annual Institute for International Research (IIR) Money Laundering Compliance Forumconcerning the investigation of Politically Exposed Persons (PEPs) and anti-moneylaundering investigative issues.

• September 30, 2005—Representatives from theCornerstone Unit attended a conference of theInternational Association of Financial CrimeInvestigators (IAFCI) in Orlando, Fla., where theymade presentations and ran an informationbooth, at which they interacted with financialinvestigators from various countries, presentedliterature and answered questions concerning theCornerstone Initiative.

• October 18, 2005—Representatives from theCornerstone Unit and Special Agent in Charge,

New York representatives attended a round tablediscussion with JP Morgan Chase, Wachovia, Bankof America, Citi Group, Inc, Merrill Lynch, FirstCitizens, Royal Bank of Canada, Commerce Bank,Deutsche Bank, Corporate Risk International andother federal agencies. During the meeting, hostedby JP Morgan in New York, N.Y., seniorrepresentatives from law enforcement and theprivate sector discussed best practices and waysto collaborate to combat money laundering andother financial crimes.

• October 27, 2005—Cornerstone Unit Chief Jim Dinkins and Section Chief Joe Gallionpresented at a conference sponsored by JPMorgan Chase in Columbus, Ohio, concerninginternational money laundering and bulk cashsmuggling prevention.

• November 1, 2005—OI Director Marcy M. Formanpresented at the annual American BankersAssociation (ABA) conference held in Arlington, Va.

Director Forman discussed ICE’s financialinvestigations program, the Cornerstone Initiativeand high-lighted successful ICE investigationsrelevant to the banking and financial communities.Cornerstone Program Managers also ran aninformation booth and interacted with members ofthe banking community.

• November 9, 2005—Deputy Assistant Directorfor Financial and Trade Investigations Kevin Delli-Colli presented at the International Associationof Financial Crimes Investigators in Melbourne,Australia. He discussed bulk cash smuggling,money laundering and the Cornerstone program.

• November 29, 2005—OI Director Marcy M.Forman presented the keynote address at a humantrafficking seminar in Washington, D.C., sponsoredby Women in Federal Law Enforcement. DirectorForman discussed ICE’s use of financial andimmigration authorities to dismantle criminalorganizations.

CCoorrnneerrssttoonnee CCaalleennddaarr

ICE Special Agent in Charge, New York

(ICE SAC/NY) recentlyfinished an 18-month

investigation, entitled “Operation ChequeMate”, that identified and dismantled a network of individuals in London,England and the United States who werepartly responsible for the production of more than $15,000,000 worth of coun-terfeit/forged and stolen bank checksseized by ICE SAC/NY, and the defraudingof securities firms of $250,000. OperationCheque Mate was successfully conductedin partnership and cooperation with thefinancial trading community, UnitedKingdom and Spanish law enforcement,INTERPOL, U.S. regulatory agencies andother industry organizations—includingthe Securities and Exchange Commission(SEC), the Commodity Futures TradingCommission (CFTC), Securities IndustryAssociation (SIA), New York StockExchange (NYSE) and the National FuturesAssociation (NFA).

Over 50 private sector companies assistedICE SAC/NY during this investigation.Thisinformation exchange led to the indict-ment of the two foreign-based principals,

11 arrest warrants; the conviction of twoindividuals for bank fraud; and the seizureof banks checks, along with stolen identi-ties from both U.S. and U.K. citizens.

The Scheme

The U.K.-based organization managed bythe aforementioned two principals, profit-ed hundreds of thousand of dollars byestablishing online trading accounts withnumerous brokerage firms with eitherstolen, fictitious or their own identities.After establishing the online relationship,they mailed bulk packages containingfraudulent or forged checks ranging from$61,000 to $600,000 along with applica-tions in pre-addressed envelopes to a U.S.-based operative, who would then forward-ed the envelope from a domestic address,to attract less scrutiny than foreign corre-spondence. Soon after, the subjects request-ed wire transfers of trading profits to a for-eign bank account. As a result, the firmswere exposed to millions in losses after thechecks returned as counterfeit.

The Partnership

As part of the combined and coordinatedeffort, ICE worked with several organiza-

tions, associations, and brokerage firms toplace alerts on their Web sites, warningpotential investors and other firms aboutthe fraudulent scheme.The alerts alsoincluded the name and contact number ofthe ICE case agent for the investigation.These postings resulted in numerous leadsand significantly reduced the potential lossto the securities industry. Based on thealerts and industry cooperation, 14 finan-cial Suspicious Activity Reports (SARs)were filed by affected brokerage firms thatassisted in the investigation.

Fortunately, the losses sustained by the vic-tim firms totaled just over $250,000.Without the early detection and combinedand coordinated efforts of law enforcementand the private sector, losses could haveexceeded $15 million. $

Page 4 of 4Volume II: No. 3December 2005 • Customer providing identification that is

unreadable, altered, poor quality copies orfacsimiles.

• Customer requesting trading privileges prior tostandard 10-day check verification period.

• Customer opening and closing investmentaccount(s) in short period of time.

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ICE Dismantles International Money Laundering And Check Fraud Organization