The downfall of Gulnara Karimova and the U.S. Department of Justice’s (DOJ) enforcement actions against her and the international telecom companies that she shook down for over $1 billion in bribes have been significant developments in themselves, and there are numerous indications that the DOJ’s actions so far are only an early stage of wider campaigns against international financial crimes. Foreign political figures, banks, and telecom companies all should be on notice that this line of investigation and enforcement actions is likely to be a harbinger of expanded future actions in each of their fields, under the Foreign Corruption Practices Act (FCPA) or related areas of law such as anti-money laundering (AML).

Foreign Political Figures

The DOJ’s criminal indictment of Gulnara Karimova, who once dabbled in modeling and singing, may make her the very model of a modern money launderer. The indictment of Karimova and her alleged co-conspirator Bekhzod Akhmedov, filed on March 7, 2019, charged Karimova with money laundering in violation of 18 U.S.C. § 1956 using a quite slim jurisdictional basis. Her actions that violated the FCPA occurred in Uzbekistan, and the transactions that laundered the proceeds of corruption occurred between accounts in banks outside of the United States. The only connection to the United States is that certain transactions of proceeds of corruption were dollar denominated, so that the transfers between foreign banks had to be routed through correspondent accounts at banks in New York. These movements of electrons through the computer systems of New York banks would suffice to support the commission of a financial crime in the United States.

Using the routing of dollar-denominated transactions through correspondent accounts at U.S. banks as a basis for jurisdiction over transactions otherwise conducted entirely outside the United States is not new. For example, on July 14, 2017—a few days before the Attorney General announced that the DOJ will significantly expand its use of asset forfeiture actions on July 17, 2017—the DOJ filed an asset forfeiture action to seize the superyacht Galactica Star, purchased by a citizen of Nigeria for a citizen of Nigeria (a former Minister of Petroleum Resources), from a Dutch shipbuilder, using funds from a U.K. company, transferred between accounts at two non-U.S. banks, in a transaction brokered by a Channel Islands firm. The lack of any U.S. nexus other than transactions being dollar denominated did not prevent the asset forfeiture action from proceeding, with an order of sale approved in March 2019. (Whether the producers of the Syfy Network program Battlestar Galactica have a basis to sue the builder of the Galactica Star for the unlicensed homage of the name and nameplate font of their fictional starship was unaddressed.)

Prosecuting a foreign political figure for money laundering with only this basis for jurisdiction appears to be a novel action, however, especially with no apparent immediate prospect of bringing that foreign political figure into U.S. custody. The indictment of Karimova may set a precedent for similar prosecutions of many corrupt foreign political figures for acts conducted entirely outside of the United States.

Whether Karimova will ever stand trial in the United States is an interesting question. No extradition treaty between the United States and Uzbekistan exists, so Uzbekistan has no obligation to extradite her. Her actual status in Uzbekistan is unclear. The Uzbekistan Prosecutor-General’s Office announced that she had been moved from house arrest to prison on March 5, 2019, but the justification for that change in her status ,that she had violated the terms of her house arrest, appears questionable since the cited violation occurred more than three months earlier on November 22, 2018. Closed-door diplomatic discussions between the United States and the current government of President Shavkat Mirziyoyev on her fate conceivably could occur, but there have been no reports of any. Even if they are occurring, the interests of the Karimov family are likely to influence the decision of the government of Uzbekistan, and for the family to be willing to send their daughter from domestic detention to possible imprisonment outside of their control in the U.S. justice system would be quite cruel. Time will tell what happens in this case.

Banks

Gulnara Karimova’s international money laundering involved banks that are some of the usual suspects in such cases, and AML enforcement actions against these banks by U.S. and European authorities have already begun.

Two Latvian banks named by Organized Crime and Corruption Reporting Project (OCCRP) in 2015 as frequently used by Karimova, Aizkraukles Banka and Parex Bank, have been among the hardest hit by the U.S. Department of the Treasury’s USA PATRIOT Section 311 action against ABLV Bank in February 2018. Aizkraukles Banka is ABLV Bank, having changed its name to ABLV in 2011. The Section 311 action caused Aizkraukles/ABLV to go out of business and forced Latvian authorities to start a cleanup of their banking sector to reduce the bank accounts for non-residents of Latvia that have been a significant international money laundering problem for decades. The crackdown has especially affected Parex Bank, a leader in providing such accounts.

The Dutch Public Prosecution Service has punished ING Bank with 775 million euros (approximately $900 million) in fines and disgorgement for its negligence in preventing money laundering by Gulnara Karimova and others, announced on September 4, 2018.

Standard Chartered, another bank used by Karimova according to OCCRP, has been punished by multiple enforcement actions by U.S. authorities and recently by U.K authorities as well. Standard Chartered was the subject of two New York State AML and OFAC sanctions enforcement actions totaling approximately $640 million in 2012-2014 and a DOJ non-prosecution agreement with its branch in Switzerland in 2015. was On April 9, 2019, a host of U.S. and U.K. regulatory and law enforcement agencies announced the conclusion of a massive joint enforcement action against Standard Chartered, with approximately $1.06 billion in penalties and forfeitures. None of these actions specifically referred to Uzbekistan or Gulnara Karimova in their publicly released documentation, but Karimova’s flow of corrupt payments through Standard Chartered may have been a small part of the larger pattern of misconduct by Standard Chartered that led U.S. and U.K. authorities to penalize the bank.

Other Telecom Companies

The FCPA actions against Gulnara Karimova, VimpelCom, TeliaSonera, and MTS send a clear message to foreign governments and international telecom companies that the U.S. government intends to punish corruption in the buildout of telecommunications infrastructure, and that it will seek to punish both those who give bribes and those who receive them. It may not be a meaningless coincidence that this messaging is occurring simultaneously with the start of 5G buildout worldwide. Another possibly not meaningless coincidence is that an international telecom company that appeared in the 2015 OCCRP report on bribes paid to Gulnara Karimova but not in any related FCPA enforcement actions so far is Huawei. Part III of this series will address this aspect of the situation.