Accountants, bankers and Mueller, oh my

Events of the past two weeks read like a script for a major motion picture on money laundering and global corruption, including the guilty plea of Trump attorney Michael Cohen; the special counsel’s revocation of the cooperation and plea deal with Paul Manafort; and the German police raid on Deutsche Bank, just to name three.

Each of these events include deep connections to the Kremlin.

Dizzying developments in the Panama and Paradise Papers, the special counsel investigation and the central role that professionals have played bear consideration by Congress in January.

The banks

{mosads}The Bank Secrecy Act (BSA) was passed almost 50 years ago. It supposedly requires U.S. financial institutions and foreign banks conducting business in the United States to work with the U.S. government in cases of money laundering and fraud, including filing mandatory currency transaction reports and suspicious activity reports with the U.S. government. 

Banks are also supposed to have BSA programs to prevent the misuse of the U.S. banking system by criminals and politically exposed persons (PEPs). It’s more relevant than ever, as the last two weeks reveal.

One can simply review the original indictment of Manafort to see how the banking system was misused, involving the payment of tens of millions of dollars from Russia and Ukraine, using a bank from Cyprus as the conduit. That money ultimately ended up in the United States.

Witnessing hundreds of German police lined up outside Deutsche Bank AG’s Frankfurt headquarters was an especially delicious irony for me, seeing how in an op-ed published on Nov. 8 in The Hill, I called on the new Congress to hold hearings on the failure of U.S. banking regulators to hold these U.S. and foreign banks responsible for their obvious violations of the BSA.

When will Congress hold federal bank regulators to account? Why are we watching EU law enforcement and regulatory officials taking the lead in what is also a U.S. money laundering problem?

The professionals

One thing made clear by each of the Panama, Paradise and special counsel investigations is that the accounting and legal professions are at the very center of the scandals.

But for professionals, the money laundering and illegal conduct simply could not have taken place. Indeed, professionals are licensed by the state because they hold the public trust. That trust has not been demonstrated here.

Lest you dismiss my observation by assuming it is only bit-players like Michael Cohen, you are wrong. As I have repeatedly written, each of the “Big Four” accounting firms have been implicated in the Panama and Paradise Papers, and a former attorney at white-shoe law firm, Skadden Arps, admitted to lying in the special counsel investigation.

What’s more, the then-president of the American Bar Association was caught on an undercover tape giving advice to an African dictator trying to hide his dirty money. He was not alone: 12 of the 13 New York City law firms approached by undercover investigators were willing to be engaged to assist this faux African dictator hide his corruption.

With regards to the accounting profession, and especially the Big Four, their involvement stems back to Enron. When Congress enacted the Sarbanes-Oxley (SOX) Act, committee staff allowed a loophole to be inserted into the bill — allowing accounting firms to continue to provide audit and tax advisory services for the very same clients.

{mossecondads}As demonstrated by Apple’s tax avoidance in the Paradise Papers, there are at least $252 billion reasons the House must now take up an amendment to SOX to eliminate this loophole. A similar crackdown for the legal profession is warranted, perhaps finally bringing attorneys within the ambit of the BSA.

The special counsel

Unlike most university professors, I had no summer vacation this year. Instead, I represented one of the five witnesses granted immunity to testify against Paul Manafort in August. I first spent winter break preparing the client to testify before the grand jury.

I spent the time in between winter and summer breaks teaching fraud and ethics at the University of Maryland. It made for quite a cognitive dissonance between College Park, Md. and the U.S. District Courts for the Eastern District of Virginia and the District of Columbia. With Manafort’s plea deal revoked, it looks like my client is getting dragged back in.

One thing I learned from summer break was how well-prepared the prosecutors in the special counsel’s office were. They knew everything about my client, Paul Manafort and Rick Gates.

I suspect they know more about some others. Some of them are almost certainly professionals, perhaps large international banks that have done business with administration officials; and perhaps even world leaders themselves.

David P. Weber serves as a full-time faculty member at the University of Maryland, where he teaches fraud examination and professional ethics. He also manages the boutique law firm Goodwin Weber PLLC, representing clients who have been harmed by professionals. He is the former assistant inspector general for investigations at the U.S. Securities and Exchange Commission, the SEC’s chief investigator.