A Guide to Anti-Money Laundering for Crypto Firms
A former Miami professor and expert on drug cartels and corruption has been sentenced to six months in prison for money laundering crimes totaling around $2.5m.
In 2020 Professor Bruce Bagley, now 75, pleaded guilty to two counts of money laundering, and admitted helping Colombian businessman Alex Saab hide profits from a Venezuelan food program within the US banking system.
According to the Associated Press, during sentencing this month he told Judge Jed Rakoff of the US District Court in Manhattan: “I am ashamed of my irresponsible behavior. I have spent my life as an academic working to understand and improve conditions in many countries in Latin America, and to be here today is the greatest departure from the life that I have aspired to.”
Prosecutors said Bagley “allegedly opened bank accounts for the express purpose of laundering money for corrupt foreign nationals.”
After opening a bank account in 2016 for a company he created, Bagley left the account dormant for a year, before receiving monthly deposits of around $200,000 from a fake Swiss wealth management firm and UAE food company. Bagley would withdraw 90% in a cashier’s check, payable to an account held by a “Colombian individual” and send the rest to his personal account as a commission.
Between November 2017 and October 2018, the account received approximately $2.5m – money the prosecutor says represented the proceeds of foreign bribery and embezzlement stolen from the Venezuelan people.
In October 2018, Bagley’s business account was shut down for suspicious activity, but two months later a new account was opened, and the transfers continued. Fake contracts were also allegedly drawn up to disguise the illicit activity.
Prosecutors said Colombian businessman Alex Saab was involved in the scheme. Mr Saab, a close ally of President Nicolás Maduro of Venezuela, was extradited last month by the US to face money laundering charges. The charge sheet included bribing Venezuelan officials and siphoning $350m from government housing projects. He transferred some of the funds into South Florida banks.
Sentencing and implications for compliance teams
In court, Judge Rakoff said that a sentence of up to five years, recommended by federal guidelines, would be “irrational” and “overly punitive,” considering Dr Bagley’s poor health and advanced age.
But despite calls by Dr Bagley’s lawyer for no prison time and a sentence of time served, Judge Rakoff said he could not ignore the fact “that of all the people in the world, Dr Bagley was most able to appreciate the wrongfulness of his crime when he committed it, and it cannot go unpunished.”
The judge recommended that Dr Bagley’s six-month sentence be served in a medical facility, according to a Justice Department spokesperson.
For compliance teams, this case illustrates the importance of comprehensive due diligence checks to identify instances where money laundering offenses sit alongside other illicit activities such as bribery, corruption and sanctions violations. It also raises questions as to how Dr Bagley was able to open a second account after the first was closed due to suspicious activity.
Drug trafficking and related financial crimes are a sensitive political topic in the US, and while Dr Bagley’s ties to Alex Saab may not have been detected via Politically Exposed Person (PEP) screening, Dr Bagley’s reputation as an AML expert and respected professor may have provided a false level of comfort. Adverse media checks on customers alongside PEP and sanctions screening can help firms to build a more comprehensive picture of a customer’s profile and network.
Originally published November 25, 2021, updated May 6, 2022
Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.
Copyright © 2022 IVXS UK Limited (trading as ComplyAdvantage).