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State of Financial Crime 2023 Report

Ex-FBI Agent Charged with Violating Russia Sanctions and Money Laundering

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On January 23, 2023, federal prosecutors announced the arrest of former FBI Special Agent, Charles F. McGonigal, and former Soviet and Russian diplomat, Sergey Shestakov, on criminal charges related to sanctions violations and money laundering. 

According to court documents, the defendants allegedly conspired to violate the International Emergency Economic Powers Act (IEEPA) by investigating a rival Russian oligarch for Oleg Deripaska – a Russian aluminum tycoon designated by the Treasury’s Office of Foreign Assets Control (OFAC) in 2018. Prosecutors also claim Deripaska paid McGonigal through an intermediary for his efforts to remove him from OFAC’s Specially Designated Nationals And Blocked Persons List (SDN).   

Since the arrest in New York, McGonigal pleaded not guilty to the charges and was released on a $500,000 bond.

Alleged Activity

Retiring in 2018, McGonigal is a former Special Agent in Charge of the FBI’s Counterintelligence Division in New York. According to the Department of Justice (DOJ), McGonigal and Shestakov negotiated with Deripaska in 2021, ultimately agreeing to investigate his rival in exchange for concealed payments. 

To obfuscate the payment trail, the defendants worked with Deripaska’s agent to create shell companies to act as counterparties in the contract, which featured forged signatures. They were also careful not to mention Deripaska’s name in any of their communications, instead referring to him as “our friend from Vienna,” “you-know-whom,” and “the big guy.”

As a result of the FBI’s investigation, McGonigal and Shestakov are charged in the Southern District of New York with:

  • One count of conspiring to violate and evade US sanctions
  • One count of violating the IEEPA
  • One count of conspiring to commit money laundering 
  • One count of money laundering 

Each of the above charges carries a maximum sentence of 20 years in prison. Additionally, Shestakov is charged with one count of making false statements, which carries a maximum sentence of five years in prison.

In a separate case, McGonigal is facing additional federal charges in the District of Columbia relating to his alleged receipt of $225,000 from an individual who had business interests in Europe and was a former employee of a foreign intelligence service. According to the nine-count indictment, McGonigal concealed his relationship with the individual from the FBI who later served as an FBI source in an investigation involving foreign political lobbying, of which McGonigal had official supervisory responsibilities. 

The defendant’s initial appearance in federal district court in Washington has not yet been scheduled.

Mid-Level PEP Screening 

In our 2023 global compliance report, we asked 800 C-suite and senior compliance decision-makers across North America, Europe, and Asia Pacific which area their firm most valued in a politically exposed persons (PEP) screening solution. The results showed a clear shift toward a greater focus on mid-level government officials, with 39 percent selecting this option, a ten percentage point increase on 2021 that made it the highest ranking factor. 

The data shows that firms increasingly recognize that there is no “one size fits all” classification regarding PEPs. In particular, there is a recognition that middle-ranking officials could act on behalf of a PEP, circumventing sanctions and anti-money laundering controls, as seen in this case.  

In light of this, compliance staff should familiarize themselves with a joint statement that clarifies the Bank Secrecy Act’s due diligence requirements for customers who may be considered PEPs. According to the statement, it is unlikely McGonigal would have been classified as a PEP owing to the term commonly being used in the financial industry to “refer to foreign individuals who are or have been entrusted with a prominent public function.” Furthermore, the Agencies state they do not interpret the term to include US public officials.

As a result, firms should ensure less prominent public functions are considered customer risk factors as part of their enterprise-wide risk assessments, especially when they have exposure to high-risk jurisdictions. 

Sanctions Evasion Guidance

Compliance teams looking to uplevel their sanctions screening and monitoring controls should review the guides issued by the Financial Crimes Enforcement Network (FinCEN) since the Russia-Ukraine conflict began in March 2022. Particular attention should be given to the list of red flag indicators and reporting instructions:

What will 2023 Hold for Sanctions on Russia?

Stay ahead of shifting sanctions hotspots from Russia to China and North Korea to Iran.

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Originally published 26 January 2023, updated 27 January 2023

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.

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