Global standard for cryptocurrency anti-money laundering to be agreed

The global anti-money laundering task force has said it is closer to establishing a worldwide set of standards to apply to virtual currencies.

The president of the Financial Action Task Force, Marshall Billingslea, said he is optimistic that at its plenary, due in October, the FATF will agree a series of standards that will close the anti-money laundering “gaps” that all nations face.

“It is essential that we establish a global set of standards that are applied in a uniform manner,” he added.

The task force has accelerated its work and made significant progress on reaching a “consensus across nations” after the G20 requested the organisation tackle the issue as a matter of urgency.

In October, the FATF will discuss which of its existing standards need to be updated to address virtual assets, since its current recommendations do not acknowledge them. It will then revise the methodology it uses to assess how countries implement these standards and when this revised assessment methodology will take effect.

Mr Billingslea, who is also assistant secretary to the US secretary, said currently the adoption of anti-money laundering standards and regimes pertaining to digital assets and virtual currencies is “very much a patchwork quilt or spotty process,” which is “creating significant vulnerabilities for both national and international financial systems”.

China and South Korea have clamped down on the sector, while other countries — including France, Switzerland, Malta and Gibraltar — are drawing up regimes for formally policing the space in an attempt to attract fintech business.

UK MPs also highlighted on Wednesday the urgent need to regulate “Wild West” crypto-asset markets. The Commons Treasury select committee warned that a dearth of regulation around crypto-assets had left investors exposed to a “litany of risks” — without any of the protections usually afforded to consumers, such as access to compensation.

Cryptocurrencies are not regulated by central banks but are held digitally via electronic identities that in many cases allow their owners to remain anonymous. As a result, they have been linked to payments for prohibited goods such as guns and drugs and are a target for hackers.

Mr Billingslea said there were concerns of an emerging use of virtual currencies by terrorist organisations including Isis, as well as in extortion schemes, such as the WannaCry attacks.

His comments come after some observers argued that authorities such as Europol, Europe’s law enforcement agency, should devise a centralised system that flags cryptocurrency wallets linked to nefarious activities to major exchanges, so that they can block the owners from exchanging those funds for hard cash.

Despite the risks associated with digital assets, Mr Billingslea said they also presented “a great opportunity”. In terms of regulation, he said, “you can’t tilt too far in one direction or another” since blockchain, the technology that underpins virtual assets, “will continue to evolve”.

https://www.ft.com/content/1a67f6b2-bbf7-11e8-94b2-17176fbf93f5

House Passes Bill to Update Money Laundering Crypto Enforcement

By Jacob Rund

The Treasury Department’s anti-money laundering enforcement unit could soon see an update to its duties after the House advanced legislation aimed at prioritizing its focus on cryptocurrencies and other emerging technologies.

The FinCEN Improvement Act (H.R. 6411), which passed Sept. 12 on a voice vote, would add language to the Financial Crimes Enforcement Network’s governing law that requires it to coordinate with other countries’ financial intelligence units on cryptocurrency-related initiatives.

It would also add tribal law enforcement groups to the list of “partners” with whom FinCEN is tasked with working to combat money laundering and other activities that fund terrorism and organized crime. Those partners, according to U.S. code, include “federal, state, local, and foreign” law enforcement and regulatory authorities.

The bill “is an important step in modernizing FinCEN and ensuring our law enforcement and intelligence communities can detect and prevent criminals and terrorist networks from using virtual currencies” for money laundering and cyberwarfare, Rep. Ed Perlmutter (D-Colo.) said in July when the bill was introduced.

Rep. Steve Pearce (R-N.M.) joined Perlmutter in sponsoring the legislation.

Redundant?

“It’s an insult to small potatoes everywhere,” Ross Delston, a Washington attorney and anti-money laundering expert witness, said of the bill. It would give FinCEN authority that it already has to deal with activities involving cryptocurrency, he told Bloomberg Law.

FinCEN officials have stated that they will go after criminals using bitcoin and other virtual currencies to launder money and avoid the traditional financial system.

“As far as coordinating with tribal authorities, while that could in theory be an issue, it’s not going to come up an awful lot,” Delston said. “It’s a really minor issue.”

Regardless of these complaints, the bill passed with bipartisan support.

The bill, in addition to its language on cryptocurrencies and tribal law enforcement, contains a provision that would require FinCEN to support activities that protect against “terrorism,” rather than “international terrorism” as U.S. code now states.

Another Bill Coming

Another bill targeted at FinCEN’s information sharing and collaborative efforts will be considered this week. Financial Services Committee members plan to vote Sept. 13 on the 2018 FinCEN Modernization Act (H.R. 6721), which would instruct the bureau to create and maintain “research, development, and information sharing programs.”

It would allow FinCEN to enter into transactions with other government agencies, states, and “any agency or instrumentality” of the United States that furthers the goals of information sharing and developing new technologies. The bureau could also solicit and accept gifts from these parties.

The bill could provide an inside track for vendors to avoid the normal procurement process and land a government contract by offering cash or “in kind” gifts, Delston said.

Real estate agent sentenced to 6+ years for wire fraud, money laundering

By Alcynna Loyd

A California real estate agent was recently sentenced to more than six years in prison and three years of supervised release after pleading guilty to one count of wire fraud and one count of money laundering.

According to the Department of Justice, from October 2012 through October 2013, Robert Jacobsen sold homes with unpaid mortgages on them to unsuspecting homebuyers but eventually, authorities caught wind of the scheme.

According to the DOJ, Jacobsen’s scheme involved him creating a fictitious company called “American Brokers’ Conduit Corporation,” which was not related to an already-existing mortgage originator known as “American Brokers’ Conduit,” which originated loans in the Bay Area.

The DOJ explained that Jacobsen used intermediaries to gain control of homes with mortgage liens that secured loans originated by the real “American Brokers’ Conduit,” and then Jacobsen would use intermediaries to sue the phony “American Brokers’ Conduit Corporation” in court, claiming that the legitimate mortgage liens were invalid.

From the DOJ’s announcement:

As he controlled both the plaintiff and the defendant in these lawsuits, Jacobsen then instructed the attorneys for both sides to enter into stipulated judgments, signed by the courts, resolving the lawsuits by purporting to declare the mortgage liens invalid. In so doing, he omitted to tell the courts that neither he nor any other person involved in the lawsuits was a legitimate representative of either the real “American Brokers’ Conduit” or the then-current owners of the liens. Jacobsen filed those agreements with the relevant county recorder’s offices, to give the appearance to anyone conducting a title search that the liens had been declared invalid by a court, and then sold the homes to unsuspecting buyers without paying off the original loans on the homes. 

Jacobsen was initially charged with 13 counts of wire fraud and money laundering but the remaining charges will be dropped if he maintains his part of the plea agreement, the DOJ said. As a result of his plea, Jacobsen was also ordered to forfeit a yacht he purchased with the sale proceeds and pay an undetermined restitution fee.

Former Bucks County official pleads guilty to money laundering and extortion charges

U.S. Immigration and Customs Enforcement

PHILADELPHIA — Former director of public safety in Lower Southampton Township, Pennsylvania, pleaded guilty to money laundering and extortion charges Sept. 5, following an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI), FBI, Internal Revenue Service – Criminal Investigations, and the Pennsylvania State Police.

Robert P. Hoopes, 71, of Doylestown, Pennsylvania, pleaded guilty to one count of conspiracy to commit money laundering and four counts of Hobbs Act extortion under color of official right. From February 2016 until December 2016, Hoopes had authority over all police, fire, and emergency operations in the township.

From 2014 to 2016, Hoopes solicited, extorted, and attempted to extort bribes and kickbacks from individuals and businesses in exchange for his influence over Lower Southampton Township’s Board of Supervisors, Solicitor, officers, and employees. For example, Hoopes solicited bribe payments from Robert A. DeGoria, who was then the vice-president of an outdoor advertising company, in exchange for offering his influence to reduce lease payments that the company owed to Lower Southampton Township.

In November 2016, Hoopes and co-defendant Bernard T. Rafferty, who was then a Deputy Constable in Bucks County, accepted a bribe of $1,000, as well as the promise of other fees, in exchange for Hoopes and Rafferty using their positions as public officials to “fix” a traffic case in Bucks County Magisterial District Court.

Additionally, from June 2016 to August 2016, Hoopes, Rafferty, and co-defendant Kevin M. Biedmeran, who was then a business development manager at Philadelphia Federal Credit Union, laundered $400,000 in cash, represented to be proceeds from health care fraud and illegal drug trafficking, and accepted money laundering fees totaling $80,000 in cash.

Hoopes faces a maximum possible sentence of 100 years in federal prison for his crimes. He is scheduled to be sentenced on Dec. 17, 2018.

Rafferty previously pleaded guilty to conspiracy to commit money laundering and honest services mail fraud. He is scheduled to be sentenced on Nov. 9, 2018.

Biederman previously pleaded guilty to conspiracy to commit money laundering and bank bribery. He is scheduled to be sentenced on Nov. 8, 2018.

DeGoria previously pleaded guilty to one count of making a false statement to federal agents. DeGoria is scheduled to be sentenced on Nov. 6, 2018.

In a related case, Michael J. Savona, an attorney who also served as Solicitor in Lower Southampton Township, previously pleaded guilty to one count of making a false statement to federal agents. Savona is scheduled to be sentenced on Nov. 7, 2018.

Jailed Bitcoin expert subject of three-way fight over money-laundering inquiry

https://www.thenational.ae/business/technology/jailed-bitcoin-expert-subject-of-three-way-fight-over-money-laundering-inquiry-1.766673

A cryptocurrency expert languishing in a Greek jail may have a vantage point on a tantalising issue – how Russians in US Special Counsel Robert Mueller’s crosshairs used Bitcoin to obscure their money trail.

The expert, Russian citizen Alexander Vinnik, was detained last year after US prosecutors in San Francisco accused him of supervising a digital-currency exchange that helped criminals launder billions of dollars. That exchange, according to cryptocurrency analysis company Elliptic, handled some Bitcoins traced to Fancy Bear, a hacking unit. Fancy Bear is one of the names for the Russian military intelligence officers who Mr Mueller separately accuses of stealing and releasing Democrats’ emails to sway votes in the 2016 elections.

Three countries are fighting to extradite Mr Vinnik: Russia, France and the US. The link outlined by Elliptic could explain why – and why Russia has threatened retaliation against Greece if it hands him over to one of the others.

The next turn in the Greek matter comes Tuesday. The country’s Supreme Court is set to rule on extradition requests from France and Russia, which both allege that Mr Vinnik committed cybercrimes against their citizens.

Mr Vinnik is one of multiple Russian hackers indicted by the US, some of whom could provide insights into Russian cybercrime beyond their individual cases.

Yevgeniy Nikulin, who was extradited from the Czech Republic and is charged in San Francisco with hacking LinkedIn and Dropbox in 2012, is of interest in the US inquiry into election meddling, a Justice Department official said last week. Peter Levashov, a Russian programmer who has claimed he worked for Vladimir Putin’s ruling party, is charged in Connecticut with cybercrimes linked to spamming.

Mr Vinnik denies the US money-laundering accusations, according to his lawyer, Ilias Spyrliadis. He had no control over the $9 billion (Dh33.06bn) in Bitcoin that US prosecutors in San Francisco say ran through BTC-e, the cryptocurrency exchange, the lawyer said.

Mr Vinnik won’t comment on the Russian fraud accusations, Mr Spyrliadis said, and he denies the French charges including money laundering. Still, as an alternative to extradition, Mr Vinnik has offered to work with Greek and possibly other authorities from his current location, the lawyer said.

In the San Francisco case, the US says that Mr Vinnik and BTC-e catered to cybercriminals and allowed them to launder criminal proceeds from Bitcoin and other digital currencies and turn them into cash. The exchange didn’t vet customers, letting them move money in and out anonymously. To set up an account, according to the indictment, all a person needed was a username, password and email address, which often bore no relationship to the identity of the user.

That sort of service matches a description by Mr Mueller of how the Russian military intelligence officers layered transactions through cryptocurrency exchanges to maintain anonymity when they bought time on servers they used to launch attacks.

Elliptic used details provided in the indictment, such as a transfer of exactly 0.026043 Bitcoin on February 1, 2016, to search the electronic register of all Bitcoin transactions – known as the blockchain – to find specific payments. It then used software it has developed to identify the origin of the funds for those transactions.

“There was a strong link between much of the funds allegedly used by the Fancy Bear group and BTC-e,” said Tom Robinson, Elliptic’s chief data officer. “What I can’t say for certain is whether Fancy Bear obtained them directly from BTC-e, or whether there was an intermediary.”

Mr Vinnik couldn’t have known who, really, was using the platform, Mr Spyrliadis said. While Mr Vinnik was an expert working for BTC-e he was “in no way running it”, the lawyer said.

“Mr Vinnik could sometimes see a passport and ID when performing the transactions, but was in no place to know whether this person was using a fake ID, whether he or she was wanted by Interpol or involved in anything,” he said.

The US has been trying to get its hands on Mr Vinnik for more than a year. Greece’s Supreme Court ruled in December that he could be extradited to the US to face the charges in San Francisco. But the process has been stalled by the requests from Russian and France. Greece’s Supreme Court may well approve both the French and Russian requests, Mr Spyrliadis said.

That would punt the decision to Greece’s new justice minister. Before coming to any resolution on extradition, the Greek Justice Ministry will also need to examine a political asylum request by Mr Vinnik. A justice ministry spokeswoman said the minister couldn’t comment on the case as he has just assumed his post.

A co-operating Mr Vinnik would open the door to the US gaining strategic information on Russian hackers, said Arkady Bukh, the lead lawyer defending Mr Nikulin. Getting access to emails, names and bank accounts related to Russian hacking is what Mr Vinnik’s case in the US is really about, said Mr Bukh, who isn’t representing Mr Vinnik.

Cryptocurrency exchanges are “extremely important and of great interest to the US”, said Mr Bukh. He had been in touch with Mr Vinnik’s friends about getting him legal representation outside of Greece, he said.

But first, the US would have to get its hands on Mr Vinnik, something Russia appears dead set against.

A Greek regional court approved the French extradition request in July. Russia immediately lashed out at the country: “It is obvious the Russia cannot leave these actions unanswered,” its foreign ministry warned.

Later that same day, July 13, Mr Mueller rolled out his indictment against the Russian military intelligence officers.

Former Ecuadorian oil exec forfeits six SoFla properties tied to money laundering

By Keith Larsen

A former top executive with Ecuador’s national oil company has been sentenced to more than four years in prison for allegedly laundering money through six South Florida properties.

Marcelo Reyes Lopez, a former executive with PetroEcuador, was sentenced in July to four years and five months in prison for his role in an alleged money laundering scheme involving several PetroEcuador officials and other Ecuadorian government officials.

He had pleaded guilty to one count of money laundering in October in U.S. District Court of the Southern District of Florida and agreed to forfeit six properties tied to the scheme.

The complaint for the case has remained sealed. A motion filed by the U.S. Attorney’s Office in November, however, said the U.S. “anticipates that its evidence will show the defendant participated in an extensive bribery scheme that existed to provide illicit payments to officials from Ecuador’s state-run and state-controlled oil company in order to secure and profit from contracts with that company.”

On May 8, the court entered a preliminary order of forfeiture for the six properties:

  • 11316 Northwest 79th Lane, Doral; a four-bedroom, three-bathroom house
  • 14340 Southwest 156th Avenue, Miami; a three-bedroom, two-bathroom house
  • 16711 Collins Avenue, Unit 1902, Sunny lsles Beach; a two-bedroom, two-bathroom condo
  • 605 South Ocean Drive, Hollywood; a three-bedroom, two-bathroom house
  • 609 South Ocean Drive, Hollywood; a multifamily complex
  • 345 Monroe Street, Unit 1-4, Hollywood; a multifamily complex

According to court documents, the six properties were purchased between 2013 and 2014, for a total of $3.5 million.

On Wednesday, Lopez’s sentencing documents were filed with the court, which showed he would be sentenced to a correctional facility in Georgia.

The news comes on the heels of another major money laundering case where federal officials allege top executives of Venezuela siphoned $1.2 billion from its state oil fund, PDVSA, to purchase South Florida real estate. The U.S. Attorney’s office claims at least 16 pieces of South Florida property are tied to the defendants of the scheme, one of which was a condo in the Porsche Design Tower in Sunny Isles.

Manafort Seeks to Move Money-Laundering Trial From D.C. to Roanoke

By Daniel Flatley, Greg Farrell, and Andrew Harris

Paul Manafort asked a Washington federal judge to move his September trial on money-laundering and illegal lobbying charges to Roanoke, Virginia, arguing that the pool of potential Washington jurors would be biased against him.

Recent news coverage of his conviction on bank- and tax- fraud charges in Alexandria, Virginia, and his time working for the 2016 campaign of President Donald Trump make it impossible to get a fair trial in the nation’s capital, his attorneys said in a Wednesday court filing.

“Nowhere in the country is the bias against Mr. Manafort more apparent than here in the Washington, D.C., metropolitan area,” the attorneys said. They cited heavy news coverage of their client’s conviction on Aug. 21 at a federal courthouse in nearby Alexandria, and District of Columbia voters’ propensity for supporting Democratic Party candidates.

Manafort has a history of working for Republican Party figures, most recently serving as Trump’s campaign chairman. Manafort is the only target of Special Counsel Robert Mueller’s investigation to stand trial and be convicted by a jury.

U.S. District Court Judge Amy Berman Jackson had given defense lawyers until the end of the day Wednesday to file their change of venue request but told attorney Richard Westling that it would be hard to find a place in the country where news of Manafort’s legal entanglements hasn’t been heard.

“Where do you want to go?” she asked Westling at a Tuesday hearing.

“I don’t know that I have the answer to that yet,” Westling responded. “It may be that there is no place.”

Jackson said the “overwhelming majority” of publicity for Manafort’s first trial was national, not local and assured the attorney that, “This jurisdiction has had very high-profile cases before.”

Acknowledging his bid was a long shot, Westling said it was important for the motion to be made in the event of an appeal.

“The nation’s attention remains fixed on Mr. Manafort,” the defense team said in the filing. Manafort, they said, “has become an unwilling player in the larger drama between Mr. Mueller and President Trump.”

World Away

Roanoke is 230 miles (370 kilometers) southwest of Washington, and politically a world away, according to the defense. While Washington’s metro area is the sixth biggest TV market in the U.S., Roanoke ranks No. 70, according to Nielsen data.

“This may be the rare case where a juror’s predisposition may directly tie to their vote in the last presidential election,” Manafort’s lawyers said, adding “it’s not a stretch” to assume that DC voters who backed Democrat Hillary Clinton in the 2016 election “would be predisposed against Mr. Manafort, or that voters who supported President Trump would be less inclined toward the Special Counsel.”

Almost 91 out of every 100 Washington voters cast their ballots for Clinton, according to Manafort’s team, while fewer than 5 percent voted for Trump. Roanoke is more balanced, they said.

Jackson said she would close jury selection, which could take as long as two days, to the public because of the size of the courtroom and the “awkward and unpleasant” process of having attorneys and jurors come up to the bench for individual questioning.

She also said she would remove a question about whether jurors voted in the 2016 election from the jury questionnaire.

Manafort’s Alexandria jury deadlocked in 10 of 18 counts, prompting U.S. District Judge T.S. Ellis III to declare a mistrial on those unresolved allegations. Prosecutors have until the end of the day Wednesday to decide whether they want them retried.

Manafort had also sought to have the Alexandria trial moved to Roanoke. Ellis denied that request.

The case is U.S. v. Manafort, 17-cr-201, U.S. District Court, District of Columbia (Washington).

U.S. Probing Whether Malaysian Fugitive Laundered Funds to Pay Chris Christie and Trump Lawyer

By Bradley Hope, Tom Wright, and Rebecca Davis O’ Brien

The U.S. Justice Department is investigating whether a fugitive Malaysian financier laundered tens of millions of dollars through two associates and used the funds to pay a U.S. legal team that includes former New Jersey Gov. Chris Christie and a lawyer who represents President Trump, according to people familiar with the matter.

Jho Low, the Malaysian businessman, has been described in U.S. court filings as playing a central role in the alleged embezzlement of $4.5 billion from a Malaysian fund called 1Malaysia Development Bhd.

Malaysian authorities this week separately charged Mr. Low with money laundering in the case, which investigators suspect may be one of the biggest financial frauds in history. He has been moving around Hong Kong, Macau and mainland China in recent months, according to people with knowledge of his whereabouts.

Mr. Low was close to former Malaysian Prime Minister Najib Rajak, who unexpectedly lost an election in May and was arrested last monthin Kuala Lumpur. Mr. Najib has pleaded not guilty to charges of money laundering and criminal breach of trust in connection with the 1MDB scandal.

The Justice Department, in July 2016 and last year, filed civil lawsuits in federal court in California seeking to recover assets from Mr. Low and others including mansions, artwork and a yacht allegedly bought with 1MDB funds. It is now pursuing a criminal investigation in which Mr. Low, who has U.S. assets, is a target, these people said.

Former New Jersey Gov. Chris Christie is part of Mr. Low’s U.S. legal team.
Former New Jersey Gov. Chris Christie is part of Mr. Low’s U.S. legal team. PHOTO: JULIO CORTEZ/ASSOCIATED PRESS

Since 2016, Mr. Low’s access to the global financial system has been sharply curtailed by banks wary of handling allegedly tainted funds, according to the people familiar with the matter. That has made it difficult for him to pay directly for a range of outlays, from lifestyle expenses to legal and advisory services, according to these people.

There is no indication that any of the people who ultimately received payments were aware the funds could have originated from money Mr. Low allegedly siphoned off from 1MDB. The Justice Department is investigating Mr. Low’s potential use of two intermediaries to facilitate the payments through the international financial system, people familiar with the matter say. A Justice Department spokeswoman declined to comment.

Representatives for Mr. Low didn’t respond to a request for comment. He has previously denied wrongdoing.

The team of lawyers and consultants working for Mr. Low includes Mr. Christie, who briefly headed Mr. Trump’s presidential transition team; Mr. Trump’s longtime lawyer Marc Kasowitz ; Bobby Burchfield, a lawyer who has served as the Trump Organization’s outside ethics adviser; and Ed Rogers, a Washington lobbyist with close ties to the Republican Party.

Mr. Christie is representing Mr. Low in the asset-forfeiture cases in California, a spokesman for the former governor said. “There has been no communication by Governor Christie with any other area of government on Mr. Low’s behalf,” the spokesman said, adding there has been “no inquiry made to him by the Department of Justice with regard to any other investigation regarding funding or otherwise.”

A spokesman for Kasowitz Benson Torres, Mr. Kasowitz’s New York law firm, confirmed the firm represents Mr. Low in Justice Department matters. “Here, as with all of our clients, our job as attorneys is to represent and vindicate our clients’ interests; and here, as with all of our non-pro-bono clients, we are paid for the legal services we provide,” the spokesman said in a statement.

Mr. Burchfield said, in an emailed statement, that Mr. Low retained his Atlanta-based firm, King & Spalding, to “advise him on the ongoing investigations,” adding that the law firm “performed appropriate due diligence on sources of payment.”

“Further, neither I nor King & Spalding has had contacts with any governmental entity, directly or indirectly, on behalf of Mr. Low, nor has King & Spalding received any inquiries from the Department of Justice regarding this engagement,” Mr. Burchfield said.

Mr. Rogers declined to comment.

The Justice Department is looking into whether a Thai businessman, Phengphian Laogumnerd, and American former rap artist Pras Michel, a founding member of the Fugees hip-hop group, played roles in helping Mr. Low make payments, the people familiar with the matter said.

For at least a year, these people say, Mr. Low has relied on Mr. Phengphian to pay accommodation expenses in Hong Kong and Macau, legal and advisory bills and to keep Mr. Low’s $250-million yacht, Equanimity, fully staffed and maintained until it was seized earlier this month. Justice Department investigators are examining records and money flows related to a series of companies controlled by Mr. Phengphian in Hong Kong and in offshore havens such as the British Virgin Islands to determine whether Mr. Low’s money was involved, the people said.

The Thai businessman also handled payments of tens of millions of dollars to Mr. Low’s lead law firm and advisers, New York-based Kobre & Kim LLP, and British reputation law firm Schillings International LLP, according to the people familiar with the investigation.

“We do not comment on any specific financial arrangements with our clients due to the commercial confidentiality and privileged nature of such information,” said Robin Rathmell, who has identified himself as Mr. Low’s global counsel at Kobre & Kim. Partners at Schillings didn’t respond to a request for comment.

A representative for Mr. Phengphian said his client “is an independently wealthy businessman. The source of his income is nothing to do with—and he has not received any money from—Mr. Low.”

The representative added: “What he chooses to do with his own funds is his business alone. The Department of Justice has never contacted him about anything, neither have they ever asked him about the source of his funds.”

Mr. Michel was responsible for bringing on another consultant to work on Mr. Low’s behalf: Republican fundraiser and venture-capital executive Elliott Broidy, who was vice chairman of the Trump campaign’s joint fund with the Republican Party during the 2016 presidential campaign. The route of any payments to Mr. Broidy also are part of the Justice Department probe, the people said.

Mr. Broidy’s lawyer has previously said Mr. Broidy and his wife were hired by Mr. Michel “to provide strategic advice as part of a broader team to Mr. Low.”

A lawyer for Mr. Michel said: “I do not know what, if anything, the Department of Justice is currently reviewing, but I am confident that Mr. Michel has not done anything improper.”

The public-integrity section of the Justice Department is separately investigating some of the lobbying work on behalf of Mr. Low, including whether Mr. Broidy attempted to sell his influence in the Trump administration to Mr. Low, who in turn was allegedly acting as an agent of the Malaysian and Chinese governments, people familiar with the investigations said.

A lawyer for Mr. Broidy said: “Elliott Broidy has never agreed to work for, been retained by nor been compensated by any foreign government for any interaction with the United States Government, ever.”

Mr. Low has been seeking to influence the administration to drop its investigations into him and 1MDB, according to people familiar with Mr. Low’s dealings and the Justice Department investigations. The Justice Department investigations overlap and involve some of the same investigators, the people familiar with them said. The Washington Post first reported on the public-integrity investigation.

Dog Trainer Accused of Tax Fraud, Money Laundering

By Guillermo Contreras

Federal agents have arrested a principal operator of a canine-training operation after he was indicted Wednesday by a grand jury on charges related to fraud and money laundering.

Bradley Croft, 46, who has said he was a founder of Universal K9, was arrested moments ago the San Antonio Express-News confirmed. A reporter observed as a federal grand jury returned several indictments by 3 p.m. that included one against Croft.

Agents with the FBI, and the IRS’ Criminal Investigation division raided Universal K9 at 15329 Tradesman, near Loop 1604, which is billed as a nonprofit, on Aug. 8. Of 31 dogs found on the site, 26 were taken into custody by the city’s Animal Care Services.

Councilman Manny Pelaez, who represents the district that includes the site of Universal K9, said in an online post on Aug. 8 that “the IRS and the FBI just shut down an operation that was preying on veterans and not doing right by dogs. That’s a good thing worthy of mention and support.”

San Antonio Police Department officers assisted. The Express-News confirmed that the Department of Veterans Affairs also was involved in the investigation.

“Universal K9 specifically outreaches to veterans and offers a two-week K9 Handlers course or a ten-week trainers course in which any veteran may utilize his or her GI Bill to cover 100% of course costs, including the canine,” Universal K9 said in a lawsuit it filed recently against former students.

It costs $12,500 for a 10-month course, according to exhibits included in the lawsuit.

Universal K9 is also listed as a nonprofit foundation that donates dogs to police departments nationwide and has been featured on local and national media, including CBS News and the Express-News.

Croft is expected to make his initial court appearance on Thursday.

Feds freeze millions in assets linked to stolen Venezuelan oil funds laundered in South Florida

Federal prosecutors have frozen hundreds of millions of dollars in South Florida luxury real estate and other assets linked to a network of Venezuelan business people and former government officials charged with laundering more than $1 billion that U.S. authorities say was stolen from the country’s vast oil income.

Among the targeted assets are at least 17 South Florida homes, condos and horse ranches ranging in total value from $22 million to $35 million, based on property assessments in public records and real estate market estimates.

They include a condo in the Porsche Design Tower in Sunny Isles, a residence on Hibiscus Island overlooking Biscayne Bay, four homes in the exclusive Cocoplum neighborhood of Coral Gables, and two ranches in the wealthy equestrian community of Wellington in Palm Beach County.

Also facing federal forfeiture: More than $45 million that has already been seized by U.S. authorities in the past year, along with additional deposits at City National Bank of New Jersey and other financial institutions in the Bahamas, England and Switzerland.

This week, the U.S. Attorney’s Office filed a motion to freeze the assets of nine defendants recently charged with conspiring to commit money laundering by transferring funds from Venezuela’s state-owned oil company, PDVSA, to South Florida, the Caribbean, Europe and Central America for their personal enrichment. Some of the defendants are close to the nation’s president, Nicolás Maduro, who is also under investigation, the Miami Herald has learned.

Their assets — including the Porsche Design Tower condo owned by former PDVSA legal counsel Carmelo Urdaneta Aqui — are typically listed in other people’s names or corporate companies to disguise the defendants’ ownership interests, prosecutors say.

U.S. District Judge Kathleen Williams granted the prosecution’s motion, which prevents the defendants from selling their assets. The Feds can seize the properties only if they secure convictions through plea deals or at trial.

Only two of the nine defendants charged so far are in custody. Matthias Krull, a German national who resided in Panama and also worked as a private-wealth management banker in Switzerland, pleaded guilty on Wednesday in Miami federal court to conspiring to commit money laundering. Krull, 44, who was arrested last month at Miami International Airport and is being held at the Federal Detention Center, admitted in court that he was involved in at least $550 million worth of money-laundering activities.

Krull, represented by lawyer Oscar S. Rodriguez, is cooperating with Homeland Security Investigations and the U.S. Attorney’s Office, according to his plea agreement. By pleading guilty, Krull faces up to 10 years in prison instead of potentially twice that amount of time under an indictment charging the other eight defendants. Krull’s sentencing hearing is set for Oct. 29 before U.S. District Judge Cecilia Altonaga.

The only other defendant in custody is Miami-based investment broker Gustavo Adolfo Hernandez Frieri, 45, who was arrested last month in Italy and is facing extradition. Hernandez, 45, a Colombian-born naturalized U.S. citizen, is accused of using his Miami financial firm, Global Securities Advisors, and another firm, Global Strategic Investments, to launder money with false mutual-fund investments. A Homeland Security investigator says in a criminal affidavit that the two brokerage companies, which are listed as having offices at 701 Brickell Ave., are “affiliated” and were used by Hernandez for meetings with members of the money-laundering network.

Representatives of Global Strategic Investments insist Hernandez has had no involvement in the firm, which is headed by Hernandez’s brother, Cesar.

The remaining seven defendants, including two former PDVSA senior officials accused of pocketing bribes as part of the alleged massive money-laundering scheme, are in Venezuela or other foreign countries.

The Miami criminal case is the largest money-laundering racket — totaling at least $1.2 billion — ever alleged against former Venezuelan officials and business people, some of whom are close to Venezuelan President Maduro. Maduro himself is also under investigation, along with his three stepsons and a TV network mogul, Raúl Gorrín, who also owns a Cocoplum home that he recently put on the market for $8 million. But Maduro, the stepsons and Gorrín have not been charged in the ongoing investigation.

Even if Maduro, who became president after Hugo Chávez’s death in 2013, is ultimately charged, it’s unlikely he would be brought to the U.S. for prosecution. But the probe could add to the political challenges already facing the embattled president. Maduro has been the focus of months of protests over his country’s failing economy.

The president’s stepsons, Gorrín and others are suspected of receiving hundreds of millions of dollars in funds from Venezuela’s national oil company that were transferred to bank accounts set up in other people’s names in Europe.

On Wednesday, it was disclosed that about $200 million in the country’s oil funds was transferred overseas to the president’s stepsons in the name of Mario Enrique Bonilla Vallera, a Venezuelan businessman who U.S. authorities say was a “straw” owner of their bank accounts. Bonilla, who was added as a defendant to the new indictment, is also listed as the registered officer for three Florida businesses whose mailing addresses are linked to one of the four Cocoplum residences being seized by federal prosecutors, state records show.

Maduro, his stepsons and Gorrín, however, were not identified in the court hearing or in case records.

The alleged money-laundering conspiracy began in December 2014 with a currency-exchange scheme to embezzle $600 million from PDVSA obtained through bribes and fraud, the criminal affidavit says. The defendants used an associate, who would later become a confidential source for the feds, to launder a portion of the PDVSA funds. By May of 2015, the conspiracy had doubled to $1.2 billion embezzled from Venezuela’s national oil company.

In early 2016, the associate approached Homeland Security investigators in Miami about cooperating and becoming a confidential source, according to the affidavit. The source agreed to wear a recording device to launder $78 million in PDVSA funds that he had received from a loan contract with the national oil company.

The federal probe, called Operation Money Flight, was launched with the initial focus on the defendants’ efforts to launder a portion of the $78 million. That investigation uncovered the broader money laundering, according to the affidavit.

The eight defendants named in the complaint are accused of embezzling funds from Venezuela’s oil income and exploiting its foreign-currency exchange system to amass illegal fortunes in the United States and other countries. To leverage their profits, the defendants took advantage of their access to the Venezuelan government’s foreign-currency exchange system, which offers a far more favorable rate than the everyday market. The system was used to convert dollars and euros to bolivars and then back to dollars and euros as the defendants stole from the country’s oil riches for overseas investments in Florida, Europe and other parts of the world.

A factual statement filed with Krull’s plea agreement Wednesday jibes with the initial criminal affidavit that was unsealed upon his arrest last month. The court records put Krull in the middle of the money-laundering racket as the go-to banker for the Venezuelans and others. Some met with Krull at the banker’s Panama office as well as at Gorrín’s office in Caracas and condo on Fisher Island in Miami.

While Maduro is not mentioned by name in any court records, there are references to him as “Venezuelan Official 2” and to his stepsons, according to multiple sources familiar with the probe. His stepsons — Yosser Gavidia Flores, Walter Gavidia Flores and Yoswal Gavidia Flores — though also unnamed are described by the sources as receiving an estimated $200 million in funds stolen from the nation’s national oil company, Petroleos de Venezuela, S.A., or PDVSA, that were wired to a European bank in late 2014 and early 2015.

The deposits for his three stepsons — the grown children of Maduro’s wife, Cilia Flores, from previous relationships — were among 10 wire transfers totaling about $600 million, according to the affidavit by Homeland Security Investigations. Flores is not mentioned by name in any court records either.

The affidavit says the wire transfers were made from PDVSA, with about $265 million going to accounts linked to the complaint’s lead defendant, Francisco Convit Guruceaga, a Venezuelan billionaire businessman. He and other members of the wealthy class are often referred to as the “boliburgués,” an elite politically connected group in Venezuela. An unnamed conspirator also received some of the money, according to the affidavit filed by Assistant U.S. Attorney Francisco Maderal.

Roughly $200 million went to the grown stepsons of Venezuelan Official 2. Sources say that Venezuelan Official 2 is Maduro.

Court documents say another $80 million went to “Conspirator 7.” Sources familiar with the affidavit told the Herald that Conspirator 7 is Gorrín, owner of the Globovision television network in Venezuela. Gorrín, who has close ties to Maduro and the late president Chávez, has been sharply criticized for turning a pro-opposition news network into one more friendly to the president.

In late 2017, Gorrín tried to broker an exit strategy with the Trump administration for Venezuela’s beleaguered government, according to various Washington sources, by peddling the idea that Maduro and other key government leaders might be willing to negotiate a transition in Venezuela in exchange for amnesty. He also retained Ballard Partners — the firm of President Donald Trump’s former Florida lobbyist — ostensibly to help his Venezuelan TV network company expand into U.S. markets.

Gorrín’s lawyer in Miami, Howard Srebnick, denied any wrongdoing by his client.