1. E XTRATERRITORIAL A PPLICATION OF U.S. L AW - S ECTION 319 OF THE U.S.A. P ATRIOT A CT Alcides I. Avila Holland & Knight LLP FIBA/CSBS ANTI MONEY LAUNDERING CONFERENCE February 9, 10 & 11, 2005

2. WHAT IS A FORFEITURE? A Forfeiture is: – the taking of property located in the US – by the US government for itself or for a foreign government – without compensation – when the property is connected with some illegal activity

3. WHAT PROPERTY CAN BE FORFEITED? PROCEEDS: ► Property acquired by unlawful activity example: cash from a drug sale ► Property traced to property acquired by unlawful activity example: home bought with the cash

4. BASES OF A FORFEITURE (1) UNDERLYING CRIMINAL ACTIVITY (2) A FEDERAL FORFEITURE STATUTE that authorizes forfeiture for that criminal activity Most commonly 21 USC 853, 881 (Drug Forfeiture Statutes) 18 USC 981, 982 (Money Laundering Forfeiture Statutes)

5. BASES OF A FORFEITURE Broadest of these is Anti-Money Laundering Forfeiture Statutes: ► includes violation of virtually every U.S. federal criminal law ► includes violations of many foreign criminal laws » drug laws » murder, kidnapping, robbery, extortion, terrorism » fraud by or against foreign bank » public corruption

6. BASES OF A FORFEITURE Generally, there must be a connection between the property and the federal crime » a vehicle transporting counterfeit currency » real property in which a federal felony drug offense occurs » money exchanged for drugs » property bought or investments made with money from drugs ► MAJOR EXCEPTION: USA PATRIOT ACT §319

7. Extraterritorial Powers U.S.A. Patriot Act provides significant extraterritorial powers –Subpoenas –Freeze Orders and forfeitures Substantial legal and practical issues –Conflicts with laws of other jurisdictions –Validity of service –Operational issues for U.S. financial institutions

8. Forfeitures The Patriot Act provides U.S. courts with long- arm-jurisdiction over foreign money launderers U.S. courts may issue pretrial restraining orders to ensure that any bank account or other property of a defendant located in the United States is available to satisfy a judgment

9. Section 319 of U.S.A. Patriot Act Provides U.S. government with extraordinary tool to reach funds deposited in foreign banks Foreign banks that maintain interbank accounts with U.S. financial institutions have significant exposure Applies to civil forfeiture actions

10. Interbank Accounts For purposes of a forfeiture, if funds are deposited into an account at a foreign bank, and that foreign bank has an interbank account in the United States with a Covered Financial Institution, the funds shall be deemed to have been deposited in the interbank account and may be seized.

11. Need to Trace Funds In the case of a forfeiture action, it is not necessary for the U.S. government to establish that the funds are directly traceable to the funds that were deposited into the foreign bank.

12. “Owner of Funds” Only the “owner” of the funds seized may contest the action Neither the U.S. financial institution nor the foreign bank are deemed “owners” of the funds, unless –involved in wrong doing that led to forfeiture –Foreign bank establishes that it had paid funds prior to forfeiture

13. Consequences to Foreign Bank Risk of loss with no standing to contest forfeiture in court The Attorney General, in consultation with the Secretary of the Treasury, may suspend or terminate a forfeiture action –Determines conflict of law exists –In the national interest of the U.S.

14. Safeguards Against Forfeiture Actions Know Your Customer Revise Account Documentation Close Interbank Accounts

15. Subpoenas Relating to Correspondent Accounts The U.S. Attorney General and the Secretary of the Treasury are authorized to issue a summons or subpoena to any foreign bank that has a Correspondent Account in the U.S. For records relating to its Correspondent Account, “including records maintained outside of the United States relating to the deposit of funds into the foreign bank.”