Michael Cohen Suspicious Activity Report(SAR) Implications

SARs are now part of the common parlance as the public digests daily developments in all things related to the Russia investigation. It was the WSJ that first referenced a SAR filed by First Republic Bank with regard to Michael Cohen, in relation to his work in processing hush money to Stormy Daniels, for her silence with regard to her purported romantic dalliance with Donald Trump back in 2006. It is fair to say that not many were aware of the existence of SARs, and the importance they play in financial investigations conducted by Federal law enforcement, nor the US Treasury agency FinCEN, that maintains SARs in a massive database. But as Yogi Berra once said, “you can observe a lot by just watching.”

Recent media reports have now disclosed the existence of the filing of five separate Suspicious Activity Reports by financial institutions with regard to Michael Cohen. Cable television has delved into reports of large payments to Cohen from corporate interests that are suggestive of access to the President being solicited and sold by the President’s personal attorney. Substantial payments have been revealed by the SARs, as being derived from overseas interests, and landing in Cohen’s First Republic accounts for his Delaware shell company, Essential Consultants LLC. Included in these overseas payments are multiple transfers from Columbus Nova accounts in Switzerland to Cohen during 2017 totaling approximately $500,000. Columbus Nova is a domestic company related to the Renova Group which is controlled by Russian oligarch Viktor Vekselberg, who is described by Ronan Farrow, as a “long time ally of Russian President Vladimir Putin.” A key sentence from a First Republic SAR pertaining to Cohen, notes that “a significant portion of the deposits continues to be derived from foreign entities.”

SARs are extremely valued by law enforcement for investigative leads, in the face of budget cuts that have severely limited the staffing of such powerhouse financial investigative agencies as the FBI and IRS. Financial institutions are mandated by the Bank Secrecy Act to file SARs when they uncover transactions that are suspected of involving funds derived from illegal activity, or are conducted to hide or disguise funds or assets derived from illegal activity, or involves Structuring, or other means to evade the requirements of the Bank Secrecy Act. And finally, and perhaps most significantly in the instant case, SARs are required when transactions are detected that have no business or other apparent lawful purpose, or is not the sort of transaction in which the particular customer would be expected to engage.

This last reference is part and parcel of each financial institution’s Anti-Money Laundering(AML) program known as Know Your Customer or KYC. Financial institutions are compelled to be a source of information for law enforcement with regard to suspicious financial transactions due to the Bank Secrecy Act. Following the money for Law Enforcement is clearly facilitated by the filing of SARs. Many significant enforcement successes have been triggered by SARs, including the successful prosecutions of Elliott Spitzer and Denis Hastert. Paul Manafort, ex Campaign chair for President Trump, has been indicted on numerous charges of Money Laundering, Tax Evasion and violations of the Bank Secrecy Act. It has been reported that over twenty SARs were filed on Manafort by various financial institutions which no doubt provided law enforcement with welcome leads in tracking Manafort’s illicit international financial transactions. It remains to be seen whether the five SARs filed on Michael Cohen will ignite any prospective indictment on possible financial charges e.g. Tax Evasion or Conspiracy to Defraud a Government agency e.g. FEC or IRS, but chances are, the SARs could not have hurt the Government’s investigation.

Three financial institutions are reported to have filed SARs that may impact Michael Cohen and possibly others: First Republic, Morgan Stanley, and City National Bank located in Los Angeles. While these institutions were no doubt happy to be of assistance to the FBI, it is more likely that the main motivating force in filing the referenced SARs, is the need to comply with the AML provisions of the Bank Secrecy Act. One can reasonably ask the question, what would have happened to the above financial entities if they had not filed the SARs on Cohen’s suspicious financial activity? After all, implementing an efficacious AML as part of a Bank’s overall compliance program is not cheap, and does not provide any return on the costs invested. And there are costs.

But as Yogi Berra may have put it — there are costs and there are costs! Consider the fines any of the above financial institutions would have risked if they did not implement an effective AML program that kicked out the above noted SARs. Consider the fact that any financial institution could be criminally investigated and possibly prosecuted, if not in compliance with the Bank Secrecy Act.

Consider Deutsche Bank!

On January 30, 2017, just a week after Donald Trump was inaugurated as President, New York State Department of Financial Services(DFS) announced that Deutsche Bank and its NY branch were to pay a $425M fine for violation of New York State’s AML, with regard to Deutsche’s involvement in the $10Bn Russian Mirror Trading money laundering activity, conducted through Deutsche’s Moscow, London and New York offices, as well as various offshore locations. Simultaneously, UK’s FCA announced fines of $204M in civil penalties against Deutsche Bank, representing the largest financial penalty ever asserted by FCA for failings of AML controls. The FCA announcement noted that Deutsche had failed to have proper controls to stop customers transferring Billions from Russia to offshore accounts “in a manner that is highly suggestive of financial crime.”

Congresswoman Maxine Waters has publicly noted that DOJ opened up a criminal investigation of the Russian Mirror Trade activity in the USAO-SDNY some time ago. She has written multiple letters requesting a status report on this stalled investigation without obtaining a reply. CNN noted last December that the Money Laundering section of DOJ had joined the investigation. It is noted that Josef Ackerman was the head honcho of Deutsche Bank during the period of time of much of the Mirror trading activity. It is also noted that after departing Deutsche, Josef Ackerman was brought onto the Board of Directors of the Viktor Vekselberg directed Renova Management Group’s RMAG, located in Switzerland, in February 2014, with the direction to supervise RMAG’s international investment. Additionally, Ackerman was subsequently brought on by Wilbur Ross to direct the Bank of Cyprus(BOC), a bank notorious for Russian money laundering, in November 2014. Viktor Vekselberg was one of the largest shareholders of BOC, and ex KGB agent Vladimir Stryzhalkovsky, was a Vice Chairman of BOC at the time Ackerman came on.

So can we presume that the suspicious payments received by Cohen from the Vekselberg associated company just happened to be coincidental with the dormancy of the criminal investigation by USAO-SDNY into Deutsche Bank’s Russian money laundering activities during Donald Trump’s first year of presidency?

President Trump might answer that question with a — We will see, which won’t be satisfactory to Congresswoman Waters and many others. But you just have to know that Yogi would say — It ain’t over til its over!

Martin J. Sheil

Retired Supervisory Special Agent IRS Criminal Investigation

Encrypted Proton email address — martinsheil@protonmail.com

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Martin Sheil

Retired Special Agent IRS Criminal Investigation; Federal Contractor Deloitte & DOJ OCDETF; Letters of Commendation from Directors FBI Louis Freeh & Comey