FinCEN has reported the following criminal cases have been solved in part by the use of SARs. The cases are reported here as a means of highlighting the type of case that involves reliance on financial institutions' filing SARs.

· Proactive Bank Secrecy Act Search Leads to Arrest in Ponzi Scheme: In 2005, a financial investigator discovered a SAR filed two weeks earlier that referenced an investment group and a potential Ponzi scheme. The investigator contacted the bank and received supporting material related to the SAR. Because of the suspicious activity, the bank was preparing to close the account.

The district attorney's office quickly launched an investigation. In total, there were four separate SARs that financial institutions submitted on the defendant documenting actions that had the appearance of a Ponzi scheme. In addition, there were several currency transaction reports (CTRs) related to the defendant that recorded additional transactions that were part of the scheme.

The defendant had promised investors outlandish interest rates, up to 100 percent annually. He deceived customers by lying to them about his investment experience, the legality of the business, and the way that a customer's money would be invested. The defendant told investors, among other things, that he was a highly experienced investor, when in reality the defendant had no investment experience whatsoever.

Although the dollar amount of the suspected criminal violations was somewhat lower than most of their cases, the nature of the possible crime hastened their action. Investigators believed that if they did not act immediately, the perpetrator might defraud more victims. The district attorney executed a search warrant and arrested the individual listed on the SAR.

A grand jury convened and handed down 18 felony counts, including multiple counts of fraud, larceny and money laundering. The defendant pleaded guilty to the charges. The subject will serve a minimum of two to seven and a half years in prison, although the final sentence will be determined based upon the amount of restitution provided.

· Currency Transaction Reports Expose Drug Traffickers Laundering Profits Through Casinos: Nine members of a drug trafficking organization were exposed and convicted largely through evidence collected from CTRs. The defendant was known as the "money-man" of the drug trafficking organization because he was responsible for laundering the organization's illegal proceeds from drug sales. The defendant was a known, though modest, gambler until hired by the drug trafficking organization to launder its profits. Both the money the organization paid the defendant for these services and the large sums of money put into the defendant's possession to be laundered allowed the defendant to trade a low-budget gambling style for that of a high roller.

The defendant would recruit third parties at a casino to purchase or cash in chips for the defendant, paying these recruits a nominal fee for doing so. Presumably unbeknownst to the recruits, the chips were purchased with illegal drug profits. After spending some time gambling, the defendant would cash out some of the chips, claiming they were gambling winnings, and thereby fabricating a source for the group's revenue other than drug trafficking, thus successfully "laundering" the money.

Every time the defendant cashed-out chips in an amount over $10,000, the transactions were recorded on a CTR by the casino. According to the reports, the total value of chips redeemed was approximately four times the total amount of chips purchased. When the dollar amount of the chips was compared to the recorded winnings in the pit area, the numbers did not correspond.

The reports also provided other evidence supporting money laundering by the defendant and associated group. Twenty-four of the CTRs recording the defendant's transactions revealed the use of aliases and multiple Social Security numbers. On numerous other CTRs, the defendant refused to provide a Social Security number altogether.

The defendant may not have been entirely aware of the currency transaction reporting requirements in casinos. The defendant was apparently aware, however, of the currency transaction reporting requirements of banks. In addition to money laundering, the defendant was charged with structuring transactions to avoid reporting requirements. Criminals trying to hide illegal proceeds will often make a series of deposits just under the $10,000 reporting threshold (referred to as structuring) in order to avoid having a CTR filled out recording the transaction.

In the face of the evidence against them, eight of the nine defendants in this case pleaded guilty to a 68 count superseding indictment charging distribution of marijuana, money laundering and structuring transactions to avoid reporting requirements. Criminal forfeitures in the case included millions of dollars, multiple properties, automobiles and bank accounts. CTRs were invaluable to the success of this investigation.

· Bank Secrecy Act Records Found in Real Estate Fraud Case Lead to Separate $1.5 Million Embezzlement Scheme: A state law enforcement agency opened an investigation against an individual for fraudulent activity related to real estate sales in Mexico. In the course of the investigation, an agent requested records filed under the BSA. Several BSA records related to the individual indicated financial activity often associated with money laundering. In fact, these records documented activity related to an embezzlement scheme at a large technology company. At the time, the alleged crime was undetected by the company or by any law enforcement authority.

The original scheme consisted of the sale of real estate in Mexico. The defendant misrepresented the value of the real estate to buyers and sellers. Many of the buyers were Americans and Canadians with no real knowledge of the true value of real estate in Mexico. The defendant would sell the properties for amounts higher than the actual sales price disclosed to the property owner/seller, keeping relevant information from the investors, and make other misrepresentations regarding the transactions. The defendant would then pocket the excess proceeds from the sales of the real estate.

To support the case, investigators contacted the state prosecutor's office for access to BSA records on the defendant, businesses controlled by the defendant, and associates of the defendant. The state prosecutor's office opened a case and found seven SARs related to the defendant and numerous CTRs. A closer examination of the SARs revealed that these records detailed an extraordinary number of checks cashed just under the $10,000 reporting threshold.

Further investigation revealed that much of the activity took place in accounts related to a technology firm owned by the defendant. Specifically, activity occurred in accounts that regularly had deposits of checks originating from an international technology company. Investigators determined that these checks were payments for services provided by the defendant.

In fact, the defendant was working with a coconspirator who was an employee of the technology company and who created phony invoices for services that were never performed. The defendant initially split the proceeds with the coconspirator using checks as payment. However, recovered e-mails documented that the pair reverted to cash payments to avoid suspicion and to make transactions easier. The company was unaware of the embezzlement until notified by investigators.

Early last year, the defendant was found guilty of real estate fraud and ordered to pay restitution. The defendant is under investigation for hiding assets to prevent payment of restitution. Indictments are pending in the original embezzlement scheme.

- David Legault