NEW YORK, NY (January 20, 2025) – In a significant development underscoring the importance of robust anti-money laundering (AML) compliance, Dubai-based money exchange service provider, Wall Street Exchange (WSE), has entered into a non-prosecution agreement (NPA) with U.S. authorities, agreeing to pay over $9 million to settle a bank fraud investigation. The case, announced today by John J. Durham, United States Attorney for the Eastern District of New York, and Harry T. Chavis, Jr., Special Agent in Charge of the Internal Revenue Service-Criminal Investigation (IRS-CI) New York Field Office, highlights the far-reaching consequences of inadequate AML controls and the critical need for transparency in dealings with U.S. financial institutions.
The NPA, finalized on January 19, 2025, with the U.S. Attorney’s Office for the Eastern District of New York and the Department of Justice’s Money Laundering and Asset Recovery Section (MLARS), resolves allegations that WSE made false statements to a U.S. bank regarding the AML compliance of its operations and its UK-based subsidiary, Wall Street Forex London Limited (Forex). The agreement mandates WSE to pay a criminal monetary fine of $3,920,000 and forfeiture amounting to $5,326,648. Furthermore, WSE is required to cooperate fully with U.S. authorities for the duration of the agreement.
A Wake-Up Call for Global Financial Institutions: U.S. Attorney Durham Emphasizes Accountability
“With this agreement, WSE admits that it is responsible under U.S. law for the past acts of its former officers, directors, employees, and agents, which constitute a violation of law, specifically bank fraud, and has implemented a program to detect and prevent money laundering violations,” stated U.S. Attorney Durham. “My Office is committed to holding foreign actors accountable for abusing our financial system and ensures that we protect the integrity of U.S. banks.”
The case received substantial assistance from the Drug Enforcement Administration (DEA), New York Division, highlighting the collaborative efforts of U.S. agencies in combating financial crimes.
IRS-CI: AML Compliance is Crucial to Protecting the Integrity of U.S. Financial System “WSE’s failure to inform the US bank of an open investigation in the UK left the bank vulnerable to regulatory scrutiny. Anti-money laundering compliance is not only necessary to protect the sovereignty of our financial institutions but also that of our nation,” declared IRS-CI New York Special Agent in Charge Chavis. “IRS-CI worked closely with our federal partners to ensure that there is accountability in this case, and now WSE will pay the US government more than $9 million in fines and forfeiture.”
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The Intricate Web: WSE, Forex, and a History of AML Lapses
WSE, headquartered in Dubai, UAE, is a prominent money exchange service provider. Its subsidiary, Forex, was incorporated in the UK in 1992. Before 2018, several of WSE’s senior executives, referred to collectively as WSE Executives, were deeply involved in managing Forex. Notably, two of these executives, Officer 1 and Officer 2, simultaneously held positions at WSE and served as directors of Forex.
Between 2009 and 2018, WSE maintained a U.S. dollar correspondent bank account with Bank A in New York, enabling it to conduct dollar-denominated transactions and access the U.S. financial system. Forex held a similar trading account with Bank A in London between 2012 and 2017.
Forex’s Troubled Past: Facilitating Suspicious Activities and Ignoring Red Flags
Prior to 2016, Forex’s business activities included facilitating international dollar-denominated wire transfers for money service businesses (MSBs) that lacked the capability to conduct such transfers independently. Forex was obligated to register with UK financial authorities, including His Majesty’s Revenue and Customs (HMRC) and the UK Financial Conduct Authority (FCA). It was also required to adhere to UK money laundering regulations, including establishing internal controls to prevent clients from using its services for illicit activities.
However, evidence revealed that Forex, through its external compliance consultant and its own employees, was aware that its MSB clients were using its platform for suspicious money laundering activities. Forex’s external consultant flagged numerous instances of clients providing false information. Even internal concerns raised by Forex employees about the inadequacy of its internal controls and the potential facilitation of money laundering were brought to the attention of the WSE Executives.
The Downfall: HMRC Revokes “Fit and Proper” Status, Forex Shuts Down UK Operations
The year 2016 marked a turning point for Forex. HMRC, after a thorough investigation, revoked the “fit and proper” status of all Forex directors, including Officer 1 and Officer 2. HMRC’s investigation revealed that Forex had repeatedly engaged in non-compliant financial activities, persistently failed to comply with key money laundering regulations, and lacked adequate internal controls to detect money laundering. Consequently, HMRC canceled Forex’s registration, effectively barring it from operating in the UK. Forex subsequently ceased its UK operations in 2016.
Bank Fraud: Concealing the Truth from Bank A and Maintaining a Facade
Despite the serious regulatory actions taken against Forex, both Forex and WSE failed to disclose the negative findings regarding Forex’s AML compliance, the HMRC investigation, and the real reason behind Forex’s closure to Bank A. Instead, between 2015 and 2018, Forex and WSE engaged in a pattern of misrepresentation, consistently omitting that Forex itself was the subject of both internal and UK authority investigations, including in WSE’s and Forex’s audited financial statements for 2015.
During Bank A’s due diligence reviews of WSE in 2015 and 2016, WSE repeatedly answered “No” when asked about any issues identified in internal or external audits. Shockingly, in 2016, when Bank A inquired about any regulatory actions concerning AML issues, WSE again responded “No,” despite HMRC’s revocation of Forex directors’ “fit and proper” status for AML violations just weeks earlier. WSE continued this pattern of misrepresentation in 2017.
Furthermore, between 2016 and 2018, WSE falsely claimed to Bank A that Forex’s withdrawal from the UK and surrender of its license was a voluntary “business decision,” rather than a consequence of HMRC’s regulatory action.
The Consequences: Bank A Terminates Relationship, WSE Faces U.S. Scrutiny
WSE’s deceitful actions, carried out by its former officers and directors, allowed it to maintain its banking relationship with Bank A until September 2018, when Bank A finally terminated its relationship with WSE globally.
The Non-Prosecution Agreement: A Path to Resolution and a Lesson Learned
The Department of Justice’s decision to enter into an NPA with WSE was influenced by several factors:
- Nature and Seriousness of the Offense: The events largely pertained to a defunct affiliate, occurred under former management, and WSE has not held U.S. bank accounts since 2018.
- Remedial Measures: WSE has taken steps to enhance its compliance program.
- Lack of U.S. Criminal History: WSE has no prior criminal record in the United States.
- Cooperation: WSE cooperated with the investigation, providing valuable information.
The Prosecution Team: A Collaborative Effort to Uphold Bank Integrity
The case was handled by the Business and Securities Fraud Section and MLARS of the U.S. Attorney’s Office for the Eastern District of New York, in coordination with the Office’s Bank Integrity Task Force. Assistant U.S. Attorney Hiral D. Mehta, former Assistant U.S. Attorneys Genny Ngai and Brian Morris of the Eastern District of New York, and Trial Attorneys Elizabeth Carr and Michael P. Grady of MLARS’ Bank Integrity Unit led the prosecution, with assistance from MLARS Paralegal Specialist Nicholas Aholt. The Justice Department’s Office of International Affairs also provided significant support.
Implications and Key Takeaways: A Global Call for AML Vigilance
This case serves as a stark reminder of the serious consequences of AML compliance failures and the importance of transparency in international financial dealings. The $9 million settlement and the NPA send a clear message that the U.S. will aggressively pursue entities that abuse its financial system, regardless of their location.
Key takeaways for financial institutions worldwide include:
- Robust AML Compliance is Non-Negotiable: Financial institutions must implement and maintain comprehensive AML programs that include thorough due diligence, ongoing monitoring, and robust internal controls.
- Transparency is Paramount: Honest and complete disclosure of information to U.S. banks is crucial. Concealing negative findings or regulatory actions can lead to severe consequences.
- Corporate Accountability: Companies are responsible for the actions of their officers, directors, and employees, even if those actions occurred under previous management.
- Global Cooperation is Essential: Combating financial crime requires international collaboration and information sharing.
- Know Your Customer (KYC) and Know Your Business (KYB) are critical: It is extremely important to understand who you are doing business with.
The WSE case is a cautionary tale for the global financial industry. It underscores the U.S. government’s unwavering commitment to protecting the integrity of its financial system and holding accountable those who seek to exploit it. As financial transactions become increasingly complex and interconnected, the need for robust AML compliance and transparent business practices has never been greater.
