Remarks of

Lanny A. Breuer
Assistant Attorney General
Criminal Division
United States Department of Justice

22nd ABA/ABA Money

Laundering Enforcement Conference

October 19, 2010

Washington D.C.

I. Introduction

Thank you for that kind introduction, Rob. It’s a pleasure for me to be here today. I want
to thank the American Bankers’ Association and the American Bar Association for this
opportunity to speak with you.

Over the last quarter century, asset forfeiture and money laundering prosecutions have
become integral to our country’s law enforcement strategy. Whether it takes the form of drug
trafficking, fraud, or corruption, crime is – very bluntly – a business. And like any business, it
requires capital. When we forfeit the proceeds of crime and vigorously prosecute violations of
our money laundering laws, we take the profit out of crime and deny criminal organizations the
resources they need to survive.

But because crime is a business – and because criminals must constantly hide, move, and
access their money – they will always look for, and seek to exploit, vulnerabilities in our
financial system or weaknesses in a bank’s compliance structure. Thankfully, most bankers are
committed to keeping dirty money out of their institutions. They know it is bad for business; bad
for their reputations; and bad for the integrity of our banking system. Frankly, they know it is
just plain wrong. That commitment to protecting our banks is the very reason that so many of
you are gathered here for this important conference and I applaud you. Yet, this view is not
shared by all. Indeed, the Justice Department has recently prosecuted several cases where
compliance was simply ignored and short-term profits were put ahead of doing what was right.

We have learned much from these prosecutions. When compliance officers don’t do their
jobs effectively, our first line of defense is breached. When financial institutions are ambivalent
about fostering a culture of compliance – or when they fail to devote the necessary resources to
their Bank Secrecy Act and anti-money laundering programs – criminals are able to inject dirty
money into our banks and, worse, use that money to advance their illegal activity.

For these reasons, all of you play a critical role in our efforts. Money laundering schemes
succeed, and criminal enterprises thrive, only when law enforcement is not in a position to detect
the dirty money moving surreptitiously through our banks. But you can be our eyes and ears.

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 Today, I would like to speak with you about how the Justice Department is aggressively
deploying its resources to prosecute those who threaten the integrity of our financial system.
And, I want to describe how you can be our partner in that fight.

II. Reinvigorated Criminal Enforcement

Ten years ago, there were no criminal enforcement actions, or even serious regulatory
penalties, for the failure of banks to file Suspicious Activity Reports or comply with the Bank
Secrecy Act. Indeed, the first civil penalty against a bank for failing to file SARs was imposed
only in September of 2002.

Happily, things have changed. Since that first civil penalty in 2002, the Justice
Department has undertaken a series of investigations of financial institutions, resulting either in
the criminal conviction or deferred prosecution of at least 15 different banks – among them
Lloyds, Credit Suisse, Wachovia, and Barclays. Moreover, in the last three years alone, our
prosecutions of banks have resulted in forfeitures of nearly $1.5 billion dollars.

In bringing these enforcement actions, we have not just focused on large banks. Indeed,
the banks have run the full gamut – from Pamrapo Savings Bank, a small community bank in
New Jersey that pleaded guilty earlier this year to conspiring to violate the Bank Secrecy Act, to
banking giant Wachovia, which admitted in March in a deferred prosecution agreement to failing
to establish an anti-money laundering program.

In both of these cases – to put it very plainly – the institutions abdicated their roles as
responsible gatekeepers to the American banking system. Pamrapo, for example, admitted to
failing to file CTRs and SARs related to approximately $35 million in illegal and suspicious
transactions, including more than $5 million in structured currency transactions. Wachovia
admitted to allowing at least $110 million of drug proceeds to flow unimpeded through its
accounts. As seen in just these two cases, the amount of dirty money that can move through a
single bank can be staggering.

It is not surprising, then, that the use by criminals of our banking system to launder
money poses a significant criminal threat. All you have to do is look at the cartel-driven
bloodshed in Mexico, the damage that organized crime syndicates can inflict on our
communities, and the millions of dollars that Americans lose each year to fraud, to see why the
Justice Department is so committed to prosecuting and punishing money launderers.

Money laundering, moreover, is not the only concern we as law enforcement have when
we talk about protecting the integrity of our banks. Indeed, we have been equally vigilant about
going after those banks that have, for their own profit, purposefully violated U.S. sanctions
against certain countries – sanctions that are meant not only to protect our banks, but also to
affirmatively block specific countries from using our financial institutions. Last year, for
example, Credit Suisse admitted to systematically evading – over the course of a decade – U.S.
sanctions against Iran, Sudan, Burma, Libya, and Cuba. Credit Suisse set up a system – some
might even call it a business plan – to deceive the United States by disguising its U.S. dollar
clearing on behalf of countries that the United States had banned from our financial system. The

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bank’s actions ranged from stripping out the word “Iran” from payment messages, to substituting
code words for Iranian customer names, to hand-checking payment messages from Iran to ensure
that they had been formatted to avoid U.S. sanctions filters. Credit Suisse even advised and
trained the sanctioned entities on how to avoid automated filters at U.S. banks. In essence,
evading our banking regulations was a service offered by Credit Suisse to sanctioned countries.
As a result, Credit Suisse illegally moved hundreds of millions of dollars through the American
financial system. As part of a deferred prosecution agreement with the Justice Department
relating to this conduct, Credit Suisse forfeited $536 million dollars to the government.

In each of the cases I just described, the bank’s compliance processes fell far short. Now,
I am very aware that at many banks, Bank Secrecy Act and anti-money laundering
responsibilities are considered a cost-center. Setting up an effective compliance program to
detect and report suspicious activity means accruing significant expenses for technology,
personnel, and training – all without the promise of any short-term profits. But if there is one
message I want to leave you with today, it is that financial institutions simply cannot cut corners
on compliance: having a compliance program that works is worth it. Indeed, as our recent
prosecutions show, failing to adopt and maintain a real compliance structure will have serious
consequences. Frankly, not having a robust compliance program makes absolutely no business
sense.

III. Our New Initiatives

Now, more than ever, the American public wants, and deserves, trust and transparency
from the financial industry. The public wants to see profits, of course, but not at the expense of
the security of our banks. To that end, I want to talk with you today about two new initiatives
that I believe will significantly enhance the Justice Department’s enforcement efforts. Two
initiatives that I am proud of.

First is the creation of the Money Laundering and Bank Integrity Unit within the
Criminal Division’s Asset Forfeiture and Money Laundering Section. The creation of this Unit
is a testament to, and builds upon, our recent enforcement successes. The new Unit will be
devoted to investigating complex, national and international criminal cases, and will focus on
three specific types of violators: first, financial institutions, including their officers, managers,
and employees, when their actions violate the law; second, professional money launderers who
sell their services to criminal organizations; and third, those engaged in using the latest and most
sophisticated money laundering techniques, such as virtual currency and mobile payment
systems. By standing up this new Unit, we are committing significant resources, and expertise,
to prosecuting those who funnel crime proceeds through our banks. Moreover, we are seeking to
staff the Unit with sophisticated, talented and aggressive lawyers – prosecutors and lawyers from
the banking industry – those who know the complicated mechanisms by which money moves
through the global financial system, and those who understand how organized criminal networks
work.

Our second new initiative is the Kleptocracy Asset Recovery Initiative, which will target
and recover the proceeds of foreign official corruption that have been laundered into or through
the United States. In November of last year, at the Global Forum on Fighting Corruption and

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Safeguarding Integrity, in Qatar, Attorney General Holder pledged to redouble the U.S.
commitment to recovering foreign corruption proceeds. This Initiative represents a concrete step
toward fulfilling that commitment. The Kleptocracy Initiative will involve three key sections in
the Criminal Division: the Asset Forfeiture and Money Laundering Section, which will lead it,
and the Office of International Affairs and the Fraud Section, which will provide critical support.
Once fully implemented, this Initiative will allow the Department to recover assets on behalf of
countries victimized by high-level corruption, building on the Justice Department’s already
robust enforcement of the Foreign Corrupt Practices Act. Through the Kleptocracy Initiative, the
Department will ensure that corrupt leaders cannot seek safe haven in the United States for their
stolen wealth. And, if we uncover such wealth, the Justice Department will forfeit and return
this stolen money to its rightful owners – the people and governments from whom it was taken.

IV. Enhanced Enforcement Against Individuals

In addition to these new initiatives, and in conjunction with our already vigorous
enforcement efforts against financial institutions themselves, individual wrongdoers must be
prosecuted and sent to jail when they play a role in the illegal conduct of the banks for which
they work. Naturally, no company can act criminally without some action by individuals. And
we are acutely aware that we cannot allow companies to be seen as “taking the fall” for
executives who may have violated the law. Yet, we are also cognizant of the challenges in
proving the criminal liability of any single person where the real problem in a particular financial
institution may be a systemic failure to build a true compliance program. It is not surprising,
then, that the decision whether to prosecute an individual, an entity, or both, is one we have to
make very carefully.

As our recent record shows, we are not reluctant to bring criminal charges against
executives when they put at risk the stability of their financial institutions. This past June, for
example, the Justice Department obtained an indictment against Lee Bentley Farkas, the former
chairman of Taylor, Bean & Whitaker Mortgage Corporation. TBW, as it is called, was once
one of the largest private mortgage companies in the United States. Mr. Farkas was charged with
perpetrating a massive fraud scheme that resulted in losses exceeding $1.9 billion and that
contributed to the failure not just of TBW, but also of Colonial Bank, one of the 50 largest banks
in the United States before its collapse in 2009.

Similarly, this past July, in a prosecution brought by the U.S. Attorney’s Office in
Atlanta, two vice presidents of Integrity Bank, a $1 billion financial institution, pleaded guilty to
various crimes. The bank’s former vice president in charge of risk management, Joseph Foster,
pleaded guilty to insider trading of Integrity stock. He admitted to knowing that the bank faced a
growing risk that a debtor would default on $80 million in outstanding loans, and sold his stock
anyway. In the same case, Integrity’s former executive vice president in charge of lending,
Douglas Ballard, admitted to conspiring with a major bank customer to provide bogus loans in
exchange for cash bribes.

The Integrity and Colonial Bank investigations are just a couple of examples of the
Department’s commitment to prosecuting individuals who cheat, deceive, and defraud.

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Although not every investigation of a financial institution will result in the indictment of
individual executives, we will not let individuals escape from punishment when they
intentionally violate the laws that are meant to protect our financial system.

V. The Benefits of Cooperation

Before I end, let me discuss with you one additional, and important, issue: the critical
decision that all of you face about how and whether to cooperate with the government when the
institutions for which you work are faced with evidence of illegal conduct.

I have said many times before, and I say to you again now, we want companies that
uncover illegal conduct to come forward voluntarily. Put very simply, if you come forward and
fully cooperate with our investigation, you will receive meaningful credit. “Meaningful credit”
does not mean a free pass for doing the right thing. But, self-reporting and cooperation do carry
significant incentives. Indeed, many options are available to the Justice Department short of
prosecution when a banking entity has been truly cooperative: no charges may be brought at all,
or we may agree to a deferred prosecution agreement or non-prosecution agreement, sentencing
credit, or a below-Guidelines fine. Ultimately, every case requires an assessment of the
particular facts, as well as the severity and pervasiveness of the conduct and the quality of the
bank’s compliance program. But, in every case of self-disclosure, full cooperation, and
remediation, the Department is committed to giving credit where it’s deserved.

The recent resolution of the Barclays Bank matter is a concrete example of what I mean
by “meaningful credit.” In May 2006, Barclays voluntarily disclosed to the Office of Foreign
Assets Control four transactions that violated U.S. sanctions. At that time, Barclays commenced
a limited internal investigation into the operation and limitations of its automated filtering system
and, in November 2006, the bank exited all relevant relationships with banks subject to U.S.
economic sanctions, banks headquartered in sanctioned countries, and the subsidiaries of such
banks. In 2007, after being contacted by federal and state prosecutors, Barclays agreed to
cooperate fully and broadened its review to include a comprehensive internal investigation
covering the preceding seven years.

Barclays promptly shared the results of its internal investigation with the Department and
the Manhattan District Attorney’s Office, as well as with OFAC, and Barclays’ U.S. banking
regulators – the Federal Reserve and the New York State Banking Department. And, most
important, from the beginning of the investigation, Barclays took full responsibility for its
conduct. The case was resolved through a deferred prosecution agreement with a term of two
years, a forfeiture of $298 million, and compliance by the bank for a period of two years
overseen by the Justice Department, OFAC, and the Federal Reserve in coordination with the
UK’s Financial Services Authority.

As seen by our prosecution of Barclays, real cooperation has real benefits. At the same
time, cooperation didn’t result in amnesty, nor should it have. Indeed, while a deferred
prosecution is a second chance of sorts for an institution, any bank that is subject to deferred
prosecution must understand that it must live up to the terms of its agreement. If a bank subject
to a DPA fails to implement a state-of the-art compliance program, does not live up to its

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promise of full cooperation, or commits any other crime during the term of the agreement, it will
be prosecuted for all of its conduct.

VI. Conclusion

The Department of Justice is committed to punishing and deterring illegal conduct in our
financial system. But the Department cannot – and does not – do this work alone. Indeed,
nowhere is cooperation among our public and private sector partners more vital than in fighting
the increasingly interconnected groups that traffic in drugs, run organized crime syndicates, and
commit fraud – and then try to use our banks to hide and move their crime proceeds. Of course,
nothing we do will make us invulnerable, but we can become less vulnerable if we work
together.

I want to thank you for all the work you do. You are the gatekeepers of our financial
system, and you have a daunting task. But the challenges you face cannot be an excuse. You
must institute robust anti-money laundering and compliance programs in order to prevent dirty
money from entering our banking system. And, if you uncover evidence of illegal conduct in
your institutions, we need you to come forward.

The Justice Department continues to work hard to zero in on the profits of crime, and the
new Bank Integrity Unit and Kleptocracy Initiative I’ve described today are significant
additional steps in that direction. We hope, and expect, that you will do your best to partner with
us on this essential mission.

Thank you so much for having me here today.

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