Banking and Finance Law Daily Conviction upheld for man charged with financial crimes related to a ‘hawala’ money network
Tuesday, May 4, 2021

Conviction upheld for man charged with financial crimes related to a ‘hawala’ money network

By Donielle Tigay Stutland, J.D.

Ninth Circuit panel affirms convictions against a man charged with co-conspirators involving the use of a "hawala" system for money laundering used to move drug trafficking proceeds.

A Ninth Circuit panel affirmed a jury conviction against Harinder Singh for conspiracy to launder money, conspiracy to operate an unlicensed money transmitting business, and operating such a business, arising from Singh’s involvement in a "hawala operation," a money transmitting network that he and his co-conspirators used to move drug trafficking proceeds from Canada to the United States and eventually to Mexico. The panel rejected Singh’s sufficiency-of-the-evidence challenges to his §1956 conviction and his §1960 conviction finding that the government had shown sufficient evidence of concealment in the co-conspirators hawala system to constitute money laundering and that the hawala system used by the co-conspirators were extensive, involving many people such that it qualifies as a publicly oriented money transmitting business. Judge Watford dissented in part with relation to the §1960 claim, writing that the purpose behind "how" the defendant moved the money was not sufficient on its own to prove "why" he moved the money to sustain the money laundering conviction (United States v. Singh, May 3, 2021, Parker, B.).

Background. In 2018, a jury found Singh guilty of conspiracy to commit money laundering, conspiracy to operate an unlicensed money transmitting business, and operating an unlicensed money transmitting business based on his involvement in a hawala system that was found to be an international money laundering organization moving millions of dollars in proceeds for narcotics traffickers, including a Mexican cartel.

The court described the "hawala" system as "a system designed to transfer funds from point to point outside of formal money transmission channels without the physical movement of money." In a hawala system, brokers transfer money through other brokers, often in other countries, and the system typically involves little record-keeping, is not subject to government regulation, and is based on the promise of trust.

The court noted that the government had offered proof that the network in which Singh was involved transferred large sums of Canadian dollars from a co-conspirator’s Canadian drug operation to Los Angeles. Then, working with a broad network of hawala brokers, based in California and in India, the delivery of funds which had been initially been sent to California were ultimately delivered to the Mexican cartel.

On appeal, the defendant asserted that at trial, the government had produced insufficient evidence of a purpose to conceal, as required by 18 U.S.C. § 1956(a)(1)(B)(i), to support his conviction for concealment money laundering under Count I, and insufficient evidence of public involvement to support his convictions for operating and conspiring to operate a money transmitting business under Counts II and III, see 18 U.S.C. § 1960(b)(2).

Money laundering. The defendant argued that the government had not shown sufficient evidence of concealment, relying on Cuellar, in which the Petitioner’s conduct was found to not have been designed to conceal an attribute of the funds but simply to move them. Singh argued that his case also requires reversal of his conviction because the government adduced insufficient evidence that the hawala transactions in which he participated had a concealment purpose. The court disagreed. First, the court noted that the statute is violated if concealment is in whole or in part. Next, the court discussed how the parties use of the hawala system and other actions probe the concealment of the money, such as the numerous transactions which involved the use of code words, burner phones, and serial numbers written on the cash. Additionally, the Appellant falsely stated that bags containing cash contained shoes. Based on the facts, the Ninth Circuit concluded that the government adduced sufficient evidence of the concealment purpose.

Unlicensed money transmitting business. Singh asserted that operating "on behalf of the public" is an essential element of a §1960 claim, and the government had failed to show that he operated on behalf of the public. The court disagreed with this reading of the statute, noting that their view is that for money transmission to be conducted "on behalf of the public" under §1960, it must occur within a transactional, business dealing or for a member of the broader community, rather than within a personal or close relationship. The court disagreed with Singh’s contention that because his services were not generally available to anyone, he was not operating on behalf of the public. Further, while the court did not believe this was an essential element of a §1960 claim, nonetheless, the court believed the government had offered ample evidence that the hawala system used by the co-conspirators was extensive, involving many people and lots of money. "Drawing all inferences in the government’s favor, it was reasonable for the jury to conclude that Singh was operating a sufficiently publicly oriented money transmitting business to fall under §1960," the court wrote.

Dissent. Judge Watford concurred in part and dissented in part. While Judge Watford agreed with the majority that Singh’s conduct rendered him guilty of operating an unlicensed money transmitting business in violation of §1960, he disagreed with the conclusion on the §1956 claim. In Judge Watford’s view, Singh’s conduct did not amount to participation in a money laundering conspiracy. Judge Watford noted that, on the surface, it appears the use of the hawala network appears to be in violation of §1956. However, he questioned, "but does that mean anyone who uses a hawala network to transfer illicit funds from point A to point B is guilty of money laundering?" Judge Watford read Cueller as specifying that "purpose" behind "how" the defendant moved the money was not sufficient on its own to prove "why" he moved the money. "The evidence cited by the majority relates to the manner in which the hawala transfers were carried out, not why they were carried out," Judge Watford wrote. He concluded that Singh’s conviction for conspiracy to commit money laundering should be reversed, because "the government failed to prove that the hawala transfers were designed to conceal or disguise a listed attribute of the funds."

The case is No. 18-50423.

Attorneys: Elana Shavit Artson, Office of the U.S. Attorney, for the United States. S. Elizabeth Richardson-Royer (Richardson-Royer Law LLP) for Harinder Singh, a/k/a Lnu, Sonu.

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