Banking and Finance Law Daily Foreign bribery law should be used to define money laundering
Tuesday, September 3, 2019

Foreign bribery law should be used to define money laundering

By Richard A. Roth, J.D.

A violation of South Korea’s law against bribing a public official was a proper basis for a money laundering prosecution under U.S. law. It was unnecessary to prove that the conduct violated U.S. anti-bribery statutes.

A South Korean scientist who solicited bribes and funneled the proceeds through U.S. banks properly was prosecuted for a form of money laundering based on violating South Korea’s anti-bribery laws, the U.S. Court of Appeals for the Ninth Circuit has decided. Whether the scientist violated U.S. anti-bribery laws was irrelevant, the court said, because the statute’s reference to "bribery of a public official" was not a specific reference to any U.S. statute (U.S. v. Chi, Aug. 30, 2019, Bea, C.).

As outlined in the opinion, the scientist was a seismologist who was both a principal researcher and a director at a South Korean geological institute. The institute bought and distributed geological equipment, and the scientist became "intimately involved" in that process as part of his work.

According to the court, the scientist began to request payments from two seismologic equipment manufacturers, one in Great Britain and one in the United States, in exchange for ensuring that their products would be purchased and for giving them information on their competitors. To avoid reporting the income to his government, he instructed the two companies to deposit the funds in a Bank of America account in the United States. He then transferred the funds to a Merrill Lynch account in the United States, and from there to a Citibank account in South Korea.

Charged offenses. After being arrested when he came to the United States for a convention, the scientist was indicated and tried for alleged violations of 18 U.S.C. §1957, which generally prohibits engaging in a "monetary transaction in criminally derived property... derived from specified unlawful activity." That U.S. Code section does not define "specified unlawful activity"; instead, it incorporates the definition given in 18 U.S.C. §1956, which defines "specified unlawful activity" to include "bribery of a public official."

The indictment, and the scientist’s eventual conviction, were based on an allegation that he bribed a public official in violation of South Korean law. He appealed both the trial judge’s refusal to dismiss the indictment and the conviction based on a claim that he would have violated 18 U.S.C. §1957 only if he bribed a public official in violation of U.S. law.

Meaning of "bribery of a public official." The court reduced the issue to the question of what 18 U.S.C. §1956 meant by "offense against a foreign nation involving... bribery of a public official." Since the statute did not include any reference to a specific U.S. law that defined such bribery, it should be understood to refer to the common or ordinary meaning of "bribery of a public official" at the time the statute was enacted, the court decided.

"Bribery of a public official" was added to 18 U.S.C. §1956 by the Patriot Act, enacted in 2001, the court said. The common, ordinary meaning at that time would have included three elements:

  1. two persons, one person to pay the bribe and one public official to accept it;
  2. a benefit—monetary or otherwise—conferred by the person giving the bribe; and
  3. an action of some nature taken by the public official related to that capacity.

Thus, those were the elements required by 18 U.S.C. §1956, and therefore incorporated by 18 U.S.C. §1957. All three elements also were required under the South Korea anti-bribery law, the court said, and all three had been proved in the prosecution.

The case is No. 17-50358.

Attorneys: Poonam G. Kumar, Office of the U.S. Attorney, for the United States. Benjamin Lee Coleman (Coleman & Balogh LLP) for Heon-Cheol Chi.

Companies: Bank of America; Citibank; Merrill Lynch

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