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A Fresh Take

Insights on M&A, litigation, and corporate governance in the US.

| 4 minutes read

Denting Dirty Dollar-Clearing: US Court of Appeals Upholds Money-Laundering Convictions Based on the Use of US Correspondent Banking Accounts

On December 29, 2020, the U.S. Court of Appeals for the Second Circuit issued an important decision in United States v. Patrick Ho, upholding the defendant’s criminal convictions for money laundering under 18 U.S.C. § 1956 and the US Foreign Corrupt Practices Act (FCPA).  As described in detail below, the Second Circuit’s opinion is notable for its holding that the use of US correspondent banking accounts may serve as the sole basis for the application of money-laundering charges. 

The defendant, Chi Ping Patrick Ho, was convicted in March 2019 of various FCPA and money-laundering charges arising from his involvement in two schemes to pay bribes to political leaders in Chad and Uganda on behalf of a Chinese energy company.  According to the Second Circuit’s opinion, Mr. Ho worked at a non-governmental organization (NGO) funded by the Chinese energy firm.  The NGO had operations in China and the United States, and Mr. Ho’s participation in the two schemes involved meetings with former non-US public officials in the United States and with Chadian and Ugandan officials in Africa, as well as communications with United Nations officials in New York.  Among other charges, Mr. Ho was convicted of violating 18 U.S.C. § 1956 based on a US dollar-denominated bribery payment that was sent from a bank in Hong Kong to a bank in Uganda. Because the payment was dollar-denominated, it was processed through US correspondent accounts and a US-based settlement system.

The Second Circuit affirmed Mr. Ho’s conviction under 18 U.S.C. § 1956(a)(2), which prohibits the transfer of funds “[1] from a place in the United States to or through a place outside the United States or [2] to a place in the United States from or through a place outside the United States” for prohibited purposes, including the promotion of specified unlawful activity (including, for example, violations of non-US anti-bribery laws).  The US Department of Justice (DOJ) typically uses 18 U.S.C. § 1956(a)(2) to bring money laundering charges when payments made in furtherance of illegal conduct are sent from the United States to another country or are wired into the United States from abroad. In the Ho case, however, the payments passed through the United States only briefly: the funds originated in Hong Kong and were received in Uganda. Ho argued that this was not enough to trigger the application of § 1956(a)(2). The Court disagreed, stating:

[W]e decline to bar juries from finding that a defendant “transports, transmits, or transfers” money “from” or “to” the United States, 18 U.S.C § 1956(a)(2), when a defendant arranges a wire transfer that uses the U.S. banking system to go from a foreign source, to a correspondent bank in the United States, to another bank in the United States, and then to a final foreign beneficiary. We will not “suppose that Congress did not intend to criminalize the use of United States financial institutions as clearinghouses for criminal money laundering and conversion into United States currency.”

United States v. Ho, slip op. (available here) at 34-35 (quoting United States v. All Assets Held at Bank Julius Baer, 571 F. Supp. 2d 1, 12 (D.D.C. 2008)).

The Second Circuit’s opinion on this issue is significant because:

  • the Ho decision appears to be the first federal appellate ruling squarely addressing the question of whether the use of US correspondent banking is a sufficient basis for an application of 18 U.S.C § 1956(a)(2);
  • DOJ frequently relies upon money-laundering statutes to prosecute conduct that falls beyond the reach of the FCPA or other US criminal statutes; although this was not the case in Ho, where the FCPA applied for other reasons, DOJ may leverage the Ho ruling to prosecute corruption cases that fall outside the FCPA but involve US correspondent banking; and
  • the Second Circuit’s jurisdiction includes New York City, where correspondent banking transactions associated with international funds transfers frequently occur, so the Ho opinion will govern where this issue is most likely to arise and may also be especially persuasive to other courts considering this issue in the future.

Looking ahead and beyond 18 U.S.C § 1956(a)(2), the Ho decision may influence future interpretations of 18 U.S.C. § 1956(f). Section 1956(f) provides for extraterritorial jurisdiction over money-laundering schemes if “the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States” and involves more than $10,000 (emphasis added).  In reaching its decision on 18 U.S.C. § 1956(a)(2), the Ho Court relied on a prior district court opinion (United States v. All Assets Held at Bank Julius Baer, 251 F. Supp. 3d 82, 94 (D.D.C. 2017)) that found that correspondent banking transactions were a sufficient basis to support the extraterritorial application of the money laundering statute under § 1956(f).  The Second Circuit did not directly consider (and Mr. Ho does not seem to have raised) whether the processing of a US dollar-denominated payment through correspondent accounts “occurs in part in the United States” within the meaning of § 1956(f), but the Ho Court’s holding that correspondent account transfers go “to” and “from” the US for § 1956(a)(2) purposes certainly suggests that this  requirement of § 1956(f) would also have been satisfied.


investigations, white-collar defense, financial institutions