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This is an excerpt of an article published on April 13, 2018 in Law360, expert analysis.

The Curious Case of the Michael Cohen-Linked Suspicious Activity Report

Federal law prohibits the disclosure of the existence of Suspicious Activity Reports. So how did the existence of a Suspicious Activity Report linked to the President’s lawyer become public?

By Hdeel Abdelhady

From early March 2018, news outlets have reported the existence of a Suspicious Activity Report linked to the President’s “personal lawyer,” Michael Cohen. On March 5, The Hill, describing a Wall Street Journal story of the same day, reported that Cohen’s “$130,000 wire payment to adult film star Stormy Daniels shortly before the 2016 election was flagged as suspicious” by First Republic Bank and “reported to the Treasury Department.”

Following reports this week that the FBI executed search warrants at Cohen’s law offices, hotel room and home and seized “business records, emails and documents related to several topics, including a payment to” Stormy Daniels, the Wall Street Journal revisited the Cohen-linked Suspicious Activity Report, writing that First Republic Bank had “conducted its own investigation” of the Stormy Daniels transaction “after receiving the subpoena from the authorities.”

From a legal perspective, these and similar news reports are striking for the legal question that they raise: How did the existence of the Suspicious Activity Report become public?

By law, banks and certain other financial institutions are required to have in place systems to detect and deter money laundering, terrorism financing and other financial crime. Banks and certain other financial institutions are required by law to file Suspicious Activity Reports with respect to certain criminal violations or where a transaction appears to have no lawful purpose, is inconsistent with a customer’s ordinary behavior and/or is in other ways suspicious (as indicated in a relevant section of the FFIEC Bank Secrecy Act manual below (annotated by the author)). 

 

Federal Financial Institutions Examination Council, Bank Secrecy Act Anti-Money Laundering Examination Manual, Suspicious Activity Reporting Overview., at https://www.ffiec.gov/bsa_aml_infobase/pages_manual/OLM_015.htm. Annotated by Author.

 

Suspicious Activity Reports (SARs) play an important role in the the U.S. anti-financial crime structure. As depicted in the graphic below, SARs make up the bulk of the reports filed daily by banks and other institutions. Federal law prohibits banks and other financial institutions from disclosing the existence (or non-existence) of Suspicious Activity Reports.  (View the full graphic and context here).

Snapshot of Bank Secrecy Act filings data, including Suspicious Activity Reports, collected and maintained by the U.S. Dept of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Courtesy of Hdeel Abdelhady/MassPoint Legal and Strategy Advisory PLLC. The information illustrated was extracted from an April 27, 2017 House Committee on Financial Services’ Subcommittee on Terrorism and Illicit Finance hearing on “Safeguarding the Financial System from Terrorist Financing.”

Assuming news reports of the Cohen-related Suspicious Activity Report are correct, the disclosure of the report is itself headline worthy and may trigger (it if has not already) law enforcement and/or regulator inquiries as to how the report’s existence came to be in the public domain.

Ms. Abdelhady’s full article is at Law360 (subscription) (the graphics provided here are not included in the article). 

 


Sources Linked to Above 

Hdeel Abdelhady, The Curious Case of the Michael Cohen-Linked Suspicious Activity Report, Law360, April 13, 3018.

Eli Watkins, FBI raids Trump lawyer Michael Cohen’s office, seizes Stormy Daniels documents, bank records, CNN Politics (April 9, 2018), https://www.cnn.com/2018/04/09/politics/michael-cohen-fbi/index.html.

Brett Samuels, Bank flagged Trump lawyer’s payment to porn star as suspicious: report, The Hill (March 5, 2018), http://thehill.com/homenews/administration/376792-bank-flagged-cohens-payment-to-porn-star-as-suspicious-report; Joe Palazzolo and Michael Rothfeld, Trump Lawyer’s Payment to Stormy Daniels Was Reported as Suspicious by Bank, Wall Street Journal (March 5, 2018), https://www.wsj.com/articles/trump-lawyers-payment-to-porn-star-was-reported-as-suspicious-by-bank-1520273701.

Philip Bump, To search Michael Cohen’s home and office, the FBI had to clear a higher-than-normal bar, Washington Post (April 9, 2018), https://www.washingtonpost.com/news/politics/wp/2018/04/09/to-search-michael-cohens-home-and-office-the-fbi-had-to-clear-a-higher-than-normal-bar/?noredirect=on&utm_term=.3b989cb0c945.

Matt Apuzzo, F.B.I. Raids Office of Trump’s Longtime Lawyer Michael Cohen; Trump Calls It ‘Disgraceful’, New York Times (April 9, 2018), https://www.nytimes.com/2018/04/09/us/politics/fbi-raids-office-of-trumps-longtime-lawyer-michael-cohen.html.

Erica Orden, Rebecca Ballhaus & Michael Rothfeld, Agents Raid Office of Trump Lawyer Michael Cohen in Connection With Stormy Daniels Payments, Wall Street Journal (April 9, 2018), https://www.wsj.com/articles/fbi-raids-trump-lawyers-office-1523306297 .

Post Author: MassPoint PLLC

MassPoint PLLC is a boutique law and strategy firm that works with diverse clients to meet legal, strategy, and risk management needs in a globalized, complex world.