United States v. $599, 930.00 of Funds Associated with Cooperating Co. 1

Decision Date19 April 2022
Docket NumberCivil Action 18-cv-2746 (RC)
CourtU.S. District Court — District of Columbia

Re Document No.: 44


RUDOLPH CONTRERAS, United States District Judge.


This action arises out of an investigation by the Federal Bureau of Investigation (“FBI”). Plaintiff United States of America (“the Government”) seeks the forfeiture of $599, 930.00 of funds associated with Cooperating Company 1 (Defendant Funds 1”) and $1, 722, 723.00 of funds associated with Yuanye Wood Co. Ltd. (Defendant Funds 3) (collectively $2, 322, 653.00, Defendant Funds”).[1] The FBI believes that North Korean entities used front companies to transact Defendant Funds in violation of U.S. economic sanctions. No claimant to Defendant Funds has responded to the Complaint, and on May 10, 2021, the Clerk of the Court entered default against Defendant Funds. The Government now asks this Court for default judgment. For the reasons set forth below, the Court grants this motion.


Cooperating Company I and Yuanye Wood are alleged front companies involved in a scheme to launder U.S.-dollar payments on behalf of the Democratic People's Republic of Korea (“North Korea”) and sanctioned North Korean financial institutions. See Compl. ¶¶ 1-4, ECF No. 1. The Government alleges that these front companies conducted transactions violating (1) the International Emergency Economic Powers Act (IEEPA), 50 U.S.C. § 1701, et seq., (2) the North Korea Sanctions and Policy Enhancement Act of 2016 (“NKSPEA”), 22 U.S.C. § 9201, et seq., (3) the federal anti-money laundering statute, 18 U.S.C. § 1956(a)(2)(A), (h), and (4) the conspiracy statute, 18 U.S.C. § 371 (in conspiring to commit the first three offenses). Id. ¶ 5. These transactions allegedly included or relate to Defendant Funds, and thus the Government argues that the funds are subject to forfeiture pursuant to 18 U.S.C. § 981(a)(1)(A), (C), and (I). Id. ¶ 6.

The Government specifically requests default judgment arguing that (1) Defendant Funds 1 and 3 were involved in money laundering offenses (or conspiracy to launder money) and (2) Defendant Funds 3 are proceeds of IEEPA violations (or conspiracy to evade the IEEPA sanctions). See Mem. Supp. Mot. Default J. (“Mot.”) at 14, 16, ECF No. 44-1. The Court thus focuses on these two claims. The Court will first summarize the relevant law, then describe the alleged money laundering scheme.

A. Statutory Framework
1. The Federal Anti-Money Laundering Statute

The federal anti-money laundering statute criminalizes transporting, transmitting, or transferring funds in or out of the United States “with the intent to promote the carrying on of specified unlawful activity, ” or conspiring to do so. 18 U.S.C. § 1956(a)(2)(A), (h). The statute defines “specified unlawful activity” to include a wide breadth of violations, including (pertinent here) violations of the IEEPA, id. § 1956(c)(7)(D), wire fraud, id. §§ 1956(c)(7)(A), 1961(1), and bank fraud, id. Any property involved in a money laundering attempt or violation is subject to civil forfeiture. See id. § 981(a)(1)(A). To show that the property was “involved in” such a violation, the Government must show “a substantial connection between the property and the offense.” Id. § 983(c)(3).

2. The International Emergency Economic Powers Act

The IEEPA authorizes the President to impose economic sanctions in response to “any unusual and extraordinary threat . . . to the national security, foreign policy, or economy of the United States” originating outside the country. 50 U.S.C. §§ 1701(a), 1702(a). To activate these powers, the President must declare a national emergency with respect to the threat. Id. On November 14, 1994, President Clinton declared a national emergency regarding the proliferation of weapons of mass destruction (“WMDs”). Exec. Order No. 12, 938, 59 Fed.Reg. 58, 099 (Nov. 14, 1994). In 2008, President Bush declared North Korea's proliferation of WMDs a national emergency, see Exec. Order No. 13, 466, 73 Fed.Reg. 36, 787 (June 26, 2008), and the successive Presidents of the United States have renewed and expanded upon this declaration annually, most recently in June of 2021, see, e.g., 86 Fed.Reg. 33, 075 (June 21, 2021).

In 2005, exercising his IEEPA authority, President Bush issued Executive Order 13, 382 denying access to the United States banking system to anyone designated as a “proliferator” of WMDs. Exec. Order No. 13, 382, 70 Fed.Reg. 38, 567 (June 28, 2005). The “WMD Proliferators Sanctions Regulations, ” which implement Executive Order 13, 382, block any property interests, including money and other financial instruments, belonging to or used in support of individuals and entities designated as WMD proliferators. 31 C.F.R. §§ 544.201, 544.308.

The Treasury Department's Office of Foreign Assets Control (“OFAC”) places individuals determined to be proliferators on the Specially Designated Nationals and Blocked Persons List (the “SDN” list). Id. There are several consequences that flow from an SDN designation. In addition to blocking property interests belonging to or supporting SDNs, id. § 544.201, an OFAC designation further prohibits U.S. and non-U.S. persons from facilitating the “provision of funds, goods, or services by, to, or for the benefit of any” designated entity, unless OFAC specifically licenses the transaction, id. § 544.201(b)(1); see also Id. §§ 544.202(c), 544.301, 544.405.

Additionally, the “North Korea Sanctions Regulations” prohibit transactions in the U.S. that support the Government of North Korea or the Workers' Party of North Korea. Pursuant to Executive Order 13, 687, the regulations block property and funds in the United States belonging to any person who is “owned or controlled by” or who has “acted or purported to act for or on behalf of, directly or indirectly, the Government of North Korea.” 31 C.F.R. § 510.201(a)(3)(iii)(E). The regulations further block property belonging to persons owned or controlled by any other person whose interests and property are blocked pursuant to the regulations, see id. §§ 510.201(a)(3)(ii)(F), 510.201(a)(3)(iii)(E), and property belonging to any person who provided financial support to other designated persons, see id. §§ 510.201(a)(3)(ii)(E) (citing Exec. Order 13, 551), 510.201(a)(3)(iv)(E).

After North Korea executed a ballistic missile test in 2016, President Obama issued Executive Order 13, 722, which took additional steps to strengthen sanctions, including prohibiting the transfer of property or interests in property that are associated with human rights violations committed by North Korea or any entities acting on its behalf. Exec. Order No. 13, 722, 81 Fed.Reg. 14, 943 (Mar. 15, 2016).

Section 206 of the IEEPA makes it “unlawful for a person to violate, attempt to violate, conspire to violate, or cause a violation of any license, order, regulation, or prohibition issued under” the statute. 50 U.S.C. § 1705(a). Property “which constitutes or is derived from proceeds traceable to” an IEEPA violation is subject to civil forfeiture. 18 U.S.C. § 981(a)(1)(C). “This chain of interlocking statutes can thus be summarized as follows: property that ‘constitutes or is derived from proceeds traceable to' violations of executive orders and [regulations] promulgated pursuant to the IEEPA is subject to forfeiture. In re 650 Fifth Avenue & Related Props., 830 F.3d 66, 87 (2d Cir. 2016) (citing 18 U.S.C. §§ 981(a)(1)(C), 1956(c)(7)(D); 50 U.S.C. § 1705).

B. Relevant Facts and Procedural History
1. North Korea's Sanctions-Evasion Scheme

The Government outlines a money laundering scheme operated by state-run North Korean banks to access the U.S. financial system and support North Korea's proliferation of WMDs in violation of U.S. and international sanctions. Due to North Korea's continued pursuit of nuclear weapons, the United Nations Security Council unanimously approved a resolution requiring all U.N. member states to prohibit financial institutions from doing business with North Korean banks. Compl. ¶ 42. Because North Korea is thus cut off from the international financial system, its state-controlled financial institutions allegedly operate a network of front companies to circumvent sanctions and conduct international financial transactions to fund the development of nuclear weapons. Id. ¶¶ 43-46.

One such institution is North Korea's state-owned Foreign Trade Bank (“FTB”), which OFAC designated in 2013 as “a key financial node in North Korea's WMD apparatus” that North Korea uses to facilitate millions of dollars in transactions on behalf of actors linked to the proliferation network. Id. ¶¶ 47, 49. The Financial Crimes Enforcement Network (“FinCEN”) also reports that the FTB has laundered “millions of U.S. dollars” evading U.S. sanctions. Id. ¶¶ 51-52. FinCEN and the U.N. Panel of Experts highlight the FTB's reliance on front companies of other nationalities and offshore bank accounts to facilitate the scheme. Id. ¶¶ 5359. Here, the Government alleges that Defendant Funds are comprised of transactions conducted by such front companies and other affiliates of the FTB.

2. Cooperating Company 1 and Defendant Funds 1

The Government alleges that Cooperating Company 1, purportedly headquartered in Singapore, conspired with a Chinese money remitter to make numerous wire transfers to a front...

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