Continued on page 2

Please feel free to send your questions and comments 

to the editors of the Cornerstone Report at: cornerstone@ice.dhs.gov

V O L U M E X I I I : N O . 1 — S U M M E R 2 0 1 7

A

ttorneys are in a position of 

trust given the nature of their 

business and the oath they take to 

demean themselves “fairly and 

honorably as an attorney and 

practitioner at law.” However, recent 

court cases have exposed an 

increasing number of legal 

professionals engaged in facilitating 

money laundering. In January 2016, a 

nonprofit activist group conducted an 

undercover investigation that revealed 

several New York real estate lawyers 

providing advice on how to move 

suspect money into the United States. 

One of the lawyers was a former 

president of the American Bar 

Association. See further details at: 

https://www.globalwitness.org/

shadyinc/.

In a recent federal case in Ohio, an 

attorney was convicted for conspiring 

to launder what he believed to be 

proceeds of narcotics trafficking. The 

court document describes the lawyer’s 

instructions on how to set up a 

company and how the funds would be 

laundered. The lawyer also details use 

of his Interest On Lawyer Trust 

Account (IOLTA) to further the 

scheme. 

An IOLTA is an account opened by an 

attorney with the intention of holding 

client funds for future services. It is 

opened with a bank with a presumed 

higher level of confidentiality 

accorded to an attorney-client 

relationship and any related 

Volume XIII No. 4 Summer 2017

Inside This Issue

3PML/Attorney’s Misuse of 

Trust Accounts ..........................1

Attorney’s Misuse of Trust 

Accounts/ Case Study................2

Breaking the Shell Game..........3

Beneficial Ownership/ Case 

Study...........................................4

Cornerstone is U.S. 

Immigration and Customs 

Enforcement’s (ICE) 

comprehensive investigative 

initiative for fighting financial 

crime.

The Cornerstone Report is a 

quarterly bulletin 

highlighting key issues related 

to ICE Homeland Security 

Investigations (HSI) financial, 

narcotics and special 

operations investigations.

Toll Free Tip Line:

1-866-DHS-2-ICE

www.ice.gov/cornerstone

Third Party Money Launderers

T

hird Party Money Launderers (3PML) are individuals or businesses 

who often times sit outside the financial sector, but offer services or 

products that present a big risk of abuse for money laundering. These 

individuals or businesses act as gatekeepers to the financial system and 

serve as a connection between the licit and illicit worlds, providing 

strategic support to criminals and terrorists. Their level of complicity 

between the licit and illicit behavior varies. 

Attorney’s Misuse of Trust Accounts
transactions. IOLTA accounts are not subject to mandatory reporting requirements which 

allows, among other things, cash deposits and withdrawals over $10,000 to go undetected. 

These accounts contain funds for a lawyer’s various clients, and act as a standard bank account 

with one unique feature: The interest earned on the account is ceded to the state bar 

association or another entity for public interests or pro bono purposes. These accounts present 

money laundering risks since a bank has no direct relationship with or knowledge of the ultimate beneficial 

owners of these accounts. Furthermore, the accounts do not trigger federal bank reporting requirements on 

clients’ behalf, and they are typically used to pool small amounts of funds related to the legal matters of 

multiple clients. 

In a December 2016 report published by the Financial Action Task Force (FATF), it labeled the law-firm 

accounts a vulnerability. In the report assessing U.S. efforts to fight financial crime, the group criticized the 

limited oversight of lawyers, who are not required to flag suspicious financial activity.

In response to increasing misuse of these accounts, HSI’s Illicit Finance and Proceeds of Crime Unit met with 

representatives of the Financial Criminal Enforcement Network (FinCEN) to discuss past and current concerns 

relating to IOLTA. FinCEN described past allegations and instances of abuse of these accounts as continuing to 

pose a risk to financial institutions. FinCEN agreed to collaborate on establishing investigative referrals and 

support involving the misuse of IOLTA. In March 2017, FinCEN established business rules to identify IOLTA 

accounts for referral to HSI. 

Below is an example from a recent HSI investigation involving the misuse of IOLTA.

Page 2 of 4

Volume XIII No 4

HSI El Paso Convicts Attorney Using Trust 

Account to Launder Drug Proceeds

J

anuary, 2014 – El Paso, TX attorney Marco Antonio 

Delgado was sentenced to the maximum 20 years in 

federal prison for conspiracy to launder up to $600 

million in illegal drug proceeds after a lengthy HSI 

investigation.

Based on evidence presented during trial, the jury 

found that Delgado conspired with other individuals 

to launder $600 million in illegal drug proceeds for 

members of the Milenio Drug Trafficking 

Organization (DTO). Two episodes of money 

laundering demonstrated to the jury included an HSI 

and Carroll County (GA) Sheriff’s Department seizure 

of $1,000,000 in U.S. Currency traveling from Atlanta, 

GA, to Mexico via El Paso; and, an HSI seizure of 

$50,000 in drug proceeds, in Chicago, IL, which was 

transported to El Paso and deposited in Delgado’s

IOLTA bank account.

The IOLTA account was utilized as a funnel account, 

taking in funds from various criminally derived 

sources. Once in the IOLTA account, Delgado 

directed the funds to various entities benefiting the 

DTO as well as himself. IOLTA accounts are often 

used in this manner for the advancement of criminal 

enterprises because they receive less scrutiny by the 

banks with which they are held. 

Additionally, in September 2016, Delgado was 

convicted of additional unrelated charges of theft, 

wire fraud and money laundering for his role in a 

fraud scheme where he diverted several million dollars 

from a business transaction into his own personal 

accounts held with offshore banks. 

Attorney’s Misuse of Trust Accounts continued from page 1
With the recent release of the Panama Papers and subsequent inquiry by federal agencies, 

shell companies have received greater attention in their utilization by criminal 

organizations to exploit financial institutions. A shell company is a legal vehicle (LLC, LP, etc.) 

that typically has no physical presence (other than a mailing address), and generates little to no 

independent economic value. Although they are not illegal and can have many legitimate business purposes, 

they are commonly used to facilitate illicit activity, including money laundering and tax evasion.

Shell companies are not a new phenomenon in their utilization in the laundering of illicit proceeds, but often 

investigators and Anti-Money Laundering (AML) specialists may overlook them, especially if shell companies 

are utilized within a corporate structure or part of several legitimate businesses. 

FinCEN published an advisory relating to indicators of possible shell account activity. These indicators, detailed 

below, can assist investigators and AML professionals:

 An inability to obtain – whether through the Internet, commercial 

database searches, or direct inquiries to the foreign correspondent 

bank whose customer is the originator or the beneficiary of the 

transfer – information necessary to identify originators or 

beneficiaries of wire transfers.

 A foreign correspondent bank exceeds the anticipated volume 

projected in its client profile for wire transfers in a given time 

period, or an individual company exhibits a high amount of sporadic 

activity that is inconsistent with normal business patterns.

 Payments have no stated purpose, do not reference goods or 

services, or identify only a contract or invoice number.

 Goods or services of the company do not match the company’s profile based on information previously 

provided to the financial institution.

 Transacting businesses share the same address, provide only a registered agent’s address, or raise other 

address-related inconsistencies.

 An unusually large number and variety of beneficiaries receive wire transfers from one company.

 Frequent involvement of beneficiaries located in high-risk, offshore financial centers.

 Multiple high-value payments or transfers between shell companies with no apparent legitimate business 

purpose.

Page 3 of 4

Volume XIII No 4

Breaking the Shell Game

CRACKING THE SHELL

S

hell companies present an added risk because of the lack of transparency and their nature to obfuscate the 

true parties behind the transaction. Even without knowing the ultimate owners of the companies, tenacious investigators and AML specialists are able to identify potential suspicions or other risk-relevant information about a person, entity, or address closely related to the shell company. This information combined 

with the transaction activity itself often will provide the connection to potential illicit activity.
HSI – A Diverse, Global Force

HSI is a critical investigative arm of the Department 

of Homeland Security and is a vital U.S. asset in 

combating criminal organizations illegally exploiting 

America's travel, trade, financial and immigration 

systems.

DHS/ ICE

Homeland Security Investigations

500 12th Street, SW

Washington, DC 20536

E-mail: cornerstone@ice.dhs.gov

Web: www.ice.gov

Pharmaceutical fraud and money laundering 

facilitated through front companies

HSI St. Paul identified a money laundering 

organization using front companies and funnel 

accounts to further a scheme involving illegal 

pharmaceutical sales. In addition to the illegal 

importation of illicit pharmaceuticals, the target 

recruits and employs several individual “merchants” in 

the U.S. who open shell companies (limited liability 

companies and corporations) within the states in 

which they reside. Those individuals utilize these shell 

companies to acquire legitimate merchant terminal 

accounts that allow them to process credit card sales 

transactions manually from a computer.

Thus far, the investigation has revealed that the U.S. 

“merchants” receive a commission of approximately 

10% of the total monetary amount processed through 

credit card transactions. This commission is kept by 

U.S. “merchants” as payment for their services and to 

pay incurred business and terminal fees. Suspects 

based in India directed the remaining 90% in illicit 

proceeds to be wire transferred to various bank 

accounts in the U.S., India, and elsewhere around the 

world.

B

eneficial ownership requirements vary 

throughout the U.S. Shell companies 

have been used as fronts to open accounts 

and purchase real estate without revealing the identity of 

the natural persons who own or control the accounts. 

Perceived credibility of companies and legal arrangements 

incorporated in the U.S. impacts the risk of them being 

abused for money laundering.

According to The New York Times, nearly half of the most 

expensive residential properties in the United States are 

now purchased anonymously through shell companies 

(Feb 7, 2015).

Page 4 of 4

Volume XIII No 4

Beneficial Ownership