Monday, June 30, 2008

Russian Federal Customs Service Suing Bank of New York Mellon over a past Money Laundering Scheme

In the 1990’s the Bank of New York Mellon was part of a court case involving a money laundering scheme where two Russian émigrés transferred $7.5 billion to the bank using an unlicensed wire transfer. As a result the bank was forced to pay a fine of $38 million.

The New York Sun reported in this article today that the case has resurfaced and the Russian Federal Customs Service is suing the bank, on the grounds that Russia deserves $22.5 billion in compensation in accordance with the RICO treble damages rule. The trial is being held in the Moscow Arbitrazh Court.

As this article in PR Newswire mentions, over 20 prominent legal scholars have supported Bank of New York motion to dismiss on these grounds:

- The U.S. Congress never intended RICO to be used by foreign courts;

- The Bank was never convicted of, much less charged with, any underlying criminal wrongdoing, which a RICO claim requires;

- The plaintiff is unable to provide any evidence of actual financial damages, as specified under RICO;

- This particular Russian court, the arbitrazh court, is a commercial court that has no jurisdiction to interpret or apply criminal statutes, let alone U.S. RICO law; and

- This is a case to recover lost tax revenue, which is a claim that cannot be brought under RICO, and any enforcement would be precluded in most countries by the well-established Revenue Rule.

For now proceedings have been adjourned until July 3rd, 2008.

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