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College Admissions Scandal: Are Wealthy Cheaters Money Launderers?

April 12, 2019
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Have mercy, Aunt Becky! Federal prosecutors on Tuesday, April 9, brought new conspiracy and money laundering charges against 16 parents involved in the alleged $25 million college admissions scandal, including “Full House” actress Lori Loughlin and her clothing designer husband, Mossimo Giannulli. This is not the type of money laundering financial institutions generally detect in their BSA compliance programs or even hear about routinely in the news. Let’s look at why these cheating allegations turned into indictments of money laundering. 

Loughlin and Giannulli were initially charged with fraud for allegedly paying $500,000 to college consultant William “Rick” Singer and his non-profit organization, Key Worldwide Foundation (KWF), which prosecutors said was a front for accepting bribes.  

According to the indictment, Loughlin and Giannulli allegedly “[conspired] to launder the bribes and other payments in furtherance of the fraud by funneling them through Singer’s purported charity and his for-profit corporation, as well as by transferring money into the United States, from outside the United States, for the purpose of promoting the fraud scheme,” a press release from the U.S. Attorney’s Office states. 

Wiretapped conversations and emails between Loughlin and Singer discussing IRS audits of KWF led to the grand jury money laundering indictmentaccording to People.com. “They’re always worried about things going on in foundations,” Singer said. “I see,” Loughlin replied, and then later said, “So we just have to say we made a donation to your foundation and that’s it, end of story.”  

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The charge of conspiracy to commit money laundering carries a maximum sentence of 20 years in prison, three years of supervised release and a fine of $500,000. The fraud-conspiracy charge also carries a maximum 20-year prison term, three years of supervised release and a fine of $250,000. The stakes associated with cheating have just been raised for Loughlin, Giannulli, and the other 14 parents in these new indictments.  

The other more famous of the cheaters, Felicity Huffman, along with 12 other parents, pleaded guilty to lesser charges of fraud and conspiracy, avoiding the additional charges 

How the rich and famous respond to these new indictments is yet to be seen, and no doubt will be of interest to the anti-money laundering community. Although the facts of this case are a bit unusual, a few takeaways for the AML community remind us to go back to the basics: 

  • Know your customers and when possible, know your customer’s customers.
  • Conduct enhanced due diligence on your Non-Governmental Organizations (NGOs) and give higher risk points to NGOs as applicable.
  • When large amounts of funds are flowing through an NGO, moving from the U.S. and outside the U.S., confirm the source and use of funds. 
  • Does the amount of funds flow and purpose make logical sense (example, $25 million to a college consultant)?  
  • When in doubt, file a SAR. 

When investigating transactional activity, remember, even Aunt Becky makes bad decisions and could end up laundering money through your institution.  

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