AML and OFAC Applies to State Governments
I had a short conversation, off the record, with several investigators that work for state unemployment agencies.
The common complaint was the inertia with regards to senior management. In particular, the assertion from many state directors of unemployment funding that neither the AML laws nor the OFAC laws apply to them.
I learned that several of the state agencies are sending benefits to people out of state. Wow! If the condition of receiving unemployment funding is that one must be ready to work if offered, how do they do that when they are out of state? Or how can the state paying benefits know if the applicant is working in another state and not telling the state that are sending them money?
One state was sending 49 different benefit checks, to 49 different beneficiaries to the address of a chain restaurant in another state! Another has 41 checks going to a person with the same name but each had a different address and all went to an address in three different zip codes; all adjacent to each other
The very scary part was the realization that unemployment checks, were being sent to recipients in Iran, Iraq, Egypt, Albania, Columbia, etc… No doubt this is fraud, but it is also money laundering by the state for continuing to send money to a fraudulent beneficiary. –Could it also very possibly be a violation of OFAC rules and regulations on excluded parties (not checked) as well as prohibited countries?
It is a condition of receipt of unemployment funding that one must be ready to work immediately if the opportunity presents itself. Thus, how can someone in another county be ready for work?
Just a quick note, we checked with a few experts on AML and OFAC and they concur that:
a) The state are required to be complaint,
b) the most basic description of what I heard screams money laundering and
OFAC sanctions violations,
c) all require the filing of Suspicious Activity Reports (SAR’s),
d) where are the people responsible for compliance?,
e) the banks processing the payments have a duty to report.
It is more than just wasted tax dollars. If we are going to stop crime corruption and terrorism, the burden is not just on the shoulders of the financial community, but the states too must shoulder the same responsibility not to fund and/or permit fraud on this scale.
