Canadian asset manager and Canadian tax lawyer whose firm gave anti-money laundering advice indicted in US for money laundering

By Christine Duhaime | March 21st, 2014

International tax lawyer and former fund manager from Québec indicted in US after IRS sting

The arrest of two Canadians from Québec, Eric St-Cyr, an investment fund manager, and Patrick Poulin, a lawyer, in the US over money laundering charges hit the news today when their cases were transferred to Florida for prosecution.

Mr. St-Cyr and Mr. Poulin were indicted on March 6, 2014 in Virginia and the Indictment was sealed pending their arrests on March 13, 2014. They are not being released on bail.

Bishops Legal

According to LinkedIn, Mr. Poulin, is a Québec tax attorney at a law firm named Bishops Legal, based in the Turks and Caicos. According to the Bishops Legal website, it services prominent international banks and other financial institutions and global investment funds and undertook financial regulatory work for those clients. The firm website mentions the prevention of international money laundering in the Turks and Caicos.

Clover Asset Management

Mr. St-Cyr operated an asset investment firm, Clover Asset Management, for Canadian and American clients that was incorporated in the Cayman Islands. According to the firm’s website, Mr. St-Cyr set up the firm because no firm could meet the “needs” of institutional and private wealth clients in the Caribbean except him. Mr. St-Cyr’s bio says he was a former asset manager in Canada.

Alleged use of beneficial ownership and law firm trust account to wash funds

According to the Indictment, Mr. St-Cyr and Mr. Poulin, together with a third defendant, used beneficial ownership structures to create layers of transactions in multiple jurisdictions to facilitate the laundering of proceeds of crime. They are alleged to have solicited clients to specifically use their services to evade US taxes by, inter alia, creating bogus legal entities, including foundations, in offshore tax havens.

Allegedly, part of their services included serving as board members of the legal entities to obfuscate true ownership and control. Part of the alleged money laundering scheme involved having clients fund bogus foundations, subsequent to which the foundations would wire funds to Mr. St-Cyr’s investment firm for investment to dodge reporting taxes. According to the Indictment, Mr. Poulin would subsequently wash the funds through his law firm’s trust account back to the client in his or her home country.

Other non-US lawyers allegedly helped in the money laundering scheme

The Indictment alleges that a series of non-US attorneys and advisors were used to create many bogus legal entities (e.g., corporations, trusts and foundations) for tax evaders and allowed their law firm trust accounts to be used to receive funds for that purpose.

In order to catch Mr. St-Cyr and Mr. Poulin, three US undercover agents met with them in Canada and Miami and hired them to launder $2 million of dirty money the agents said they obtained from defrauding a US bank. According to the Indictment, Mr. Poulin and Mr. St-Cyr were willing to launder proceeds of crime provided none of the proceeds were derived from terrorism or drug trafficking.

Zero Exposure Inc.

According to the Indictment, Mr. Poulin, through his law firm, established a foundation for the undercover agents with the not-so fortuitous name of  “Zero Exposure Inc.” Mr. Poulin was, at that point probably about 100% exposed if the allegations are accurate. The Indictment alleges that subsequently, Mr. Poulin knowingly accepted proceeds of crime into the law firm trust account, which were sent to him in the Cayman Islands and invested. He also allegedly used Canadian financial institutions to launder funds from Québec to the US.

“Offshore trusts are better for tax evasion and foundations are better for laundering proceeds of crime”

Mr. St-Cyr is alleged to have told the IRS agents that foundations are better for laundering funds and trusts are better for tax evasion, and that he charged higher fees for money laundering than for tax evasion.

The charges

Mr. St-Cyr and Mr. Poulin are charged with Conspiracy to Launder Money Instruments pursuant to 18 USC §1956(h) and Laundering Monetary Instruments pursuant to 18 USC §1956(a)(3)(B). The latter relates to undercover operations where the financial transaction involves property represented to be proceeds of specified unlawful activity. The proceeds in §1956(a)(3) cases are not derived from a real crime; they are undercover funds supplied by the government. The specific intent provisions in §1956(a)(3) require that the transaction be conducted with the intent to conceal or disguise the nature, location, source, ownership or control of the property or to avoid a transaction reporting requirement.

Mr. St-Cyr wanted be Spiderman

Ironically, Mr. St-Cyr wrote in a client newsletter that he dreamed of putting on a Spiderman suit and becoming an American superhero. If the allegations against Mr. St-Cyr are accurate, he seems to have missed the point about Spiderman, namely that Spiderman worked to stop financial crimes from being committed, not the opposite.

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