International tax lawyer and former fund manager from Quebec indicted after IRS sting
The arrest of two Canadians from Quebec, 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.
St-Cyr and 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, Poulin, is a Quebec tax lawyer at a law firm named Bishops Legal, 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.
Clover Asset Management
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, St-Cyr set up the firm because no firm could meet the “needs” of institutional and private wealth clients in the Caribbean except him. 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, St-Cyr and 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 St-Cyr’s investment firm for investment to dodge reporting taxes. According to the indictment, 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 lawyer 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 St-Cyr and 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, Poulin and 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, Poulin, through his law firm, established a foundation for the undercover agents with the not-so fortuitous name of “Zero Exposure Inc.” Poulin was, at that point probably about 100% exposed if the allegations are accurate. The indictment alleges that subsequently, 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 Quebec to the US.
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
St-Cyr and 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.