nationalsecuritylaw United States v. Banki (2d Cir. Oct. 24, 2011)

October 25, 2011

* United States v. Banki (2d Cir. Oct. 24, 2011) (affirming in part, reversing in part)

A second circuit panel (Chin, joined by Cabranes and Pooler) has issued a complex decision partially reversing, partially vacating, and partially affirming the conviction of Mahmoud Reza Banki on charges of violating the Iranian Transactions Regulations (the “ITR” are a set of economic sanctions promulgated under IEEPA and administered by Treasury’s OFAC, and they include a prohibition on providing “services” to Iran without express authorization from Treasury). The short of it is that Banki was in the U.S. receiving millions of dollars from relatives in Iran via hawala transfers, and that the particularly hawala method in use in this instance involved matching of funds inbound to Iran (that’s greatly oversimplifying the matter, but it gets to the main idea). Banki ultimately was charged with conspiring to violate the ITR and to operate an unlicensed money-transfer business; with actually violating ITR; with actually operating such a business (or aiding-and-abetting it); and with making false statements to OFAC in response to a pair of administrative subpoenas. He was convicted on all counts (as to counts two and three, he was convicted as an aider-and-abetter, not a principal).

The Second Circuit affirmed the false statement convictions, but otherwise reversed. The panel held that:

– executing money transfers from the US to Iran on behalf of another person equals a “service” under ITR, whether you get paid a fee or not;

– the ITR are ambiguous with respect to whether they permit non-commercial remittances, and hence under the rule of lenity the ITR should not be applied in this instance (thus negating counts 1 and 2);

– the trial judge erred by declining to include in the charge to the jury (on the unlicensed money-transfer business counts (1 and 3)) Banki’s proposal to define a “business” as requiring that there be more than one money transfer; the panel noted that the evidence at trial arguably only showed Banki’s knowledge that money was remitted to Iran in one instance; and

– the trial judge did not err in declining to charge the jury that a hawala customer/beneficiary cannot be liable as an aider-abetter.