Feds Allege Men Used NY CU to Funnel $1 Billion in High-Risk Transactions

Federal prosecutors have alleged two men used New York State Employees Federal Credit Union to funnel more than $1 billion in high-risk transactions without any anti-money laundering controls.

But an attorney representing one of the two accused men said the allegations are baseless and inaccurate and questioned why federal prosecutors, after their three-year investigation, waited just two weeks before the statue of limitations date to file charges.

From 2014 to 2016, Gyanendra Asre, 53, of Greenwich, Conn., and Hanan Ofer, 67, of New York City, devised and executed a scheme to bring lucrative and high-risk international financial business to small, unsophisticated financial institutions, according to an indictment unsealed last week by the U.S. Attorney’s Office for the Eastern District of New York based in Brooklyn.

Asre pleaded not guilty last week in federal court to eight counts of failing to maintain an anti-money laundering program at the credit union, failing to maintain an effective AML program at the credit union’s CUSO, failing to file suspicious activity reports and operating an unlicensed money transmitting business. Ofer also pleaded not guilty to one count of operating an unlicensed money transmitting business.

“The allegations are not accurate; they’re based on a subjective analysis by the government as to how my client and his business should have conducted internal controls related to their operations with a federally-chartered credit union in New York,” Oscar A. Herasme, a New Jersey-based attorney representing Ofer, said. “Specifically, the charge of operating an unlicensed money transmitting business has no merit because our client was not operating as a money transmitter. He was operating under the auspices of the credit union at the request of the credit union. The credit union was duly chartered by the NCUA, therefore this allegation of online money transmission is baseless.”

He added: “The government has been investigating this case for the past three years. And it is interesting to me that with two weeks to go on the expiration of statute of limitations for ever bringing any charges in this matter because it happened over five years ago, that they decided to indict my client on charges which, quite frankly, are just regulatory violations and they don’t even have a basis for that.”

A lawyer representing Asre has not been posted on the federal docket as of Wednesday. Attempts to reach Asre were unsuccessful.

Federal prosecutors said Asre and Ofer were trained in anti-money laundering compliance and procedures, and represented to financial institutions that, because of their experience and training, they understood the risks associated with the high-risk business and would conduct appropriate anti-money laundering oversight as required by the Bank Secrecy Act.

Asre served as NYSEFCU’s compliance officer from March 2015 to June 2016 and also was a member of the credit union’s supervisory committee from November 2014 to April 2016. He also was a 25% owner of NYSEFCU-CUSO, which was a money services business registered with FinCEN. Ofer was employed as a manager of logistics at an unidentified U.S. financial institution and owned 25% of the NYSEFCU-CUSO.

Based on Asre’s and Ofer’s representations, they allegedly caused the transfer of more than $1 billion in high-risk transactions, including hundreds of millions of dollars originating from foreign jurisdictions, through NYSEFCU and the NYSEFCU-CUSO.

According to the indictment, from November 2014 to June 2016, the CUSO received more than $100 million in bulk cash deposits of U.S. currency from an unidentified Mexican bank into a Federal Reserve account and then wired those funds to the Mexican bank’s accounts to an unidentified U.S. financial institution, according to the indictment.

Federal prosecutors alleged Asre allegedly failed to implement and maintain the requisite anti-money laundering programs or conduct oversight required to detect, identify and report suspicious transactions.

Asre and Ofer owned and operated DDH Group LLC, an unlicensed money transmitting business and money services business that conducted some of these high-risk transactions, federal prosecutors alleged.

In October 2017, NYSEFCU was liquidated by the NCUA, which declined to comment on whether the alleged $1 billion high-risk transactions contributed to its decision to close the credit union.

Herasme indicated NCUA examiners were aware of the services his client was providing NYSEFCU.

“We intend to show evidence that on at least two occasions, while my client was servicing the credit union, the NCUA examined the operations of the credit union, including the services being provided by my client and found absolutely no compliance issues,” he said.

NYSEFCU’s financial performance reports show that in the three years (2012, 2013 and 2014) before Asre and Ofer were providing their services, the credit union was making $11,000 to $13,000 in fee income. In 2015 and 2016, the credit union’s fee income substantially increased to $87,000 and $79,000, respectively.

Moreover, Herasme contended that the amount of money that was legitimately processed through the credit union and its CUSO was estimated at $250 million, not $1 billion.

He also took issue with the federal prosecutors’ characterization that his client and codefendant targeted unsophisticated financial institutions.

“The fact of the matter is that the credit union was headed by a gentleman (NYSEFCU Board Chair Paul F. Altruda) with over 40 years of experience as a former regulator who knew exactly how to operate the credit union, and to call him unsophisticated was basically insulting to him and his team at the credit union,” he said. “Just because you’re small doesn’t mean you’re not sophisticated.”

Altruda did not respond to a CU Times message seeking comment.