The opinion of the court was delivered by: P. Kevin Castel, District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW PURSUANT TO RULE 23(c), FED R. CRIM. P.
On October 15, 2008, the government filed a two-count superseding indictment against defendant Mauricio Mazza-Alaluf. The first count charged him under 18 U.S.C. § 371 with conspiring to conduct an unlicensed money-transmitting business in violation of 18 U.S.C. § 1960, and the second count charged him with a substantive violation of section 1960. Mazza entered a plea of not guilty.
Defendant Mazza applied to the Court to waive his Sixth Amendment right to a trial by jury. Rule 23(a), Fed. R. Crim. P. As required by Rule 23(a)(1), Mazza submitted a signed waiver affirming his decision. The government consented to the waiver. Rule 23(a)(2), Fed. R. Crim. P. On November 6, 2008, I questioned Mazza and concluded that his waiver was knowing and voluntary, and approved it. Rule 23(a)(3), Fed. R. Crim. P.
This case was tried to the Court on November 13 and 14, 2008. The government presented the testimony of six witnesses and the defendant testified in his own defense. Both sides rested, and in lieu of closing arguments, submitted memoranda of law to the Court.
These are my findings of fact and conclusions of law. For the reasons set forth, I find that the government has proved beyond a reasonable doubt Mazza's guilt on the crimes charged in counts one and two of the superseding indictment.
Mazza is a Chilean national with a college degree in business administration.*fn1 (Tr. at 237-38.) Sometime in 1988 or 1989, he acquired the business that became Turismo Costa Brava S.A. ("Turismo"). (Tr. at 240.) The services that Turismo provided were varied, and included the transfer of funds to third parties on behalf of customers. (Tr. at 243.) Mazza described the company's functions as "an auxiliary to the banking system." (Tr. at 243.) A Chilean business purchasing goods from abroad might retain Turismo to relay payments to the non-Chilean seller (Tr. at 125-26) or a Chilean business might arrange for Turismo to facilitate its own payments from a U.S. customer. (Tr. at 255, 243.) Some customers with U.S. dollars wanted their funds transferred to U.S. accounts, Mazza testified. (Tr. at 243.) Turismo also acted as a local currency exchange for individuals (including tourists) and for currency-exchange houses located in Chile and neighboring countries (often known as casas de cambio). (Tr. at 214, 242, 244-45.) It sometimes converted euros into dollars and directly transmitted U.S. dollars to accounts designated by its customers. (Tr. at 211-13.) At the time of Mazza's arrest, Turismo operated three storefront businesses in Santiago, Chile. (Tr. at 241.) Turismo had no branch offices or employees in the United States, and it solicited no customers in the United States. (Tr. at 249, 258.)
Turismo opened and maintained bank accounts in the United States, specifically including accounts with the New York-based Israel Discount Bank, the Harris Trust and Savings Bank in Chicago, Illinois ("Harris"), and a Chase Manhattan Bank ("Chase") branch located in Dearborn, Michigan.*fn2 (Tr. at 246.) Mazza testified that Turismo used U.S. accounts because Turismo often transacted business using the U.S. dollar, which was a standard currency used in Latin America. (Tr. at 268-69.) Turismo also retained Beacon Hill Service Corporation ("Beacon Hill") to act as its "international business agent." (Gov't Ex. 31.) Beacon Hill operated out of New York, where it opened a Chase account under its own name as an agent for Turismo. (Gov't Ex. 11.) Many (although not all) of the transactions facilitated by Beacon Hill on Turismo's behalf originated from U.S. banks and were cleared through U.S. banks. (Gov't Exs. 15, 16.) Mazza described Beacon Hill's significance to Turismo as follows:
Essentially, it was as if it were a checking account. It allowed me to deposit checks. It allowed me to collect checks. It allowed me to issue checks. And the most important thing for the development of my business as of that moment was to make wire transfers from my office in Chile. (Tr. at 248.) Turismo used these U.S. banks accounts to facilitate thousands of transactions totaling hundreds of millions of dollars.
The existence of these U.S.-based accounts and Turismo's activities regarding them are at the heart of this case. Turismo used a multi-step process to place funds into U.S. accounts. Its employees and owners traveled to Los Angeles International Airport ("LAX") carrying bulk cash, often denominated in euros and other European currencies. (Gov't Ex. 43; Tr. at 146.) Turismo couriers openly declared the currency as they passed through customs. (Tr. at 119-20, 146.) Once in the U.S., the Turismo representatives delivered the currency to an armored car service, which then transported the currency to the Associated Foreign Exchange ("AFEX"). (Tr. at 121-22.) AFEX transmitted the funds in their dollar equivalent to Turismo's U.S. bank accounts. (Tr. at 122, 147.)
Turismo, and Mazza personally, came to the attention of U.S. authorities during one such trip in 2006. On May 5 of that year, Mazza passed through U.S. customs at LAX carrying approximately $1.8 million in euro and other foreign currencies. (Tr. at 118-20.) Two agents of the Drug Enforcement Administration and one agent of the Internal Revenue Service questioned Mazza about the cash he was carrying, and Mazza informed them that it came from Chile. (Tr. at 119-20.) Mazza described himself to authorities as manager and part owner of Turismo. (Tr. at 121.) At the conclusion of the interview, Mazza was released.
On March 31, 2007, Mazza was arrested while again passing through LAX. (Tr. at 123.) At the time of arrest, he carried approximately $2 million worth of euros and other forms of currency, denominated mostly in large euro notes. (Tr. at 124.) He stated to law enforcement officials that much of the money came from casas de cambio, and described to the officials aspects of Turismo's business. (Tr. at 124-28.)
Although Mazza and the government largely agree on these facts, they differ significantly on whether they establish that Turismo operated as a money-transmitting business subject to statutory registration requirements. Mazza contends that 18 U.S.C. § 1960 does not apply. In his view, Turismo, as a business operating in Chile, was not subject to the registration requirements of a money-transmitting business, and Turismo's use of U.S. bank accounts was insufficient to bring Mazza within section 1960's boundaries. The government, by contrast, argues that Turismo was an unlicensed money-transmitting business of precisely the type that section 1960 was intended to reach.
Conducting, controlling, managing, supervising, directing or owning an unlicensed money-transmitting business is a crime under 18 U.S.C. § 1960 which was enacted as an anti-money laundering measure. Section 1960 was amended in 2001 as part of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 ("Patriot Act"), Pub. L. No. 107-56, 115 Stat. 272 (2001). Broadly summarized, section 1960 makes it a felony to own or manage a money-transmitting business without obtaining the licenses required pursuant either to state law or to requirements set forth by federal statute or regulation. Section 1960 reads in relevant part:
(a) Whoever knowingly conducts, controls, manages, supervises, directs, or owns all or part of an unlicensed money transmitting business, shall be fined in accordance with this title or imprisoned not more than 5 years, or both.
(b) As used in this section -
(1) the term "unlicensed money transmitting business" means a money transmitting business which affects interstate or foreign commerce in any manner or degree and--
(A) is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony under State law, whether or not the defendant knew that the operation was required to be licensed or that the operation was so punishable;
(B) fails to comply with the money transmitting business registration requirements under section 5330 of title 31, United States Code, or regulations prescribed under such section; or
(C) otherwise involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity;
(2) the term "money transmitting" includes transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier[.]
Judge Kaplan has aptly described section 1960 as containing "somewhat peculiar terms." United States v. Bah, 2007 WL 1032260, at *1 (S.D.N.Y. Mar. 30, 2007). Section 1960 does not itself set forth the criteria to determine whether a money-transmitting business is required to register. Instead, it incorporates the registration obligations enacted by individual states, 18 U.S.C. § 1960(b)(1)(A), as well as a federal statute requiring a money-transmitting business to register with the Treasury Department, 18 U.S.C. § 1960(b)(1)(B). "That the statute essentially defines the term 'money transmitting business' as 'money transmitting business' in subsection (b)(1) is among the more glaring problems the statute presents." United States v. Ali, 2008 WL 4773422, at *12 (E.D.N.Y. Oct. 27, 2008). Section 1960's Patriot Act revisions also removed a mens rea requirement that the defendant must be aware of the obligation to register a money-transmitting business. See United States v. Elfgeeh, 515 F.3d 100, 134 (2d Cir. 2008) (finding no error in instructions to the jury that a defendant need not have knowledge of licensing requirements in order to be found guilty); Bah, 2007 WL 1032260, at *1 ("Section 1960, as amended by the USA PATRIOT Act, makes the defendant's state of mind with respect to the need for a State license irrelevant, at least in the absence of a relevant provision of State law making the need for a license under State criminal law depend upon the defendant's state of mind.")
To find Mazza guilty under section 1960, I must find beyond a reasonable doubt that 1.) Mazza knowingly conducted, controlled, managed, supervised, directed or owned 2.) a money-transmitting business that 3.) affected interstate or foreign commerce, and 4.) was not in compliance with applicable licensing requirements under either state or federal law. 18 U.S.C. § 1960(a).
I. Mazza Knowingly Conducted, Controlled, Managed, Supervised, Directed or Owned Turismo
The evidence convincingly demonstrates that Mazza partially owned Turismo, was in control of its activities, and was actively involved in its day-to-day affairs. (See, e.g., Tr. at 243 (testimony of Mazza describing Turismo as "the institution that I operated . . . ."); 257-58 (testifying that he was one of Turismo's three owners).) Based on Mazza's own testimony, I find beyond a ...