685 F.3d 99
2d Cir.
2011
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Background

  • Banki, a U.S. citizen born in Iran, received approximately $3.4 million via hawala transfers to the U.S. from Iran between 2006–2009 for personal use, including a $2.4 million NYC apartment.
  • The transfers were conducted through a matching hawala system via Ali Bakhtiari and involved many international depositors; Banki’s family knew of the transfers but Banki did not personally know most depositors.
  • OFAC issued two administrative subpoenas in 2008 seeking information on transfers to Banki from Iran; Banki responded by identifying a cousin as the source and claiming no Iran-based payments since 1994.
  • Indictment (March 2010) charged five counts: conspiracy to violate the ITR and operate an unlicensed money-transmitting business (Count One); violating the ITR (Count Two); operating an unlicensed money-transmitting business (Count Three); and two counts of false statements in OFAC subpoenas (Counts Four and Five).
  • Trial evidence showed Banki’s role as a hawala intermediary moving funds to Iran; he was convicted on all counts after a 15‑day jury trial; sentence imposed below the Guidelines range.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether ITR service definition requires a fee Banki: no fee means no service exportation under ITR. Banki argues the district court erred by not instructing that services require a fee. No error; service exportation can occur without a fee.
Whether non-commercial remittances are exempt from the ITR Banki: § 560.516(a)(2) exempts family remittances; ambiguity warrants lenity. Government: remittance ambiguity allows limited interpretation. Regulation ambiguous; conviction on Counts One and Two reversed and remanded.
Whether the district court erred in defining 'money transmitting business' Banki: require more than a single transaction; enforce Velastegui standard. Court ruled hawala constitutes money transmitting; single transaction insufficient for conviction. Convictions on Count One (overt act) and Count Three vacated and remanded; new trial ordered.
Whether the trial court should have given a 'mere customer/beneficiary' instruction Banki: customers/beneficiaries should be exempt from liability. No foundation in evidence for such defense on ITR or conspiracy. No such instruction warranted; proper under the evidence.
Whether government conduct in rebuttal or theory of materiality constituted constructive amendment or variance Banki: shifting materiality theory and referencing uncle’s OFAC investigation broadened indictment. Government theory remained within core criminality described in indictment. Indictment not constructively amended; variance not prejudicial; no new trial ordered on this basis.

Key Cases Cited

  • Homa International Trading Corp., 387 F.3d 144 (2d Cir. 2004) (defines service broadly under ITR; discusses fee element as dicta and supports service = transfer on behalf of another)
  • United States v. Velastegui, 199 F.3d 590 (2d Cir. 1999) (defines money transmitting business as an enterprise with profit; requires more than a single transaction)
  • United States v. Russo, 74 F.3d 1383 (2d Cir. 1996) (necessity of evidence supporting defense theory; framework for jury instructions)
  • United States v. Han, 230 F.3d 560 (2d Cir. 2000) (limits on jury instruction rights; substance of request matters)
  • Milstein, 401 F.3d 53 (2d Cir. 2005) (constructive amendment/notice of core criminality principle; firmness of indictment)
  • United States v. Rigas, 490 F.3d 208 (2d Cir. 2007) (constructive amendment vs. permissible proof flexibility)
  • United States v. Santos, 553 U.S. 507 (2008) (rule of lenity requiring ambiguity in criminal statutes to be resolved in defendant's favor)
  • United States v. Wiener, 96 F.3d 35 (2d Cir. 1996) (elements of 18 U.S.C. § 1001 and materiality standard)
  • Abuelhawa v. United States, 556 U.S. 816 (2009) (buyer-seller-like concerns in conspiracy/charges; limits on liability for merely facilitating)
  • United States v. Desimone, 119 F.3d 217 (2d Cir. 1997) (conspiracy principles for joint liability)
  • United States v. Parker, 903 F.2d 91 (2d Cir. 1990) (buyer-seller exception context in conspiracy law)
  • United States v. Grezo, 566 F.2d 854 (2d Cir. 1977) (limits of who can be a 'customer' vs. 'director' in illegal gambling)
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