Were the bank activities themselves illegal? It would only be entrapment if they were soliciting the illegal activity. It sounds like they were just soliciting banking services in a way that was attractive to illegal actors. Even if the banking services themselves were not legal, it would seem like entrapment if they used that to charge them with banking crimes.
If NYPD operated a Limousine service in hopes that criminals would discuss their crimes while being overheard by an undercover officer, it would not be entrapment.
“ It would only be entrapment if they were soliciting the illegal activity.”
I’d like to note that this isn’t how entrapment works in the US (or many other places). If I’m an investigator, it is not entrapment for me to go to government employees and say “Hey, I’ll give you $100 in exchange for state secrets. You in?”. Covertly soliciting illegal activity to try to catch criminals is not entrapment. It only rises to the level of entrapment when it is something that would cause a “normally law-abiding person” to break the law, or that the defendant would otherwise have had no criminal intent - for example, “Give me state secrets or I’ll kill your wife” would be entrapment.
But in this case they are setting up a bank that has the ability to facilitate certain banking practices that would be difficult to accomplish without a complicit bank. As such, no person, whether a criminal or not, would be able to commit these crimes without the help of the bank acting as law enforcement agent. The only way it would not be entrapment with regards to the illegal banking would be if they could show that there are other non-law-enforcement run banks that were available to make these facilities available to the defendant. If other banks have mechanisms in place to prevent these banking crimes in the first place, then you couldn't expect that the defendant could have committed them without the assistance of the government agent.
However if they learned information about other criminal activities through this, then those activities would not be subject to a defense of entrapment.
So go ahead and charge them on drug trafficking. But the laundering charges look like entrapment to me. Not a 100% shut and closed case, because it is a bit subjective, but I would expect any defense to have a good chance with it.
That’s not how the court decides if something is entrapment or not. To determine if something is entrapment there are two tests, and this fails both.
Objective test (Did LEOs use incentives that would cause a normally law-abiding person also do this?): Most normally law abiding people won’t launder money given the opportunity, as they have no incentive and the police didn’t provide any additional incentive here. Not entrapment on those grounds.
Subjective test (Was the defendant pressured into doing this?): It would be hard to argue that these people laundered money against their wills. Furthermore, they’ve all committed additional crimes which would predispose them to want to launder money. Not entrapment on those grounds either.
Yes, if the money was higher, then it is entrapment. E.g. 100k for a secret.
The question is “did the police agent catch a crime or cause a crime to happen” of course where it becomes entrapment is a grey area.
The bank activities were illegal and non compliant. The OCC was about to cut them out of the entire banking network for poor reporting, meaning no OCC-licensed banks could take or send wires to them or hold accounts in their name. It would have shut off all trade for this bank without knowing what they’re doing or alleging any crime, yet.
This is how the US enforces its will worldwide.
The Treasury has a similar way to do that, without the OFAC list. They did it in 2018
Back to the OCC, the outcome of the audit would have solidified criminal charges against the bank directors, but then they backed off with the “this is a government operation” excuse. Other reasons they would back off being any other kind of leverage, which small banks do not have.
If NYPD operated a Limousine service in hopes that criminals would discuss their crimes while being overheard by an undercover officer, it would not be entrapment.