FINCEN ISSUES NOTICE ON THE USE OF COUNTERFEIT U.S. PASSPORT CARDS TO PERPETRATE IDENTITY THEFT AND FRAUD SCHEMES AT FINANCIAL INSTITUTIONS

Immediate Release

April 15, 2024

WASHINGTON—Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN), in close coordination with the Department of State’s Diplomatic Security Service (DSS), issued a Notice to financial institutions on fraud schemes related to the use of counterfeit U.S. passport cards. The Notice provides an overview of typologies associated with U.S. passport card fraud, highlights select red flags to assist financial institutions in identifying and reporting suspicious activity, and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA).

“FinCEN appreciates our partnership with DSS to highlight what is a concerning increase in the use of U.S. passport cards by illicit actors to impersonate and defraud individuals at financial institutions across the country,” said FinCEN Director Andrea Gacki. “We are issuing this Notice to help financial institutions and their customers from becoming victims to this crime, and to remind them to remain vigilant in identifying and reporting related suspicious activity.”

“The Diplomatic Security Service remains committed to protecting the American people and financial institutions from those seeking to perpetrate financial crimes by exploiting Department of State-issued identification documents,” said DSS Deputy Assistant Director for the Office of Investigations Greg Batman. “We hope this Notice will help financial institutions recognize fraudulent passport cards and their unlawful use.”

From 2018 to 2023, U.S. passport card fraud has resulted in $10 million in actual losses and $8 million in additional attempted losses with over 4,000 victims in the United States. However, DSS and other law enforcement agencies assess losses associated with U.S. passport card fraud and associated identity theft are likely significantly greater and seek increased reporting by financial institutions to identify additional illicit activity. Fraud, including financial crimes related to the use of counterfeit U.S. passport cards, is the largest source of illicit proceeds in the United States and represents one of the most significant money laundering threats to the United States, as highlighted in the U.S. Department of the Treasury’s National Money Laundering Risk Assessment, the National Strategy for Combatting Terrorist and Other Illicit Financing, and FinCEN’s Anti-Money Laundering and Countering the Financing of Terrorism National Priorities.

The full Notice is available online at FIN-2024-NTC1

HOW A REFORMED MONEY LAUNDERER FOUND OUT MOSSACK AND FONSECA'S DIRTY LITTLE SECRET MORE THAN A DECADE AGO

I was trying to learn who the beneficial owners of several shell corporations formed by Mossack & Fonseca were, many years ago, when I stumbled upon this clever method of operation. They formed front companies in a number of the English-speaking tax havens in the East Caribbean, rather than their native Panama, where they might be uncovered by an enhanced due diligence sleuth. They intentionally deleted the names of the specific jurisdictions from external correspondence with banks, leaving that information to be the subject of guesswork on my past. M & F staff were quite good at their jobs, I quickly realized.

Here's the best part; they used locally admitted lawyers in these tax haven island republics and British Overseas Territories, rather than their own Panama City people. When you tried to find office addresses for these locals though, there was no brisk-and-mortar law office to be found; they were working virtually, long before such a term was fashionable for attorneys, making further inquiries impossible. there was simply no physical office to visit, let alone subpoena if you could, no legal secretaries or paralegals to interrogate, and no bloody files.

Now you know why I regarded that firm as highly effective in assisting corrupt PEPs, American tax evaders, and professional money launderers, and why it was a clear and present danger to the global banking community, as an opaque company, when using legitimate international financial institutions, increases the risk those banks may someday be held accountable by the law, or regulators, for facilitating money laundering.

IRANIAN SEIZURE OF PORTUGUESE SHIP IN THE STRAIT OF HORMUZ ADDS ONE MORE UNCERTAINTY FACTOR INTO SHIPPING AND RISK COSTS AND THEREBY FURTHER ASSISTS TBML LAUNDRYMEN

Compliance officers conducting transaction monitoring duties for international banks that have international trade clients should note that this week's illegal Iranian Navy seizure of a merchant vessel en route to India adds still more fuel to the difficulties they face daily in determining whether specific payments for shipping, including insurance and risk costs, or wholesale goods, is legitimate, or trade-based money laundering. the increased threat of a wider war in the Middle East specifically between Iran's proxy terrorist forces and the State of Israel, is now the highest it has been since the attacks on 7 October.

You should expect to find major increases in the direct and indirect costs of shipping goods to Europe, and such variable costs will fluctuate wildly, meaning there is no rhyme or reason to accurately calculate or estimate them. TBML laundrymen are having a field day placing criminal proceeds within such payments, and you will be hard-pressed to identify and interdict them. Nevertheless, by maintaining close ties on your information sources for insurance, risk management, shipping costs, and miscellaneous expenses that are now being routinely charged, you can cut through the confusion, and arrive at an accurate determination of what is legit and what is TBML. Press on in that manner to deal with any new challenges that may arise if a shooting war, or additional violence, occurs. It is your information resources that will serve you best in uncovering TBML.

WE NAME THE 27 CO-DEFENDANTS IN THE MOSSACK & FONSECA MONEY LAUNDERING TRIAL UNFOLDING IN PANAMA THIS WEEK

Longtime readers of my financial crime articles may recall that I named and shamed many of the M & F partners and staff attorneys, who left the firm when the scandal broke, to work elsewhere in Panama City, intentionally omitting their previous employment at the target of the "Panama Papers." We did so to insure that any potential future clients, and those American lawyers needing to retain local counsel there, had all the facts before associating with lawyers who might later be arrested. Now, as you can see, arrests did come to pass.

We note that there is a presumption of innocence with these individuals, and that a few of their names are fairly common in Latin America. if in doubt, demand the lawyer's full name, and complete work history. Then check social media for confirmation. That being said, here are the names, as they appeared in Panama media reporting on the trial:

DIRK BRAUER 

AXEL GAUSTER

 RAMSES OWENS

RUBEN HERNANDEZ

 HILDA SOTO 

EDISON TEANO

RIGOBERTO CORONADO

 RICARDO SAMANIEGO

YADIRA DE BOUTARD 

YACKELINE PEREZ 

YENNY MARTINEZ

 HERCIBELLE GONZALEZ 

ZACGARY LUNDGREN

 SABINA DE RAMOS 

ANN ATENCIO

 EGBERT WETHERBORNE

 ERNESTO GONZALEZ

EYRA PERDOMO 

VALENTIN URENA 

ITTEL FUENTES

JELICA DE MARTINEZ 

MARIA GONZALEZ 

REINA CHONG

 MARIA DIAZ 

AMAURI BATISTA

 SANDRA NARANJO 

HANS KOLSDORF

'MY SON IN MIAMI MAKES THE MONEY DISAPPEAR"

This statement, made by a Federal prosecutor at an ongoing money laundering and conspiracy trial of a former senior Ecuadorian government official accused of taking ten million in bribes and kickbacks, in the first American Odebrecht case, says it all about the systemic problems South Florida faces from laundrymen who clean dirty money through the area's banks and real estate agencies. Other American cities have similar problems, although not to the extent that we see it here.

Part of the problem, the facilitation of money laundering through real estate investments, it is hoped will be minimized by a recent court settlement that has resulted in a sea change in the way that real estate agents receive what many claim to be clearly excessive commissions, under circumstances that encourage ambitious agents to exercise "Don't Ask, Don't Tell" regarding dodgy or suspicious clients, due to the lucrative fees paid at closing.

While most American are focused upon the removal of the six per cent commission rate, that fact that agents on both sides have benefitted from high commissions. which encourage them to ignore any Source of Funds or Source of Wealth questions, even when they are staring them in the face. America's powerful real estate lobby, having now been taken down a peg in the multi-million dollar settlement, should now start advising their agents to being looking under the mattress when dealing with affluent clients, especially now that AML will eventually become a part of the real estate sales world.

WHEN CRIMINALS IGNORE THEIR MONEY LAUNDERERS, THEIR MISTAKES END UP ASSISTING COMPLIANCE OFFICERS AND LAW ENFORCEMENT AGENCIES

One of the biggest problems that money launderers face, regarding their criminal clients, is failure to follow their instructions. Wealthy criminal clients often become extremely arrogant, due to their newfound assets, and often question their laundryman's decisions, even if they have little or no background in finance or the dark realities of working in opaque tax havens, where the players often choose to take advantage of criminals, because they cannot go to the authorities.

In my personal case, one group of drug smuggling clients having made many millions in illicit profits, ignored my advice to steer clear of lawyers and banks in Switzerland, because I judged the risks of loss to be too high, even back in the freewheeling 1980s. They quietly move a significant portion of their criminal profits there, only to later find that unethical lawyers diverted some of their money to their own pockets. When clients think they know more than their laundryman, because they are full of themselves due to success, they often make major errors, which is an opportunity for law enforcement, as well as compliance officers, to discover their activities, and seize or freeze their funds.

My clients, whose leaders chose to inform on yours truly and the organization's accountant, to reduce their ultimate sentences, found later to their dismay that I revealed to law enforcement, in response after my arrest, sufficient evidence about their operations, to afford the Swiss authorities, in coordination with the US, to seize and forfeit millions of illicit profits held in Swiss banks. Never cross your money launderer because he or she literally knows where the bodies are buried, financial or otherwise.

MY LECTURE TOPIC AT NEXT WEEK'S CX24 IN SAN ANTONIO ON ON 17 APRIL

If you are attending the event, I hope to see you there. I will be covering the advanced money laundering techniques that community bankers can expect to face in 2024.

TO CATCH TRADE-BASED MONEY LAUNDERERS IN THE ACT, LEARN EVERYTHING ABOUT WHAT TBML LAUNDRYMEN KNOW ABOUT THEIR INDISTRY

We are in the middle of a TBML crisis; the perfect storm of choke point transportation issues with the Suez/Red Sea/Gulf of Aden, Panama Canal, Black Sea and Baltimore bridge accident have rendered the generally reliable red flags through which compliance officers working in transaction monitoring identify TBML in progress useless. So long as the global situation remains in constant transition, legacy compliance procedures are ineffective.

So, what to do? It is humbly suggested that compliance officers broaden their knowledge base in the shipping, insurance and transportation sectors, so that they possess the same information as the laundrymen are using to push the proceeds of crime right under their noses. Are you tapped into the daily status of transportation pricing, supply and demand regarding consumer goods coming from Asia to Western markets, insurance and risk management resources, meaning the shill sets that TBML laundrymen already have, by virtue of their experience in the industry. In short, learn what they already know, and access the relevant insider resources for anything that you cannot acquire.

Compliance officers,establish go-to people in the above fields, whom you can plumb for what passes for internal industry information in those sectors. Take some courses, even online in your precious spare time, or get your superiors to sponsor them, and allow you to devote a portion of your work week to education. If you really want to be able to spot TBML during this chaotic period, immerse yourself in the industry where laundrymen already have the training and experience, and are embedded in it. Emulate your opponents' background and knowledge, to beat them at their game.

A REFORMED LAUNDRYMAN EXPLAINS THE SPECIAL MONEY LAUNDERING CHALLENGES FACING COMMUNITY BANKS

If you are attending CX24 this month, in San Antonio, I will be presenting a lecture detailing the unique money laundering problems that community banks in the United States face. My lecture, which is sponsored by CSI, will be given on April 17, 2024. If you are scheduled to be at CX24 this year, you are cordially invited to attend.

All attendees at my presentation who have not read my autobiography, The Laundry Man ( Penguin Random House UK), will have the opportunity to receive it in the electronic version, with my compliments, courtesy CSI.

SINGAPORE'S MERE THIRTEEN MONTH SENTENCE FOR MONEY LAUNDERING IN TWO BILLION DOLLAR CASE IS NO DETERRENT WHATSOEVER

Remember that recent USD$2.2bn money laundering scandal in Singapore, where Chinese nationals using passports from Cambodia and Vanuatu, as well as a couple of cooperating European jurisdictions, moved the proceeds of crime from illegal online Chinese gambling websites through the country's banks with impunity? The first defendant to be sentenced in that case just received a paltry thirteen months for his extensive involvement. BTW, he was caught with over six million dollars in assets, which represented his net profits from the illicit operation.

What's wrong with this picture? How will Singaporean authorities ever deter others from participation in laundering operations, we ask? This sentence neither demonstrates the seriousness of the many crimes the defendant engaged in, nor takes him out of circulation for a lengthy period of time. Whether he relocates to another country after his deportation, and simply picks up where he left off, we cannot say, but part of the purpose of sentencing is to discourage him from recidivism. He will be out of prison in a heartbeat. Career criminal with a slap on the wrist.

This sentence will not deter anyone from seriously considering participation in a money laundering scheme. Singapore, which metes out the death penalty for narcotics trafficking, should understand that money laundering offenders also represent a clear and present danger to the national interest, and sentence violators to a lengthy term of imprisonment.

EIGHT LONG YEARS LATER, MOSSACK AND FONSECA FINALLY GO ON TRIAL FOR MONEY LAUNDERING IN THE REPUBLIC OF PANAMA

Remember Jurgen Mossack & Ramon Fonseca Mora, the two partners in a firm that offered all the services that a money launderer or corrupt PEP could possibly want? They are, at long last, going to trial in Panama on money laundering charges, after eight years. Twenty seven others will reportedly stand trial with them. Their method of operation of total opacity as to beneficial ownership was to engage local lawyers in obscure East Caribbean tax havens, as frontmen ( and women) to form companies for their tax-evading corrupt and laundrymen clients.

I am sure that, if you have been in the compliance business for a while, you recall the Panama Papers, where a number of unnamed individuals ( I knew some of them) blew the whistle on their illicit activities, especially for corrupt foreign government officials artfully hiding bribe and kickback money with their assistance.

I know how this will end, and it won't be with a conviction and prison sentence; the Panamanian justice system is far too corrupt for that to occur. That's why legitimate foreign businessmen and bankers should give Panama a wide berth, lest any civil litigation they must bring against Panamanians is endlessly delayed ad nauseam. M & F will probably skate, in my humble opinion, or suffer only a token fine; Don't expect justice.

DO YOU HAVE TO GO TO LAW SCHOOL TO BECOME A TRULY EFFECTIVE COMPLIANCE OFFICER?

Several years ago, upon request, I wrote a screenplay about two elderly retired (and convicted) Miami money launderers, toiling late at night in a downtown office building. After their release from Federal Prison, the only jobs they could get were as cleaners in lawyers' offices. Think grey-haired Don Johnson and Andy Garcia; They are found by a Madrid detective, who hires them to find an elusive global money launderer thought have died before a Cuban firing squad years before, but who is, in truth and in fact, very much alive, and hard at work cleaning drug profits in South Florida. They closely worked with him decades ago, and could be the only ones capable of bringing him to justice.

Correctly assuming that their target has eyes everywhere in his native Miami, they conduct their investigation from the unusual anonymity of a museum, located in the city's Historic Overtown, which was the police department and courthouse in the pre-1965 segregated past, knowing that he would never consider looking for them there.Eventually, they find their subject, performing on stage on Miami Beach, having long ago assumed a new identity, and altering his physical appearance. The identified him from a specific technique that he employed to launder the proceeds of his clients' crimes.

The moral of the story if there is one, is that to catch a money launderer, you need people who have the tools, and skills to rein him in. Although many may disagree with me, I firmly believe that, to be really effective, a compliance officer must start with the education and training that only a law degree can confer. Learning about a wide variety of legal subject prepares the individual to meet the challenges that the job presents. The fact is, many laundrymen are practicing attorneys, who use their acquired skills to create tradecraft that deceives and confuses traditional compliance officers, who don't have the perspective, as well as issue perception, which three years of learning from the casebook method instills in them. Simply put, I believe that there's no other training and education one can acquire which will put you on a level playing field with what former DEA Special Agent Tom Cash once referred to accurately as
attorney-criminals.

I rest my case.