Wednesday, October 1, 2014


The Sentencing Council has issued its final guidelines for criminal offenses, applicable where the defendant is sentenced after October 1, 2014. If you work in financial industry in the UK, you are advised to review the complete text on money laundering, which you can access here*; The chapter on money laundering begins on page 35.

Whether the maximum sentence imposed for money laundering,  of 14 years (serving no more than 13 years in custody), is insufficient punishment for the most prolific (over £10m) money launderers, and whether they should be held in custody for a longer period, as they pose a major threat, will certainly be debated. In my humble opinion, the money launderers who move real volume should be taken out of the financial system, and incapacitated, through sentences longer than that which the Sentencing Council, in its wisdom, has seen fit to impose. They need to be withdrawn from circulation, to be blunt about it. America's 20-year penalty per count, which can be served consecutively, as we saw recently, is effective.



Juan Carlos Varela, the new reformist President of the Republic of Panama, has openly and publicly asked the former Chief Justice of the Supreme Court of Panama, Magistrate Judge Alejandro Moncada Luna, to explain the Source of Funds for his purchase of two high-end apartments, for which he paid over $2m in cash.

There were two transactions:

(1) The first purchase reportedly involved a cash purchase, for $1.7m, of a luxury condominium at a project known as Coco del Mar,  which was purchased through a corporation called Corporacion Alpil S.A., which Judge Moncada Luna is said to own.

(2) the second, reportedly purchased using another Moncada-controlled corporation, Corporacion Celestial, was located in the Ocean Sky residential tower. Four hundred thousand dollars, in cash, was allegedly paid over at closing, and the $500,000 purchase money mortgage was satisfied in full shortly thereafter. The judge and his wife presently live in that unit.

Where did all this cash come from ? The court system, including especially the Supreme Court of Panama, is rife with corruption. Litigants have complained for years that they could not move their cases along to trial without paying bribes; conversely defendants have successfully delayed major cases indefinitely, through the alleged payment of bribes, directly to the judges and justices. The rampant corruption in the legal system is one of the reasons for Panama's elevated Country Risk assessment.  Moncada Luna was appointed by former President Martinelli, who also has been linked to corruption, in Panama and in Italy.

An additional question to be answered: how did the Banco Nacional de Panama grant a poorly paid civil servant, whose salary and assets could not possibly justify either the cash down payment, or make the mortgage payments ? The bank should be investigated by the Superintendent of Banking, though it is doubtful whether this will ever occur, as Panamanian regulators studiously ignore its banks' sins and regulatory violations.

Most Panama watchers feel that, notwithstanding the demands for answers, verbalized by President Varela, Moncada Luna will be neither investigated nor charged with corruption, but the lack of a court system where the Rule of Law, and not the payment of the dollar, can be counted on to occur, will continue to deter a large number of foreign investors and multinational companies. When you cannot count on the legal system for redress of grievances, many do not want to risk their investment capital there.  


James Sabatino, a career criminal who has spent most of his adult life behind bars, was sentenced to five years in state prison this week, by a Miami-Dade County Circuit Judge. Sabatino, who defrauded three Miami hotels out of $274,000, by impersonating powerful record company executives who were reputedly entertaining well-known entertainment celebrities, had been recently released from a stint in Federal Prison, and was on Supervised Release when he committed his new crimes.

Sabatino, who once sought to be released from a prison in the UK by threatening the lives of President Clinton, and his brother Roger, and threatened to kill Federal judges, by blowing up the Federal courthouse in Fort Lauderdale, Florida, has perpetrated a number of major frauds during his dark career, and always reverts to a life of crime after his release from prison. His father operated a restaurant that allegedly was connected to organized crime in the New York area. Sabatino once obtained a large number of Super Bowl tickets, by claiming that he was an executive of a major corporation, and promptly sold them; that's his typical method of operation, misrepresenting that he is a powerful executive.

Here is the key to his fraud in this case: he sent routine correspondence to the company that he wished to claim he was employed by, and doctored the reply letters he received, which contained the letterhead and signature of a senior officer, into documents stating that he was an authorized employee, and that the company guaranteed any bills that he might incur on its behalf. The victims unfortunately never engaged in any due diligence, to verify that the letters were genuine, which allowed Sabatino to defraud them. He relied upon the fact that most hotels want to accommodate big corporations, which typically run up substantial bills, and also to be able to claim that celebrities are their guests, with the favorable resultant publicity, meaning press coverage of the celebrities' activities. Sabatino, who weighs 360 pounds, was sufficiently familiar with the entertainment industry to convince his victims that he was a record company executive, with prominent clients to wine & dine.

All businesses must remember that, if they rely upon representations, and fail to verify them, they could fall victim to a costly fraud.

Monday, September 29, 2014


                                                 "The Weed of Crime bears Bitter Fruit."

A Federal Judge in Miami, obviously sick and tired of seeing the relatively short sentences meted out to money launderers, slapped a Madrid laundryman with a one hundred and fifty (150) year sentence. Alvaro López Tardón, who is said to have moved eight tons of cocaine in Europe, and who chose to launder his criminal proceeds in Miami, laundered over $14m in the Magic City, over a decade.

The defendant purchased high-end condominiums, including one million dollar one on Miami Beach, that was his residence, seventeen luxury cars, including a Bugatti Veyron, and a Ferrari Enzo, a million dollars of watches, and sundry other jewels. His associates bulk cash smuggled the money into the US, wired it to third parties, as well as to his controlled shell companies and front operations.

Tardón was convicted of one count of Money Laundering (20 years), and thirteen counts of Money Laundering Conspiracy, at ten years each. US District Judge Joan Lenard ordered* that he serve the conspiracy counts consecutively, which is another 130 years. He also drew a $2m fine, and a money judgment, to cover the forfeiture of assets seized, in the amount of $ 14,358,639.64. Since he's probably not a citizen, expect his deportation after he serves 127 years, 6 months.

As they say, let the punishment fit the crime. Let us hope that this case serves as a deterrent: you launder money in Miami, you go to prison for a long, long time.
* Case No.: 11-cr-0470-JAL (SD FL).

Sunday, September 28, 2014


It would appear, according to the best sources, that the Islamist terrorist group, Boko Haram, owes its funding to prominent Nigerian businessmen and PEPs. These individuals are reportedly funding the purchase of most of the organization's arms, ammunition, equipment and uniforms. 

The route that the terrorist financing takes is said to be:
(1) Funds are delivered by the funding parties to the Central Bank of Nigeria.
(2) the CBN transfers the money to accounts located in Cairo, where a well-connected Nigerian national, with jihadist links, purchases the arms, which are then shipped to BH.
(3) Alternatively, motor vehicles are purchased, and shipped to Benin, and transported into Nigeria, where they are sold at a reduced price, giving BH the cash it needs.   

One wonders why one does not see any visible international law enforcement efforts to interdict the efforts of those who are providing material support to Boko Haram. Neither the United States nor the UK has come out and discussed any ongoing programs to suppress terrorist financing to BH, and it is doubtful that Nigerian authorities will identify the senior PEPs involved. 

We know that BH also derives some of its income from illicit business matters inside Nigeria, and we intend to cover these in upcoming articles, but we ask the question: since the funding pipeline is known, as if the identity of the Nigerian arms trafficker who is the BH purchasing agent in Cairo, why haven't the Egyptian authorities, (with Western assistance if necessary), shut it down ?


This Fall, the Securities & Exchange Commission will continue to discuss a proposed change on the regulations governing the required minimum wealth that Accredited Investors must hold, to allow them to invest in exempt (unregistered) securities. The question is: will this change result in more, or less, financial crime, involving financial fraud ?

As you know, to be an Accredited Investor, one must:
(A) Have earned at least $200,000, during the past two years, with an expectation that it will continue, or...
(B) have a total household income of at least $300,00, for the same period, for a married couple, or...
(C) Have investable assets of at least one million dollars, exclusive of real estate holdings.

The proposals seem to going in this direction:
(1) $500,000 in income for the past two years, or...
(2) $2.5m in liquid assets, exclusive of real estate.

While the agency's intent, in the proposed increase in the floor, for designation as an Accredited Investor, there may be an unexpected, and unwelcome, result here.

(A)  Those investors who qualified before, but are now under the minimum, but still want to invest, could be driven to investments that contain a larger number of fraudulent operations, than they would have seen with exempt securities. Investment opportunities, which are later found to be fraudulent, might blossom, and target those now-disenfranchised investors, to their damage and detriment.
(B) Those with more than the $200,000 previously required, may be pooling their funds with others in similar situations, meaning those in the $200-$495,000 range, are look for alternative investments that do not cater to Qualified Investors, due to either high risk, or fraud.

We should take a hard look at the potential financial crime fallout, which could occur if the definition of Accredited Investor is raised, and see whether the possible increase in financial crime can be suppressed, whether through a high-profile public awareness campaign, or some other steps, to insure that good intentions do not result in an increase in investment fraud.


Art imitating life imitating art. Thanks for the memories, from one who lived it. In September 1984, the new television series Miami Vice brought the dark side of Miami life into American living rooms, and after that, the world's image of Miami would never be the same. Though the program took, at times, poetic license with Miami's drug-fueled life (and economy), its honest portrayal of the city opened more than a few eyes in Peoria.