Monday, September 15, 2014


Francisco Illarramendi, whose Ponzi scheme disguised as a hedge fund is about to result in his serving a Federal sentence of as much as 70 years, has sold his home. Located in pricey Fairfield County, Connecticut, Illarramendi and his wife received $3,418,500 for their mansion, according to real property reports from New Canaan. If you are interested in driving by the residence, to see just how well hedge fund managers, especially crooked ones, live, the address is 61 Parade Hill Lane. See the photograph above if you cannot make a personal visit. It's not too shabby, as you can see from here.

Did the court-appointed Receiver, assigned to garner assets of the hedge fund for the victims, who reportedly lost an estimated $300m, get the check ? We cannot say, but inasmuch as the wife of the Ponzi schemer was required to turn over their joint tax refund check to the Court, and since Illarramendi, presently in custody, could not have attended the closing in person, but had to execute the deed, the odds are that probably most of the closing proceeds, after payoff of any bona fide existing mortgages, is now in the hands of the Receiver, who surely had a representative at the closing.

Venezuelan expats living in the United States are anxiously awaiting the sentencing of Illarramendi; their wait will soon be over. They are still reeling from the impact of the dismissal, by the Receiver, of his civil suit against Illarramendi's close associate and sometime financier, Moris Beracha, who seems to have dodged the bullet thus far.  Was he forced to make a monetary settlement with the Receiver ? The court file is silent, and the mystery remains. Do you know ? There is also Javier José Ardura Gomez, a Spanish businessman whose involvement has been a matter of intense speculation since the Ponzi scheme imploded. How does he figure in, and why does he no longer come into the United States ? As you can see, questions abound in this case.


Things aren't going too well for the Arab Bank, which is presently in trial, in US District Court in New York, being sued by the victims and heirs of American victims of Hamas terrorist acts committed in Israel. The bank's defense counsel could be doing a better job of representing their client.

First, the bank flat out refused to make discovery, which one does not do in a Federal case if you expect to win. It declined to produce relevant books and records, asserting that such acts would violate Jordanian bank secrecy laws. (The bank is headquartered in  Jordan). This position has been untenable in the United States since the Bank of Nova Scotia case. As the result, the bank's ability to conduct a defense has been severely curtailed by the Court.

Second, the bank's expert witness on Hamas, an Irish academic who has written a book about the designated terrorist organization, testified that she was unable to find any connection between Hamas and charities operating in the region. When cross-examined, she admitted that she cannot read Arabic. Exactly how was she able to conduct research of Hamas activities, when she was unable to read any documents ?

The trial continues, and we shall report on the outcome, but I think you have a pretty good idea of what that will be.

Sunday, September 14, 2014


The President of Mexico, Enrique Peña Nieto, in a speech given last Friday in Reynosa, has declared that the strict, and to date highly effective, restrictions on Mexican businesses making large US Dollar deposits, in banks and MSBs, will now be partially lifted. Sr. Peña stated that the reason for the change was that Mexican companies were hurting honest businesses and corporations.

The restrictions, which imposed a USD$14,000 monthly limit on dollar deposits, now contain an exception. To qualify, these conditions must be met:

(1) The business must have been established for a minimum of three (3) years.
(2) The business must allow the authorities to monitor all its financial transactions.
(3)  The business must prove that it needs to make monthly deposits in excess of $14,000 in order to operate.

In recent years, Mexican narcotics traffickers have been forced to bulk cash smuggle their dollar profits into Panama, and other Central American jurisdictions, in order to deposit their drug profits earned in the US. They have also resorted to shipping the cash back into America.

Will this new exception to Mexico's extremely effective method of denying traffickers a safe haven for their dollars ? It is too soon to say, but experienced money launderers will probably do the following to qualify:

(A) Buy into, or otherwise take control of legitimate businesses that have been established for the mandatory three years.
(B) Bribe, threaten or otherwise coerce underpaid and corrupt inspectors and regulators who visit their entities into certifying to their superiors that they are in full compliance with the law.
(C) Make sure that the businesses they purchase can show that they need to deposit large amounts of dollars to compete, and survive.

Is President President Peña's new policy a dangerous step backwards in his country's anti-money laundering efforts ? Absolutely. It will only serve to open the floodgates again to drug dollars entering the global financial structure, which will further empower the Mexican Cartels.


The Superintendent of Banking in the Republic of Panama has warned the banking public of a fraud that claims to originate in is office, and seeks to relieve account holders in Panamanian banks of some of their money. It's the usual "tax clearance letter" scam. The letter appears below, and it is obviously intended for English-speaking account holders.


Ever since the end of the recent Gaza hostilities, there have been ominous threats of war, emanating from Hezbollah-controlled South Lebanon. Some of the statements and rumors are extremely disturbing:

(1) Hezbollah intends to invade Galilee, the area in northern Israel adjacent to the frontier with Lebanon, in force during the next conflict.

(2) Hezbollah fighters have acquired extensive combat experience in Syria, which increases the organization's ability to inflict serious casualties upon Israel Defense Forces in any future clash.

(3) Hezbollah's vastly increased missile inventory will rain down upon all of Israel's cities, causing a large number of civilian casualties.

(4) Sounds of possible tunnel networks, possibly constructed between Lebanese border villages and Israel, could result in an underground armed invasion into Israeli towns, resulting in the killing of noncombatants and kidnappings.

Israel has previously announced that, in the event of any future conflict initiated by Hezbollah, that it will take the battle into Lebanese territory, and assign responsibility to that country's government for its failure to rein in its non-state actors. Given that Israel destroyed some infrastructure outside Hezbollah-controlled territory in 2006, the last time it battled Hezbollah, you may assume that it will again inflict  similar damage.

In addition, given that there are probably a number of Lebanese banks that are moving money for Hezbollah, in the post-Lebanese-Canadian bank environment, notwithstanding all the Beirut bankers' denials, One must assume that the Israeli military will target the downtown Beirut financial community this time, so as to degrade Hezbollah's ability to rebuild and rearm. I do not think that Israel will exercise the level of restraint that it did in 2006.

Therefore, as a prudent risk management venture, so long as war drums are beating in Lebanon, international banks with financial ventures there, or whose clients are heavily invested in-country, should take steps to minimize their exposure at this time. Hopefully, you have already increased Country Risk levels to the point where there will be a red flag on any new financial exposure.


Last week, the Foreign Correspondents' Club of China published a report* that confirmed that the Government of China has increased its campaign harassment and intimidation of foreign journalists. the report particularly focused on China's response to journalists who  report negative news, be it stories about corruption of Chinese PEPs, issues involving misconduct of Chinese Companies, or the activities of Chinese nationals who oppose their government's policies.

Whether it has reached the point where compliance officers conducting due diligence investigations of Chinese nationals or entities cannot rely upon the global media to report on negative information relating to the subject of their inquiries, I cannot say, but its is suggested that, when it comes to ascertaining whether a prospective wealthy Chinese client is a PEP, you are best served by engaging a Hong Kong, or Taiwanese firm to check them out. Mainland China resources are not going to provide you with the blunt truth about your client, if it contains negative information.

Any compliance officers whose research often involves Chinese clients should review the complete text of the document; The link is below.

The Foreign Correspondents' Club of Hong Kong is also reporting harassment, intimidation, and interference with their journalists' efforts to report truthfully and completely truth about events in China.

*Position Paper on Working Conditions for Foreign Correspondents in China


The Islamic State is reportedly earning in excess of $1m per day, from the sale of oil, trucked into Turkey, and sold through black-market channels.  Though the United States has voiced its strong objections, directly to Turkey's leadership, the illicit commerce, which amount to terrorist financing, continues.

Most observers believes that this illegal oil trade is being allowed to flourish because of these reasons:

(1) Islamic State holds a large number of Turkish diplomats hostage, and the Government of Turkey fears that they will be beheaded, should it incur ISIS anger. This is a reasonable assumption, given the three summary executions of Westerners witnessed lately.

(2) Turkish consumers are actually reaping a benefits from the illicit oil sales, for it has reportedly caused retail prices for gasoline to fall.

(3) A number of wealthy Turkish businessmen, and their PEP associates, have financially benefitted from this technically illegal trade.

Given Turkey's currently frosty relationship with the United States, and the EU, Western influence thus far has failed to cause Turkey to terminate the entry of oil tankers carrying ISIS oil into the country.

Since in Turkey, such activities do not occur without tacit approval of government, and given the history of corruption among the country's PEPs, a significant portion of the oil profits is certainly flowing into the overseas bank accounts of some senior Turkish PEPs. Remember also that the adult children of Turkish ministers have been implicated in massive corruption.

It might be prudent to check all your major Turkish bank clients; has anyone been making large deposits ?  Are any wire transfers coming into their accounts from new sources, perhaps ?