Kenneth Rijock

Kenneth Rijock

Wednesday, July 29, 2015

WHY DID THE US NOT DISCLOSE THAT MULLAH OMAR DIED TWO YEARS AGO ?


The announcement today, from official Pakistani  sources, that the leader of the Taliban, Mullah Omar, died two years ago, in a hospital in Karachi, Pakistan, is yet another reminder that the United States routinely  classifies, and withholds, information that the compliance industry could use to reduce risk levels in international financial transactions that could provide material support to terrorist organizations.

Did the US Government fail to release the new of Omar's death in 2013, because it confirmed that certain interests (ISI?) in Pakistan not only cooperated with the Taliban, but gave its leadership safe haven in their country. When coupled with the fact that Osama bin Ladin was also living in Pakistan when he was killed, a picture emerges of Pakistani complicity with terrorist organizations, which raises that nation's Country Risk exponentially, and also is critical of American support for a regime that is often supporting our enemies in the war against terrorism. No wonder the State Department wanted that information classified and hidden from view.

Compliance officers, if armed in 2013 with the circumstances of Omar's death, would most certainly has governed themselves accordingly, and initiated enhanced due diligence upon most, if not all, wire transfers to, and other financial transaction with, Pakistan, based upon the well-founded fear that transfers could be terrorist financing. One wonders how many suspect transfers to Pakistan, that would have been stopped, went through, due to a lack of knowledge on the part of US-based compliance officers whose bank customers sent money to Pakistan.

When important information is classified for purely political reasons, it is those from whom the information is being kept from that generally suffer; think about that.




Tuesday, July 28, 2015

ARE YOU BANKING DECEASED HAMAS TERRORISTS ?



It seems that Hamas failed to disclose the names of a significant number of its terrorist fighters who were killed last year, during the conflict with Israel. While we know that it attempted to hide the fact that many of the dead were armed fighters who fought the Israeli Army in Gaza and inside Israel, and claimed that those who were killed were civilians, it has been accepted that a large segment of the dead were combatants.

Fifty of the dead Hamas fighters appear to have been deliberately omitted from casualty lists, and it may have been because some of them were commanders, thus constituting ranking officers, and others were the Hamas equivalent of special forces troops. Their identities, if publicly revealed, might confirm the true nature of Hamas' military infrastructure, and expose its disinformation about casualties.

Were any of the ranking officers killed in 2014 maintaining bank accounts outside the Palestinian Territories ? Given the nature of Hamas' activities, both in Europe, as well as in Africa, Asia & Latin America, it is entirely possible. Such individuals would have disguised their terrorist affiliation, and used passports obtained in Jordan, Egypt or Syria, to conceal their identities.

The morbid nature of Hamas' glorification of their dead has resulted in the proliferation of posters, photographs, and other media, depicting these deceased terrorists as heroes, and these images, together with their real names, and other information, have been collected, and can be accessed in the Appendix of the document that appears here*, which is a list of 50 individuals.

If you are a compliance officer at a bank with a large number of foreign clients from the Middle East, and you believe that it is possible that you might be unwittingly banking Hamas members, you can use the information to rule out those individuals listed, as bank clients.
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*Hamas Operatives Killed in Operation Protective Edge

ALERT ON IRAQI BANKS TRANSFERRING BILLIONS TO ISIS-CONTROLLED FINANCIAL INSTITUTIONS



If I was a compliance officer at an international bank, located in North America or within the European Union, I would advise senior management that any wire transfers to banks located in Iraq, or Jordan, may be ultimately ending up in the hands of the so-called Islamic State/ISIS/ISIL. The Finance Committee of the Iraqi Parliament has warned that $6.9bn has been transferred to ISIS, by and through banks in Iraq. This means that wires of funds, by Western banks, could be considered providing material support to a specially designated global terrorist organization, should they be forwarded to ISIS.

The United States has, thus far, turned a blind eye to the illicit financial transactions occurring in the Kurdish-controlled autonomous region of Iraq, including its movement of US Dollars into Iran, and one of the consequences of that neglect can be seen here. Iraqi Kurdistan rarely obeys any requests of the Iraqi Central Government, and ISIS oil tanker trucks have been known to be allowed to transit the area, en route to markets in Turkey. How much of the money flowing to ISIS is coming from Kurdish banks ?  

The Finance Committee has advised that Erbil & Baghdad banks involved in the illegal transfers refused to disclose the names of the account holders, but that the information was later obtained, through unofficial sources. It is alleged that major Iraqi banks are charging as much as $600,00 per month in fees, to handle the funds transfers. Jordanian banks are reported to be moving the money into Iraq, which it is promptly forwarded to ISIS-controlled financial institutions in Mosul.

Should Western bank now red line all transfers to Iraq, and should it practice enhanced due diligence on all transfers into Jordan ? These questions need prompt answers, for ISIS grows daily, and US and EU law enforcement agencies are fast-tracking their investigations of ISIS. Is the money going from Turkey, as payments for illicit ISIS oil shipments, to Jordan ?

You do not want to be made an example of, in the global war against ISIS; therefore, given the total lack of any effective compliance, Iraq's incestuous relationship with Iran, and rampant corruption, you should consider exiting ALL business with Iraq, effective forthwith, as a prudent risk management move. This may mean ending lucrative correspondent relationships.

Monday, July 27, 2015

TD BANK AGREES TO PAY $20m IN LIFE SETTLEMENT CLASS ACTION


TD Bank, which has had its problems in the Scott Rothstein Ponzi scheme, has agreed to pay $20m, to settle claims against the bank in a massive $223m life settlement fraud class action. TD Bank, an affiliate of Canada's Toronto Dominion Bank,  allegedly vouched for customers that were administering the assets of a European life settlement company, Quality Investments, although the bank knew that there were serious problems.

The suit alleged that the bank allowed funds wired to trust accounts to be co-mingled, which meant that money invested for specific life insurance policies were used to pay unrelated premium obligations, to pay money to other investors (was it a Ponzi scheme ?), or to participants in the alleged scheme. TD Bank is said to have allowed the opening of more than thirty accounts, without identifying the investors, the nature of their investment, or their relationship to the life settlement company. The bank's verification of a customer relationship in good standing, with large balances, to investors was inaccurate and misleading, and may have facilitated investors to place their money with Quality.

Furthermore, TD bank reportedly failed to report wire transfers to known offshore tax haven jurisdictions known for money laundering activities, and it seemingly conveyed the impression, to investors, that it was overseeing the accounts.

While there have been criminal charges filed in the EU against four defendants, no criminal charges, arising out of this case, have been filed to date in the United States. Some observers have likened the case to the landmark life settlement case of Mutual Benefits Corp, which was a billion dollar Ponzi scheme.

The preliminary settlement is subject to approval of the US District Court in the Southern District of Florida.

Sunday, July 26, 2015

DOES INVESTOR SUIT AGAINST BANCORP AND ITS OFFICERS SIGNAL A SEA CHANGE IN LIABILITY FOR AML FAILURES ?

The shareholder class action suit, filed against the Bancorp Bank, and two of its senior officers, its CEO and CFO, could be the shape of things to come. Should senior management be held liable for AML/BSA deficiencies, when they are not disclosed to stockholders ? A regulatory Consent Order issued on June 5, 2014, caused by rampant BSA compliance deficiencies, most likely caused the bank's stock to tumble from a high of $21.00 per share, to today's $8.75; No wonder the shareholders are angry. They are alleging materially false and misleading statements, and material omissions, were made by Bancorp, a publicly traded company.

We note that 80% of the bank's securities are owned by institutional investors, specifically pension & retirement plans, for teachers, labor groups and police organizations. Many of those interested parties have moved to be appointed as lead plaintiff, and for approval of selection of counsel. The action, which was filed last year in US District Court in Delaware, where the bank's holding company, The Bancorp, Inc., is domiciled, is not yet at issue.

The fact that the bank had an ineffective AML compliance program, and had a close relationship with anonymous prepaid card distributor, Transact Network Limited, of Gibraltar, were well known in compliance circles. Your writer was contacted by Bancorp officers, after providing training to another financial institution in the area, and I personally discussed my concerns with Bancorp senior compliance officials, several months prior to the issuance of the Consent Order, but my warnings fell on deaf ears, as management arrogantly denied that there were any AML problems.



We shall be monitoring all filings in this case, and shall be reporting back on all significant developments, as it is of interest to all in the compliance industry.



   

THE ATTORNEY-CLIENT RELATIONSHIP, "BREAKING BAD" NOTWITHSTANDING



Unless you are in law enforcement, or have led a dangerous life, you have never been inside the crystal meth lab*, except while watching Breaking Bad episodes on television. While extremely entertaining, the program had a large number of errors. When it comes to the details of the attorney-client relationship; do not take the legal points made on that show by the "Saul Goodman, Esquire" as gospel.

From New Mexico, where the show was shot, comes the University of New Mexico School of Law,  whose law review staff recently published an entire issue devoted to many of the legal issues that Breaking Bad presented. In my humble opinion, the one subject most relevant to the financial community in these troubled times is the attorney-client relationship, a subject that the authors of one article take great pains to clear up some of the errors presented in the program.

Entitled Better call Saul if you want Discoverable communications: the Misrepresentation of the Attorney-Client Privilege on Breaking Bad, the article is a profusely annotated primer in establishing, and waiving, the attorney-client privilege. The sub-topics covered include;



(1) Proving the contents of attorney-client communication.
(2) The formation and scope of the attorney-client privilege in Breaking Bad.
(3) The myth of protecting all communications involving a lawyer.
(4) Disclosure to multiple clients.
(5) Waiver by disclosure.
(6)  Joint client or common interest doctrine.
(7) Disclosure to family members.
(8) Disclosure to attorney's agents.
(9) Waiver through the crime-fraud exception.
(10) The crime-fraud exception and money laundering.
(11) Advice and the "designed to conceal" element.

You can access the entire article here by going to page 477 on the table of contents*. Cite is:
45 New Mexico L. Rev. 477 (Spring 2015).



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*You have probably guessed by now that I have been in such a place, a long time ago and far away.
**New Mexico Law Review Current Issue Vol 45. No.2

Saturday, July 25, 2015

HIGHGATE SECURITIES LTD: INCORPORATED IN BELIZE BUT OPERATING IN UNITED STATES



There is a civil suit pending, in the Cayman Islands, between troubled B & C Capital*, and a company named Highgate Securities, Ltd., which has caused me to take a hard look a Highgate.

Highgate Securities, Ltd., claims to be a Belize-registered securities broker & trader, but Internet entries by its staff say it has a "temporary headquarters" in West Palm Beach, Florida. Even if it only solicits non-US investors, residing outside of the United States, one wonders whether the Securities & Exchange Commission, the Florida Office of Financial Regulation, and FINRA, are aware of its existence.

Here's how one knows that there is something dodgy and suspicious about Highgate; take a close look at its website, and the enrollment documents appearing on the site, which must be executed by investors. They are replete with spelling and grammatical errors, typos, and syntax errors that lawyers, especially those who specialize in securities work, never, ever commit. Remember, the official language in Belize is English. There's no way a Belizean attorney would have drafted such poor documents, and that such massive errors would have survived proofreading.



The web designer is a native English speaker who works in Florida; he only input copy that he was given by Highgate. Whoever at Highgate wrote the text for the website obviously needs to go back to school.  

Its website requires visitors to acknowledge the offshore nature of its business by accepting the terms and conditions through a physical act, to wit: pressing a "button" on the relevant page,  but no such device exists. This makes me wonder if anyone at Highgate ever reads its own material. Critical areas of the website are incomplete, and no officers, directors, or lawyers are named anywhere.

Most likely, the website &  legal documents were cut & paste jobs, performed by people who have no legal education or training, and given that some of the individuals on staff have been accused on the Internet of involvement of suspect securities activities, the totality of the facts would suggest that Highgate Securities, Ltd., whose use of a name deceptively similar to other entities is itself suspicious, richly deserves further investigation, by yours truly, and American securities regulators.

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*Dodgy New Manager of Cayman Investment Company Misleads Investors Seeking Withdrawals