Kenneth Rijock

Kenneth Rijock

Sunday, November 18, 2018

USE FACIAL RECOGNITION SOFTWARE TO TAKE A BITE OUT OF TRADE-BASED MONEY LAUNDERING



Money laundering is not about bulk cash smuggling any more; the days of daily Learjet flights out of the US, carrying million of dollars in cash, are long gone. Today, professional money launderers who need to move their clients' narco-profits often resort to trade-based money laundering (TBML), which is the preferred technique for a large portion of illicit funds transferred across international borders each day.



Due to the huge volume of international trade, the transactions which are actually money laundering operations are seldom, if ever discovered in real-time. The laundrymen employ over- or under-invoicing, to repatriate drug profits earned overseas, purchase product from manufacturers or harvesting organization, hide their obscene profits in opaque jurisdictions, bribe corrupt government officials, purchase high end items to be used in laundering their cash, and a number of other illegal operations.  In one clever variation, very expensive luxury consumer items are invoiced at a small fraction of their true value, and when sold commercially, effectively clean huge amounts of narco-cash.


Candidly, even with computer programs that identify any international trade transactions that differ more than 5% from the market value of the goods, neither compliance officers at international banks who clients engage in trade, nor the law enforcement agencies that are tasked with identifying, and interdicting, the dirty transactions. There's just far too much volume of trades to review each day, and the TBML operators are constantly changing their method of operation; new corporations, new recipients, new types of good ostensibly shipped out, different methods of payment. It is all too well done; unless one of the players is arrested for another reason, and cooperates with the authorities, to shorten his sentence, we seldom learn the details of the pipelines. Identifying TBML six months after the fact is not sufficient to solve the problem, for only if we can learn who may be doing it now, can we effectively suppress their operations.

Enter facial recognition software (FRS) programs: if we change the story from the products being shipped, to the players themselves, both compliance officers and law enforcement have an advantage. They can take a close look at the individuals behind the companies involved, to profile them, search for patterns, prior criminal activity, associates, possible Cartel links, and indirect relationships.

All this information can be gleaned through facial recognition searches of social media/social networks, and resource searches of the alleged principals at both ends of transactions, the majority of of whom, in at least one end of the sale, must routinely supply government photographic identification, which we run through an FRS system. The results will give us a pictorial window into the real backgrounds of the individuals engaged in international trade transactions. The questions we seek answers to:

(1) Do any of our trade clients' corporate officers have prior criminal convictions ? Judgments for fraud ? Pending litigation ? Administrative sanctions ?
(2) Are there organized crime figures in the clients' social network ?
(3) Do any of the clients' former companies have dodgy histories ? Who are their former partners, and what are they doing now ?
(4) Who are the clients' friends and family ? What businesses are they involved in ?



Through the use of FRS to put the clients under the social media microscope, we can identify those that have a high probability of engaging in TBML, for our risk-based compliance program. Traditional investigative TBML techniques have failed; new need an effective solution, and FRS offers access to information and data that was not previously available. We suggest that it be deployed to take a bite out of trade-based money laundering.



Saturday, November 17, 2018

FUGITIVE INDIAN FRAUDSTER HIDING BEHIND CBI PASSPORT TO EVADE EXTRADITION SAYS ILLNESS PREVENTS HIM FROM RETURNING HOME TO FACE THE MUSIC

The last refuge of a scoundrel is the country where he bought his CBI passport"
Mehul "CBI" Choksi, the Indian billionaire who is considered India's Moat Wanted Fugitive, claims, through his attorneys, that a blood clot on his brain, and diabetes, prevent his voluntary return home. Choksi's lawyers have stated that he is even too ill to have his testimony taken in Antigua, where he has sought to escape justice, by virtue of the CBI passport and citizenship he purchased there late last year. eyewitnesses have claimed that he is regularly seen around Antigua's capital, and has patronized many of its restaurants and attractions, disputing his statements of poor health.

Now, Choksi has alleged that, if his health improves, he may possibly return to India in three months, but he has not promised to return. The Government of India is seeking to have him classified by the courts as a Fugitive Economic Offender, which would allow it to seize all of his assets. Choksi's attorneys are contesting that action, which will be heard later this month.

Four months after Indian authorities formally requested his extradition, in the wake of the massive Punjab National Bank scandal involving the country's biggest ever banking fraud, the Government of Antigua continues to delay, alleging that it is "reviewing" the extradition documents, in a clear case of dilatory action. The case has spotlighted one of the major dilemmas presented by CBI passports: the issuing jurisdiction's refusal to extradite their new citizen, notwithstanding that his crimes occurred long before he acquired that prized CBI passport. Antigua, St Kitts and Dominica have all had negative publicity due to their refusal to extradite their CBI citizens for criminal acts committed elsewhere, and those cases have attracted attention from the US and UK.

Antigua is believed to have accepted over two million dollars for Choksi's CBI passport, a sum far in excess of the listed official fees and costs, with the additional money going directly into the pockets of senior government officials, who are violating Commonwealth laws by throwing legal obstacles in the way of his extradition. The longer Choksi remains in Antigua, the greater the chances it will deal a fatal blow to international acceptance of the country's CBI passports are.

VANCOUVER REALTOR SENTENCED TO TWO YEARS IN US FOR MONEY LAUNDERING

Omid Mashinchi

A real estate agent from British Columbia has been sentenced to two years in Federal Prison by a judge in US District Court in Boston. Omid Mashinchi, a dual Iranian-Canadian national who entered a guilty plea to five counts of money laundering, wired narcotics profits to banks in the State of Massachusetts, using his company's accounts. He was arrested earlier this year, when he entered the United States to visit relatives who reside in California. A $30,000 fine and one year of Supervised Release were also included in his sentence.

The realtor leased luxury condominium units to members of an organized crime syndicate known as the Wolf Pack gang. One of the gang's leaders, Gavinder Grewal, was assassinated in one of those properties last December. Some of the properties he leased were used as stash houses for narcotics. One house was targeted in a drive-by shooting in 2017. The Wolf Pack is also linked to other criminal organizations, the Hell's Angels, Red Scorpions and the Brothers Keepers.


Mashinchi was listed as an unindicted co-conspirator in a case involving the gang's narcotics activities in Vancouver. He continued to lease out properties to gang members after he left a firm and surrendered his real estate license in 2016.


Friday, November 16, 2018

EU TELLS MEMBER STATES TO PHASE OUT CITIZENSHIP BY INVESTMENT PROGRAMS



It appears that the European Union has had enough of the problems created when its Members issue CBI passports to foreign nationals. Citing serious money laundering and tax evasion risks, the European Parliament's Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance has issued a Draft Report that recommends that EU Member States phase out their Citizenship by Investment (CBI) and Residency by Investment (RBI) programs.  This is the first official notice of a new European position on its CBI problems, and may have been a direct response to the challenges that the EU is confronting due to its ongoing problems in the Republic of Malta, whose dodgy CBI program has come under attack from Brussels.

The best way to understand the EU position, here is the complete text of the relevant paragraph, verbatim, to allow readers to draw their own conclusions, regarding how seriously the EU is treating its CBI-related problems:

"The European Parliament ...
91. Concludes that the potential economic benefits of CBI and RBI schemes do not offset the serious money laundering and tax rvasion risks that they present; calls on member States TO PHASE OUT ALL EXISTING CBI OR RBI SCHEMES AS SOON AS POSSIBLE." [emphasis added]. Draft Report at 18.

Read the entire Report here.

Some observations:

(1) even if the EU  succeeds in closing down Malta, Cyprus, and all the other EU Member States who currently operate CBI or RBI programs, there will still be tens of thousands of valid CBI passports for compliance officers at international banks to deal with during the next decade. Many of the holders are from Russia, China, and other high-risk jurisdictions. How with the EU treat those passports ?

(2) If Europe shuts down its CBI and RBI programs, what effect will this action have upon Caribbean jurisdictions ? The UK, for example, has had quite a bit of trouble with foreign criminal elements using CBI or RDB passports, and it may eventually want to see those East Caribbean CBI states follow suit. The problem is the cash generated is generally used for budgetary needs, and the EC states may not willingly chose to abandon that cash flow. What will the EU and UK do then?

CBI passports have been a major thorn in the side of the world's compliance officers, for they serve to disguise the true risk levels of their holders, most of whom come from high risk jurisdictions, some even having ongoing combat operations in progress. Will they soon become an endangered species ?

PROPOSED CANADIAN LEGISLATION ON BENEFICIAL OWNERSHIP AND CONTROL


House of Commons of Canada
 House of Commons Bill C-86 represents a novel effort to insure that information on Beneficial ownership of private corporations is available to regulators. Rather than rely upon the generally unsatisfactory use of certificates from corporate officers to identify ownership of a company, this bill takes a different approach.

Bill C-86 requires that corporations identify individuals with "Significant Control" of a corporation.
This means that those with a significant number of shares shall include:

'(1) Registered Shareholders.
(2) Beneficial Owners.
(3) Individuals with direct or indirect control or direction over shares.
(4) An individuals who has direct or indirect influence that, if exercised, would result in de facto control of the corporation.
(5) An individual to whom specific circumstances, set by regulations, apply.

The individuals who have Significant Control must supply their names, dates of birth, jurisdictions of residence for tax purposes, and details of how they hold control, to be held in a corporation Register. 

There are severe penalties for companies that violate the provisions of this bill. Six months' imprisonment or C$200,000 fines can be imposed for violations.

Readers who wish to review the bill may access the complete text here.

FILING ERROR IN FEDERAL COURT THAT EXPOSED ASSANGE INDICTMENT REMINDS US THAT INFORMATION CAN SOMETIMES BE FOUND IN STRANGE PLACES



Today's headlines, concerning the fact that a sloppy cut-and-paste error made by an Assistant US Attorney in the Eastern District of Virginia, which exposed the fact that there is a sealed indictment pending against Julian Assange, demonstrates that an alert investigator or compliance officer can uncover non-public information that may be crucial to identifying their own particular problem. What obviously happened is that someone used a motion from the Assange case, which remains sealed by Order of Court, as a form for an unrelated matter, but neglected to change the name of the defendant in every place where it needed to be changed. Clerical mistakes happen, but they may reveal something that was not intended to be public information.



The usefulness of the PACER (Public Access to Electronic Records) database to the compliance officer cannot be stressed enough, even for compliance officers at banks located outside the United States. Pending civil frauds, white collar crimes, and a wide variety of active, as well as closed, cases, assist the compliance officer in determining risk levels regarding new, as well as existing, clients. if your target was formerly involved with owning a company that has major litigation, against it, you want to make sure there was no misconduct attributed to him in the case.

While it is true that criminal indictments, where the defendants are outside the United States and therefore not yet in custody, are generally sealed, compliance officers, by examining open criminal files of close associates, business partners, or family members, may be able to determine that there are other co-defendants, which might include the bank client they are attempting to investigate. if tyou do not know who hid associates , friends and family are, use your social media/social networking resources, and find him, and therefore then, using the facial recognition system you are already using to vett the client.

Additionally, bankruptcies of fraudsters' companies, appeals of adverse decisions, original instruments attached to civil complaints, signatures of defendants on plea agreements, and many other useful items can be gleaned from PACER files. You can also determine whether a defendant is cooperating with the authorities, as a Criminal Information, rather than a Grand Jury Indictment, starts the proceedings. Also,when a defendant's counsel schedules a hearing for Change of Plea, you can gather he has decided not to go to trial.


Thursday, November 15, 2018

FINCEN EXPANDS GEOGRAPHIC TARGETING ORDER



The GTO expands to twelve metropolitan areas, and includes ALL relevant transactions over $300,000 that are not bank-financed. You may access it here.