Kenneth Rijock

Kenneth Rijock

Tuesday, May 24, 2016

VENEZUELA: A FAILED STATE ?

Caracas, Fall 2016 ?
Things have gone from bad to worse in the "Bolivarian Republic" of Venezuela, which can no longer feed its people. Now, not only did the brewer of the country's famous Polar Beer stop producing, due to its inability to obtain the necessary ingredients, the Coca-Cola distributor has shut down production, as it  can no longer get sufficient sugar to turn out its soft drinks.

Given the dire economic situation, any extension of credit by foreign banks, and even a single instance of financial exposure, is  fraught with a high risk of default. Many foreign creditors cannot recover their funds, due to the inability of local businesses to obtain dollars. The Bolivar is well on its way to becoming virtually worthless against the dollar.

The Venezuelan military will not intervene, to remove the failed socialist government of Nicolas Maduro, because its leaders are making millions from drug trafficking. Many Venezuelans have voted with their feet, and are now living in Miami's city of Doral.  For Country Risk purposes,  the prudent move is to avoid any and all transactions with Venezuelan businesses, for you will either be stiffed, or you may later learn that your wealthy bank client is really a corrupt government official, or a narcotics trafficker.

What is next, US Army helicopters rescuing Venezuelans from Caracas rooftops, while a bloody civil war rages below ? Many observers actually fear that this is coming, and soon.

Monday, May 23, 2016

CHINA, WHOSE NATIONALS LEAD THE PANAMA PAPERS AS CLIENTS OF MOSSACK, CENSORS THEIR NAMES AT HOME


Media representatives who have reviewed the documents and data we call the Panama Papers have reported that, of the approximately 25,000 offshore corporations found, at least 13,000 are traced to Hong Kong, where Mossack Fonseca ran a thriving business, for tax evaders, corrupt PEPs, criminal organizations, and all the other usual suspects.

Many relatives of senior Chinese leaders, themselves Politically Exposed persons, have been found as Mossack clients, but Chinese readers have reported that the online ICIJ database is totally blocked in China, as well as articles and commentary analyzing the entries. If you doubt this, go to the website where we test accessibility of websites within China, www.GreatFire.org

One Hong Kong Newspaper reports that it located more than 33,000 Chinese names in the data, including those of prominent Chinese government officials. No wonder Chinese censors fear the truth; they do not want the names of Politburo members who have offshore accounts, which spells corruption and/or tax evasion, disclosed to the public.

I would not want to be a bank compliance officer in China today, for those poor blokes have been denied critical knowledge about their high-risk customers, just so that some corrupt, fat-cat Chinese Communist Party official can continue to take bribes, kickbacks, and gifts from companies that want government business; Hiding the truth is what China is all about. No wonder their economy is suffering.




WORLD BANK REPORT ON THE CORRESPONDENT BANKING CRISIS


You may have seen a reference, in a number of recent articles, to the World Bank article, Withdraw from Correspondent Banking: Where, Why, and What to Do About It. That article details the specific reasons onshore banks are using, when conducting their decision process about terminating correspondent banking relationships, with prejudice. Readers who wish to review the complete text, may do so here. See "Complete Report in English, " on the right-hand side of the page, and download the pdf document.


Sunday, May 22, 2016

PANAMA PAPERS EXPOSES MOSSACK FONSECA UNDUE INFLUENCE IN PACIFIC TAX HAVENS



Details about the misdeeds of Mossack Fonseca in Pacific tax havens have further shown that the law firm deserves to be dismantled, and the partners all indicted, for money laundering, and other serious financial crimes. Apparently, the firm dealt with the Pacific island nations with a heavy hand.

Some of the improper acts:

(1) Coercing one Pacific island tax haven to delay entering into an information sharing agreement with Australia. The goal was most likely to allow MF to form dozens of anonymous companies in that jurisdiction, so that it would have a fistful of them available in the future.

(2) Obtaining a monopoly, in one tax haven, allowing it to be the only financial services provider, in the country. This was allegedly done to lower prices, due to a lack of competition among companies, but it resulted in a fiefdom, prime for abuse.

(3) Placing the daughter of a country's president in its local offices in that country, as an executive.

Is there any dirty stunt that Mossack and Fonseca will NOT do ? Unfortunately, Panamanian law enforcement, knowing very well how corporate formation is a large cash cow for the country,  will not kill the golden goose.

PANAMA'S ATTORNEY GENERAL ORDERS MOSSACK FONSECA TO CLOSE UP ITS WEALTH MANAGEMENT SERVICES

Atty. General Porcell

Kenia Porcell, the Attorney General of the Republic of Panama, has reportedly ordered the law firm of Mossack and Fonseca to shutter its "wealth management" (read; money laundering) subsidiaries and affiliates. The firestorm that has flared over the Panama Papers disclosures threatens to consume the credibility of country's lucrative offshore financial center, and this may be an attempt at damage control. Longtime Panama businessmen cynically believe that the law firm partners will never be indicted, but that moves will be made, by Panama, to make it appear that corrective measures are being taken.

This news, about the actions of the Attorney General, has not appeared in mainstream Panama City media, due to the fact there is a strict unofficial blackout on negative news, ordered by Government officials, and now scrupulously followed by the principal newspapers in the capital.


Saturday, May 21, 2016

MOSSACK FONSECA USED ITS CAPTIVE FOUNDATION TO HOLD BVI CORP FOR CANADIAN CLIENTS


The Panama law firm of Mossack Fonseca, whose methods and tactics more closely resemble those of an international money laundering operation, rather than a team of attorneys providing legitimate legal services, used its captive foundation to hold title to companies that it formed for clients; in this case, it was a Canadian national, though lawyers in that country now involved with him insist that they are winding down all offshore matters, and following Canada's tax laws, to the letter.

What Mossack did:

(1) Form a British Virgin Islands corporation for the client. BVI companies have bearer shares, so it si impossible to identify Beneficial Owners.

(2) Charge the client $9000 for that service. Under ordinary circumstances, this would be considered a clearly excessive fee. Ask your own lawyer what he charges to form a corporation in your jurisdiction.

(3) List "MF Foundation" as the shareholder of the BVI company. Foundations, under Panamanian law, have no shareholders, and the beneficiary can be changed at will. This is a classic money laundering technique, and it has no place in legitimate legal practice.

(4) A bank account was thereafter set up at Winterbotham Trust Company, Limited, in Nassau, Bahamas, and an initial deposit of $9000 was made. Such "under-ten" deposits are expressly designed to avoid any reporting requirements that might alert law enforcement, or tax authorities, to potential tax evasion, or criminal activity. Winterbotham also has offices in Uruguay and Hong Kong.


The above is a template for precisely how Mossack Fonseca, and indeed many other Panamanian law firms, move money for wealthy clients. Issues about whether the money is evading taxes, or is the proceeds of crime, are never brought up, as Panama is attractive, not for legitimate international commerce, but for dodgy clients, and dirty money.

Friday, May 20, 2016

HAS COUNTRY RISK FOR LEBANON NOW REACHED UNACCEPTABLE LEVELS ?


With Lebanese Bankers associations hastening to warn that the US Anti-Hezbollah financing law, now in force, is to be obeyed, notwithstanding that designated terrorist organization's domination of the country, Country Risk may now have finally reached the point of no return. In essence, the risk levels are now so high, that investments in Lebanon, and transaction with Beirut banks, represent an unacceptable level of danger.

Hezbollah, bloodied in Syria, and needing to still show the Arab street that it is relevant*, could initiate yet another conflict with Israel, which that country has bluntly warned will result in destruction of heretofore segments of the Lebanese economy that escaped damage in the last war, a decade ago. if the downtown Beirut business district is destroyed, so will be the Lebanese financial center. The anticipated loss of life could even exceed the nightmare of the Lebanese Civil War.

Would the Islamic State, or one of the radical Sunni Opposition groups fighting in Syria then threaten a weakened Lebanon ? We cannot say, but geography is not on the side of Lebanon, given the threats already posed by these insurgents, some of who have already fought with the country's small army in border towns. With Hezbollah engaged, Lebanon would be vulnerable.

Taking all this into account, the prudent move for any compliance officer, tasked with the calculation of Country Risk, will be to raise it so high on Lebanon, so as to deter any client investment, or extension of credit or other financial exposure.
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* The Shebaa Farms territorial dispute, which is a bogus Hezbollah claim, made ostensibly on behalf of Lebanon, to justify military action against Israel, has no basis in fact, as the territory was always on the Syrian side of the frontier; This is supported by French historical records. Hezbollah has always had a reckless disregard for the truth, when it serves its interests.