Friday, December 19, 2014


The Department of the Treasury, in what appears to be a case of first impression, has brought a civil suit, in Federal Court in New York, against Thomas E. Haider, formerly the Chief Compliance officer at MoneyGram International, Inc. Could this case represent the shape of things to come in regulatory actions for AML/CFT violations ?

The complaint asserts that FinCEN has already assessed a $1m civil penalty against Haider, for BSA/AML violations. Among the many allegations are these major charges:

(1) Failure to timely file SARs.
(2) Failure to implement an internal company discipline policy.
(3) Failure to terminate known high-risk agents and retail outlets.
(4) Failure to conduct effective audits of agents and retail outlets.
(5) Failure to conduct effective due diligence upon agents and retail outlets.

The Government, in its request for relief, has demanded a judgment against Haider, for the one million dollars he was assessed by FinCEN, and for "an order enjoining Haider from participating, directly or indirectly,  in the conduct of affairs of any financial institution that is located in the United States, or conducts business within the United States, for a term of years sufficient to prevent future harm to the public." Complaint at 4-5.

The United States has demanded a jury trial. Readers who wish to review the complete text of the Complaint can access it here*. Inasmuch as civil monetary penalties have not been effective in suppressing repeated AML/CFT/BSA violations at America's largest banks and NBFIs, this new enforcement tactic, personally attacking compliance officers who allow money laundering and terrorist financing to thrive, may just get the attention of the banking community. We know it will make the compliance officers sit up and take notice.

Now, if Treasury would only file criminal money laundering charges against those avaricious bank directors, who choose profits ahead of obeying the law, and routinely overrule their compliance officers, regarding suspicious clients, we just might see a change in bank policies in the United States. Will Treasury now take this next step ?
*United States of America vs. Thomas Haider, Case No.: 14cv09987 (SDNY)

Thursday, December 18, 2014


Turkey's Ministry of Finance has publicly warned three of the country's banks about their failure to cooperate in money laundering and terrorist financing matters, and has asked them to share transaction data in terrorist financing cases. The charge was made recently by the country's Finance Minister, Mehmet Simsek.

Apparently, these three Turkish banks are not cooperating with the Financial Crime Investigation Board, known as MASAK. Turkey, under major pressure from the Financial Action Task Force (FATF),  passed a counter-terrorism financing law.

The problem, with regard to the global banking community, is that the Minister has failed to publicly identify the three guilty banks, citing "privacy concerns." This failure to disclose the names of the offending banks raises the risk levels for Turkey, as international banks do not know which Turkish banks to regard as high-risk, and may end up assigning all Turkish financial institutions, and transactions with them, a higher level of risk, as a result of the Minister's desire to avoid embarrassing the banks.

Are some of these three banks moving money for Hamas' operational detachment, and headquarters in Turkey ? This is a genuine concern, given the established fact that attempts to commit terrorist attacks, within the West Bank, and in Israel proper, were orchestrated from Hamas leaders living in Turkey.

From the standpoint of Western bankers, Turkey's admission, that three of its own banks are involved in financial crime, and in providing financial support to terrorism, means that Turkish regulators are ineffective in suppressing money laundering and terrorist financing.


The Financial Industry Regulatory Authority has fined Wells Fargo Advisors LLC $1.5m, for  major rule violations, which have been acknowledged by the Respondent in an executed Acceptance and Consent. FINRA charges that Wells Fargo Advisors, and Wells Fargo Financial Network LLC, have suffered nine years of AML failures, which were belatedly reported to FINRA.

The firm's proprietary CIP program, according to the Consent, had design flaws which rendered it virtually ineffective, and violated NASD Rules 301(B), 3310(b), and 2010.

Readers who wish to examine the Letter of Acceptance, Waiver and Consent, may access the complete text here*.

*No. 2012034123501 (you will need to input requested number to access document)


Panama's beneficial ownership disclosure law, which takes effect in approximately one year, requires all Panamanian financial institutions and NBFIs to obtain the identity of the beneficial owner of corporate bank clients. The issue is, will it actually bring transparency to a Panamanian corporate culture that intentionally obscures beneficial ownership ?

Here are the problems, as I see them:

(1) Giving banks a full year to comply allows money launderers, acting for criminal clients who are bank customers, more than sufficient time to form new companies in remote, unregulated tax havens, and transfer their assets out of Panama.

(2) The one-year window also gives financial criminals time to brainstorm new strategies and tactics, to outwit the new law. for example, Panamanian foundations, which are sometimes preferred to corporations, have no shareholders, nor do foreign trusts. There will be other entities or vehicles for criminal elements to migrate to, and adequately cover their tracks, with multiple steps, in the time-frame curiously set by the outgoing Superintendent of Banking.

(3) Corporations in Panama must be formed by licensed attorneys, many of whom deliberately conceal their clients' identities, by making their staff officers and directors, and thereafter giving a front person a Power of Attorney (Poder), which allows them to open bank accounts. I frankly do not trust them to be candid, or even honest, when requested to identify their clients for the banks. How will this information be verified or validated, especially with foreign nationals as beneficial owners ? The answer is it cannot be independently confirmed.

(4) What if the beneficial owner is a foreign corporation ? Piling layers of secrecy upon the disclosures will render them ineffective.

To conclude, I think that we can expect to see a lot of smoke and mirrors, but no real disclosure of beneficial owners' identities.      

Wednesday, December 17, 2014


The announcement, by the President of the United States, that America will now start to normalize its relations with the Republic of Cuba, has certainly drawn the attention of the American financial community, which has looked enviously at the potential of a new, untapped market. OFAC immediately released a FAQ in which it reminded us that, until new regulations are promulgated, and become law, sanctions are still in effect.

There is another issue with Cuba that bankers should be aware of, before incurring any financial exposure: the country has been, and remains, a black hole for money laundering activity, especially bulk cash smuggling. Because of US sanctions, the Cuban financial structure exists* completely outside the American (New York) banking hub. Narcotics traffickers, Medicare fraudsters felling Florida, and a small number of Cuban-Americans engaged in illegal pursuits, holding profits that they wish to bank offshore, all move funds into Cuba, so that they can thereafter be sent to Switzerland, or the world's tax havens. Consider that when assessing the relevant risk factors involved in placing funds or assets inside Cuba. You money may take an international trip that you did not expect.

Add this to the high levels of corruption that presently exist, the complete lack of rule of law, and tendency of the Cuban Government to arrest foreigners first, and ask questions later, and you have a volatile mix, which stacks the odds against you and your clients, should you or they, choose to incur financial exposure there. Therefore, tread carefully, please. Remember what happened to some of those American businessmen who flocked to post-Soviet Russia in the early 1990s.

* Except for sanctions evasions, through third countries, such as Panama, but that's a story for another time.       


The General Court of the European Union has annulled the 2001 terrorist sanction upon Hamas, upon procedural and not substantive grounds, but has kept the sanction in place, to allow the EU to file an appeal. The grounds stated were that the evidence of terrorist status consisted of only media and internet information, which the Court deemed were not competent authorities, but "factual imputations desired from the press and the Internet," according to the official press release analyzing the decision.

The Court stressed that its actions were purely based on what it called "fundamental procedural grounds." and did not "imply any substantive assessment of the question of classification of Hamas as a terrorist group...."

Some sources have stated that the EU countries, which were required to reintroduce evidence every six months on Hamas' terrorist actions, had resorted to filing open-source media documents, rather than disclose classified information. If this was truly the case, it was a colossal error, for now the EU will be required to participate in a formal appeal, which could take years, if prior cases are any indication of the time-frame involved.


The United States Senate adjourned for the year yesterday; it did not move the Hezbollah International Financing Prevention Act of 2014 out of committee, and therefore did not pass this important bill. The House overwhelmingly passed its version of the bill several months ago. Given the current situation in Latin America, where Hezbollah, a Specially Designated Global Terrorist organization, is rapidly expanding its operations there, with no visible push-back from the US, the Senate's failure to strengthen  the law should be regarded as a major failure to deploy an additional tool to suppress Hezbollah in America's backyard.

Should Hezbollah strike inside the United States, there will be much hand-wringing in Washington, and you can bet that the bill will be refiled, and passed forthwith, but that will be after the fact. One sincerely hopes that the failure to pass this bill was intentional, and was not due to the behind-the-scenes efforts of senior US politicians not wanting to further agitate Hezbollah, for this group does not have American interests at heart.