Kenneth Rijock's Financial Crime Blog

FBI OFFERS $1M REWARD FOR INFORMATION LEADING TO RELEASE OF BOB LEVINSON

2012-03-10T17:12:00.002-05:00

The Federal Bureau of Investigation* has offered a reward of up to $1m for information leading to the release of retired FBI Agent Robert Levinson. Levinson, who was last seen on Kish Island, Iran, is reported to have been taken into custody by the Iranian Revolutionary Guard Corps (IRGC). He appeared last year in a video, but it is not known who is presently holding him, where, and for what purpose.

Today, he has been held for exactly five years.

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http://www.fbi.go

SENTENCING FOR VIKTOR BOUT MOVED TO 28 MARCH

2012-03-08T00:53:00.000-05:00

The Federal Judge assigned to Viktor Bout's case has ordered that his sentencing, which was scheduled for 12 March, be moved to 28 March. Reportedly the delay is due to a request by Bout's defence team, who are busy preparing their arguments.

Bout could receive a sentence of between 25 years and life in Federal Prison, based upon the charges he was convicted under. Amongst the counts was one of providing material support to the FARC, a Specially Designated Global Terrorist Organisation [SDGT]. He attempted to supply anti-aircraft missiles that were to be used to kill American military and government officials.

He was very recently moved from the equivalent of solitary confinement into the general population of the Metropolitan Correctional Centre, after the judge ruled that his confinement under such severe restrictive conditions was neither necessary nor constitutionally proper.

ANTIGUA DRAGS ITS HEELS ON EXTRADITING STANFORD DEFENDANT

2012-03-07T16:20:00.001-05:00

On 7 February, Antigua's High Court denied the extradition appeal of former director of the Financial Services Regulatory Commission, Leroy King. Unfortunately. the country's Prime Minister, Baldwin Spencer, has not signed the order. Frankly, he has run out of excuses; Stanford was convicted this week after a jury trial. It is rumoured that King will name high-ranking present and former governmental officials, who allegedly took money and favours from Stanford.

King, who faces a multiplicity of federal charges, including Money Laundering, Wire Fraud and Securities Fraud, needs to face justice for his offences. Considering that victims of Stanford's Ponzi scheme have threatened to initiate a boycott of Antigua, that tourist-oriented island nation should move, forthwith, to extradite its obviously corrupt former civil servant; The US asked for him in 2009. I have been to Antigua since the fall of Sir Allen, whose knighthood has now been revoked by Antigua, and it can ill afford to be blacklisted by any group who could potentially wreck its economy.

Mr. Prime Minister, kindly discharge your duty, and turn Mr. King over to face justice for his corrupt behaviour.

ARTICLE ON COMPLIANCE STRESS

2012-03-07T13:46:00.001-05:00

I recommend the recent article, Stresss, Compliance and Ethics, by the Society of Corporate Compliance and the Health Care Compliance Association. If you are a compliance officer or MLRO, please take the time to review it, as your health issues may be rooted in your profession.

http://www.corporatecompliance.com/staticcontent/2011StressSurvey_report.pdf

JURY CONVICTS ALLEN STANFORD ON 13 COUNTS

2012-03-06T15:58:00.001-05:00

The verdict is in; guilty on 13of 14 counts,meaning a potential life sentence. Will he get it ? Since the Sentencing Reform Act of 1987, there is no gain time for a life sentence.

WATCH THOSE EXPATS RETURNING TO THE US, PLEASE, GENTLEMEN

2012-03-06T01:00:00.000-05:00

The last time I returned to the United States from Dubai, they were waiting for me at Customs; apparently my profile had preceded me. Of course, once the agents learnt that I had returned from giving a lecture instructing bankers on how to identify money launderers, I was passed through without a search.

This week, lost in the shuffle amidst a huge criminal indictment of American defense contractors working in Iraq and Jordan, was the story of an employee of the company who had been arrested on arrival in America when customs officers found $150,000 secreted inside his possessions. That's the good news; the bad news is that this was not his first bulk cash smuggling operation; he had previously brought in a total of $800,000, according to the reports.

American contractors abroad, employees at private military companies providing security overseas, and assorted expatriates returning to CONUS* are all potential bulk cash smugglers. Why ? Payments for services rendered in cash, tempting illicit business "opportunities," and their extended presence in developing, corrupt, countries, where bribes & kickbacks paid out or accepted are the rule, all operate to raise the risk levels on these individuals. So, why on earth wasn't this contractor targeted by US law enforcement after the first couple of trips ? We cannot say, but should not such returnees be preselected, much as I have been, due to a high level of risk for smuggling of cash, financial instruments, or other items of high value ?

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* Abbreviation for the Continental United States, which excludes Hawaii & Alaska.

JURORS SAYS THEY ARE UNABLE TO REACH A VERDICT IN STANFORD PONZI SCHEME TRIAL

2012-03-05T20:37:00.004-05:00

The jurors deliberating in the Federal criminal trial of the accused billion dollar Ponzi schemer, R. Allen Stanford, have advised the court that they have been, thus far, unable to reach a verdict. The judge ordered them back into further deliberations. If a mistrial is declared, a costly retrial will be required.

We continue to closely monitor this case, and will report back to you on all future developments.

RAISE COUNTRY RISK ON PORTUGAL

2012-03-05T01:00:00.000-05:00

The failure by a Portuguese Court, to extradite the convicted murderer and airline hijacker, George Wright, to the United States, after the United States had exhausted every appeal in the Portuguese court system, us extremely disturbing. Wright, who escaped from an American prison whilst serving a 15-to-30 year sentence for murder and armed robbery, hijacked a Delta Airlines passenger jet to the Middle East, collecting a million dollar ransom payment en route. He was living in Portugal under an assumed name.

When courts in a country where you, or clients, do business, fail to follow the rule of law, and make purely political decisions in major court cases, compliance officers at international banks must take note, and adjust country risk accordingly. Should your bank, or its clients, have any financial exposure in that country, whether through investments, trade, or financial instruments, risk that you will not be able to seek justice through that court system increases substantially.

MEK ASKS APPEALS COURT TO COMPEL US TO REVOKE TERRORIST DESIGNATION

2012-03-01T20:22:00.003-05:00

The Mujahadin-e Khalq [MEK], known in English as the Peoples' Mujahedin Organisation of Iran, has filed a Petition for a Writ of Mandamus,* asking the Circuit Court of Appeals for the District of Columbia** to direct the Secretary of State to remove its designation as a Foreign Terrorist Organisation [FTO]. In December, the D.C. Circuit held that the Secretary had violated the Due Process rights of the MEK, in denying its application for revocation of its FTO designation, and remanded the matter, so that the Secretary could remedy the constitutional defects, but no action was taken by the Department of State.

This matter has attracted a great deal of attention, because both the United Kingdom and the European Union have delisted the MEK from terrorist status. The MEK, which opposes the current regime in Iran, disarmed in 2003, and claims that it has renounced terrorism. Its supporters and lobbyists in the United States have been pushing for deletion of its FTO status.
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* A judicial remedy in the form of an order issued to compel a government official to perform a ministerial duty correctly.
** In Re the Petition of Peoples' Mujahedin Organization of Iran, Case No.: 12-1118 (DC Cir).

MUTUAL BENEFITS OWNER INDICTED AGAIN, THIS TIME FOR HEALTH CARE FRAUD

2012-03-01T08:25:00.001-05:00

Joel Steinger, awaiting trial in US District Court in Florida for the Mutual Benefits billion dollar life settlement* Ponzi scheme, has been charged in a new case**, involving an alleged $3m health care fraud. Steinger, along with his brother Steven Steiner, and Steiner's partner, Henry Fecker, reportedly set up two shell companies, through which they fraudulently obtained insurance coverage.

The defendants are charged with fraudulently claiming that they were full-time employees of dummy companies, and receiving payment or reimbursement of medicals through group insurance coverage. Allegedly, they committed these crimes whilst out on bond in the Mutual Benefits case.

The charges:
(1) Conspiracy to Commit Wire Fraud and Mail Fraud.
(2) Mail Fraud.
(3) Wire Fraud.

A forfeiture provision appears in the indictment. Each of these counts carries a maximum penalty of twenty years in Federal Prison.

Joel Steinger, who faces a potential life sentence in the Mutual Benefits case, was denied bond, after the Federal prosecutor stated that he posed a danger to the community, and was a flight risk.
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* Known in the United Kingdom as traded life policies, these investments have come under scrutiny as the result of the Mutual Benefits case.
** United States vs. Joel Steinger et al, Case No.: 12-cr-20123-UU (SD FL)

QUOTE FROM HSBC FILING RE: EXPOSURE

2012-02-28T19:46:00.002-05:00

I have seen too many articles today summarising HSBCs statements in its annual filing with the Securities and Exchange Commission, which reportedly involves the civil and criminal investigations into alleged violations of Iranian Sanctions regulations. Perhaps the readers would prefer to read the relevant text in the appropriate paragraph:

Other US Regulatory and law enforcement investigations

"It is likely that there will be some form of formal enforcement action which may be criminal or civil in nature in respect of some or all of the ongoing investigations ... Based on the facts currently known, it is not practicable at this time for HSBC to determine the terms on which the ongoing investigations will be resolved or the timing of such resolution or for HSBC to estimate the amounts, or range of possible amounts of any fines and/or penalties. As matters progress, it is possible that any fines and/or penalties could be significant.* "
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*http://sec.gov/Archives/edgar/data/1089113/000119163812000216/hsba201202276k7.htm

ACCUSED FRAUDSTER STANFORD DECLINES TO TESTIFY

2012-02-28T09:02:00.002-05:00

The defence rested yesterday in the Federal criminal trial against financier R Allen Stanford, accused of operating a $7bn Ponzi scheme from his bank in Antigua. Stanford's attorneys has declared, in opening statement, that their client would testify in his own defence, but apparently decided against it, though Stanford reportedly wanted to take the stand in the trial, which has been going on for six weeks.

Final argument of counsel will occur on Wednesday, and the case will then go to the jury. We shall report any verdict as soon as it is announced.

VIKTOR BOUT ORDERED TRANSFERRED FROM SOLITARY CONFINEMENT

2012-02-26T14:55:00.000-05:00

The Federal Judge who will be sentencing convicted arms trafficker Viktor Bout on 12 March has ordered* that he be released from solitary confinement, and transferred to general population, in New York's Metropolitan Correctional Centre (MCC) "forthwith." Bout, who has been held in the jail's SHU, or Special Housing Unit, for the past fifteen months, since his arrival from the Orient, is currently housed in a small room 23 hours a day, with only minimal contact with the outside world, contended that he was being held under unduly harsh conditions, without any apparent reason. He has been called, by the global media, the "Lord of War," and the "Merchant of Death," due to his reputedly long arms trafficking career in Africa and Asia.

Bout was convicted by a jury on 2 November, 2011 of;

(1) Conspiracy to kill US nationals.
(2) Conspiracy to kill officers and employees of the United States.
(3) Conspiracy to acquire, transfer and use, anti-aircrart missiles.
(4) Conspiracy to provide Material Support to a designated terrorist organisation (the FARC).

The Bureau of Prisons was holding Bout in the SHU for the following reasons:

(A) Bout had access to "vast resources," which he could all upon to manage his escape, or to harm third parties.
(B) The nature of Bout's crimes, which involve a designated terrorist organisation.
(C) Bout possesses leadership ability, which he could use to control other inmates.
(D) Bout had previously had a relationship with former Liberian President Charles Taylor.

The Court, in an 18-page ruling, compared Bout to criminals who posed a greater threat, but who were released from such restrictive confinement conditions, dismissed the BOP concerns, and ordered him to be transferred to general population, effective immediately.

Remember, Bout is a former Russian Air Force officer. On a personal note, some of my readers may recall that I once spent some time as a "guest" in the Special Housing Unit at the Federal Prison in Tallahassee, under the exact conditions, and it can be stressful. You watch the sun come up, and go down, each day, and the routine is only broken by the arrival of a meal tray, pushed through a slot in the door. You shower & shave only three times a week, and you are restrained any time you leave your cell. Recreation, which is also solitary, is infrequent.

I found the daily arrival of a mental health professional, checking on my composure, a sign that others similarly situated, might not have had military experience, and prior incarceration at other facilities, to help them cope with the extreme boredom and close quarter confinement. Some of the SHU guests had problems, which they verbalised, especially at night. Even I found it hard to endure at times, and I eventually grew a beard, rather than deal with the constant stubble. I was happy to get out of there, even though I only going to another jail.
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*Opinion and Order entered 24 March, 2012. Case No.: 08-000365-SAS (SDNY).

FEDERAL JUDGE COMMENTS ON ATLANTIC RIM

2012-02-25T16:21:00.002-05:00

A recent court ruling may provide some guidance to individuals and entities seeking to conduct due diligence on a company holding itself out as a funding source to borrowers seeking multi-million dollar loans.

The United States Bankruptcy Judge in the Elkins Park* case, Eric Frank, on 21 February, has entered an Order that reflect the Court's observations concerning the Debtor's unsuccessful efforts to secure funding, and to later obtain the return of its escrowed deposit, from the Las Vegas corporation known as Atlantic Rim Funding Corp.

The debtor, the Land Conservancy of Elkins Park, Inc., had sought to obtain a loan early last year from Atlantic Rim Funding, to finance real property it had purchased from the Dominican Congregation of St. Catherine De'Ricci, and it had deposited, into what it understood to be escrow, $600,000, whilst funding was being processed. When 5 July, 2011, the funding date, came and went, it sought a refund of the escrow, which did not occur, and an Adversary Complaint, within the context of the Chapter Eleven proceeding, was filed in December.

The debtor, believing that it would get the funding timely, or in the alternative, repayment from escrow of the $600,000, entered into a Settlement Agreement with the Congregation, that provided for three interim payments, and the balance in 2012. Neither the promised funding, nor the oft-promised return of the escrowed funds occurred, and the Congregation sought relief from the Automatic Stay of any non-bankruptcy legal proceedings, so that it could obtain possession of the subject property.

The debtor has opposed this, citing a legal principle that holds where performance is rendered impossible, due to the actions of a third party, which was not foreseeable, enforcement is barred, on equitable grounds. it sought to vacate the parties' agreement.

The Court denied Elkins Park's motion, and stated, in the Order

" In this case, given the history of the Debtor's relationship with Atlantic Rim, which consisted of a series of Atlantic Rim's broken promises to fund a loan, it was certainly foreseeable that Atlantic Rim might not timely perform its obligation to return the Debtor's $600,000 deposit. "

Readers, who are urged to review the complete opinion, can access it at: www.leagle.com/
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*Case No.: 10-19522 ELF ( ED PA) [Bankruptcy]
Adversary Case No.: 10-0449

BULK CASH COURIER GETS PROBATION IN ILLINOIS

2012-02-24T08:41:00.002-05:00

A cash courier transporting $43,000, in shrink-wrapped packages, was intercepted on Interstate 88, just west of Chicago, and charged with money laundering, which reportedly has a maximum penalty of seven years' imprisonment under Illinois law. The charges were reduced to a misdemeanor charge of Attempted Money Laundering for the California resident, and he was sentenced to probation, and fined $500 court costs.

Seventy per cent of the funds were retained by Kane County authorities; 30% went back to the courier, under a plea agreement that is extremely disturbing; probation for money laundering ? Clearly, justice was not served here, but the coffers of a suburban Illinois county were.

The next time I see someone reduce money laundering to a misdemeanor, particularly bulk cash smuggling, I will try not to get upset, but it is a travesty.

LAWYER WITH FELONY CONVICTION EXPOSED REPRESENTING A CLIENT IN A CRIMINAL PROCEEDING

2012-02-21T16:55:00.001-05:00

There was a bit of a flap recently, in a criminal case* pending in US District Court in White Plains, New York, when it was revealed that the attorney for Defendant Nathan Rothschild, a New Jersey resident named Michael W Burnbaum, was currently the subject of a bar disciplinary proceeding in the Supreme Judicial Court of Massachusetts, that state's highest court, seeking to revoke his law license there. The Massachusetts Bar Association had recently filed a Notice of Conviction of Serious Crime, and Petition for Reciprocal Discipline.

Attorney Burnbaum was arrested in 1995**, after he asked a jailed inmate to draw him a map of the location of a shipment of cocaine he had stored before his arrest. The lawyer, a former Federal prosecutor, was reportedly acting on orders of the inmate's drug cartel kingpin, his client. He was arrested, and charged with Conspiracy, with Intent to Distribute, Cocaine. At his sentencing in Florida in 1999, he received 105 months in Federal Prison, plus four years of Supervised Release, which is a form of post-incarceration parole. He resigned from the Florida Bar, and he has not been readmitted.

For some reason, the Massachusetts Bar never learnt of his felony conviction from the Florida court, and Mr. Burnbaum apparently never disclosed it to the organisation. Generally, when a practising lawyer is sentenced in Federal Court, the trial judge inquires of the lawyer whether he is admitted in any other jurisdictions, other than the state his office is located in. It appears that Mr, Burnbaum may have failed to inform the judge that he held a license in Massachusetts, a clear lapse of ethics on his part. Of course, since he was going off to prison for more than seven years, it may not have seemed important to him at the time; it is now.

After his release in 2006, Burnbaum moved to New Jersey. In a number of social networking sites, he identifies himself as a lawyer. He successfully had his Supervised Release terminated early, and in 2011, he undertook to defend Nathan Rothschild, in a corruption case in US District Court in New York State. He actually obtained a Certificate of Good Standing from the State of Massachusetts, in order to be admitted pro hac vice*** in New York, and he stated in his application that he had no pending disciplinary actions against him in any court. This statement may be true, but, did he not have a duty of candor to the court ? Was he being deceptive ?

When his past caught up to him, it was properly noted that he was, at that moment, still a member of the Massachusetts Bar in Good Standing, that his client (who was sentenced to a year and a day) stated that he was aware of it, and he wanted Mr. Burnbaum to continue as his defence counsel.

I see that he has filed, in the court in Massachusetts, an objection to the introduction of a copy of the Florida disciplinary action against him there. These procedural tactics will only serve to gain a short delay in the inevitable, as Mr. Burnbaum certainly knows. He will ultimately lose his license in Massachusetts.

There will be other consequences; any chance that he may have had to gain admission, or readmission, to the bar of any state at a later date has most likely been greatly diminished by his actions in the New York case, as well as his attempts to evade the consequences of his criminal conviction. Honesty is, and will remain, the only policy, particularly for lawyers, who are held to a higher standard of care than non-lawyers.
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*United States vs. Rothschild, Case No.: 11-cr-00345-KMK (SD NY).
** United States vs. Burnbaum, Case No.: 95000481-AJ (SD FL).
*** "For this event," meaning that a lawyer is admitted to practice before the court for the limited purpose of that proceeding only.

LAWSUIT SAYS ATLANTIC RIM FUNDING IS A PONZI SCHEME

2012-02-19T21:25:00.000-05:00

The controversy over Atlantic Rim Funding Corp. continues; its supporters claim it is a bona fide investment source, but its detractors allege it is a Ponzi scheme or Advance Fee Fraud. A new civil suit may answer that question.

The Land Conservancy of Elkins Park, Inc., a Pennsylvania nonprofit corporation, last month filed an Adversary Complaint* in US Bankruptcy Court in Pennsylvania against Atlantic Rim Funding Corp., a Nevada Corporation, alleging that the defendant failed to provide funding, and thereafter failed to honor its contractual obligation to return the Plaintiff corporation's $600,000 escrow deposit on request.

The Plaintiff, who needed to raise $6.2m to pay off a mortgage, alleges that Atlantic Rim defaulted last July on an agreement to supply funding, and since that time has failed to return the Plaintiff's $600,000 escrow deposit, which allegedly is no longer under the control of the Defendant Atlantic Rim, and has been reduced to only $400,000. The Plaintiff was forced to file for bankruptcy when the financing fell through, and its ability to make a partial payment was lost when the promised return of the escrow did not materialise. The Plaintiff has filed an email from Defendant Dean Kennedy, in which he threatened to "lock-up" the missing deposit if suit was filed.

The Adversary Complaint alleges that Atlantic's principal, and officers, made misstatements of material fact regarding the company's ability to obtain funding, that the company is a shell, with no assets, office, employees, telephone number, or day-to-day business or finances. It also claims that Atlantic Rim is merely the alter ego of Defendant Kennedy, whose representations that he had access to funding through a trust holding $13bn in assets were relied upon by the Plaintiff, to its damage and detriment. After the funding date passed, Atlantic and Kennedy represented that they had no assets with which to repay the deposit. Do the $13bn in bonds actually exist ? If so, why can't the company easily refund Elkins Park Conservancy its deposit from other sources.

The Plaintiff has alleged that Atlantic Rim Funding is a Ponzi scheme, where deposits from failed funding contracts are applied to repay other investors who are owed their deposits. A Federal Judge has since ordered the return of the deposit, but it has not been forthcoming. A Motion for Contempt is pending. It is also alleged that there are a number of investors whose escrow deposits have not been timely returned to them.

One of Atlantic Rim Funding principals has made the following representations on the Internet; When taken in the context of this lawsuit, they raise significant questions about the company that remain unanswered:

(1) "Atlantic Rim Funding has over $13bn in assets to fund loans at this time."

(2) "Atlantic Rim is looking for good projects to fund ... we use our own money."

(3) "Atlantic Rim can offer a "no-qualifying" loan because Atlantic Rim approves all of our loans in-house."

(4) "Atlantic Rim provides loans from lines of credit that are established with the top global banks, secured by government securities provided in partnership with Atlantic."

We shall report on all major developments in this case for our readers.
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* Land Conservancy of Elkins Park Inc. vs. Atlantic Rim Funding Corp., Dean Kennedy and J. Mac Rust, Case No.: 10-19522-ELF, Adversary Case No.: 12-007 (ED PA).

PRIMARY BANK FOR PONZI SCHEMER AGREES TO PAY MULTI-MILLION DOLLAR SETTLEMENT

2012-02-19T14:00:00.004-05:00

Banks can pay a heavy price for failing to identify clients who are Ponzi schemers. Gibraltar Private Bank and Trust, where convicted attorney/Ponzi schemer Scott Rothstein's law firm banked, has reportedly agreed to pay a large settlement to Herbert Stettin, the bankruptcy trustee for Rothstein Rosenfelt Adler (RRA). The trustee alleged that Gibraltar bankers routinely permitted hundreds of overdrafts in RRA accounts, many in the hundreds of thousands of dollars, and that the Ponzi scheme could not have been perpetrated without the bank's help. The bank was the subject of an Order to Cease and Desist*, for failing to maintain and effective and adequate anti-money laundering programme.

The reported terms of settlement:

(1) Ten million dollars will be paid directly to the trustee.
(2) Ten million dollars will be contributed by Gibraltar's insurers.
(3) The bank's $50m claim against its liability insurers, who have denied coverage, is to be assigned to the trustee.

Note that there are additional lawsuits pending against the bank, but the settlement, if approved by the United States Bankruptcy Judge, is said to bar those actions. One alone is reported to be for $200m.

Another bank used in Rothstein's elaborate Ponzi scheme, where investors purchased non-existent claims for discrimination and harassment, allegedly against prominent companies and individuals, Toronto-Dominion Bank, recently was hit with a $67m judgment. It was alleged that the bank gave investors assurances, later found to be untrue, that their money was safe, whilst the accounts were being depleted by Rothstein.

Over on the criminal side, RRA administrative assistant Marybeth Feiss has entered a guilty plea in US District Court** in Florida, to Conspiracy to Defraud the United States. Feiss, who illegally "bundled" campaign contributions for local, state and national candidates supported by Rothstein, who was seeking to gain influence, violated Federal Election campaign laws when she made contributions in the names of individuals whom were not the actual contributors. Feiss will be sentenced on 4 May, and could receive up to five years in Federal Prison; she has been cooperating with law enforcement.
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*Order No.: SE-10-046
http://ots.treas.gov/_files/enforcement/97490.pdf
**United States vs. Feiss, Case No.: 11-cr-60282-KAM (SD FL).

WHEN WHITE COLLAR CRIME BECOMES MONEY LAUNDERING - PART SIX

2012-02-16T09:45:00.000-05:00

For regular readers of this series who have been wondering why this case is so important; it exposes a larger problem, which we are covering it in this segment. If this is the first time you are reading When White Collar Crime becomes Money Laundering, you are encouraged to read the earlier segments here* on this blog.

For those of you who read the articles appearing recently in the media, about how the Mexican Cartels, The former Cali Cartel, and the Norte del Valle Cartel, have used US law enforcement agencies to unwittingly assist them in their criminal operations, and have also been following the so-called "Fast & Furious" case, where firearms were allowed by US law enforcement to be shipped in bulk to Mexico, where they were used in homicides, this case appears to be connected to individuals affiliated with the paramilitaries, who have received favourable treatment by US law enforcement, with the assistance of Colombian and American attorneys. Cooperation often frustrates the ends of justice, especially where lawyers experienced in tempting US law enforcement with potentially major indictments down the road receive favours that the public, if it was disclosed, would certainly object to. When you assist a narcotics criminal, no matter what the reason, you hinder the global war on drugs.

Whilst we have previously documented, in this series, this treatment, it is now time to detail how counsel for individuals who have committed embezzlement and money laundering manipulate law enforcement, and the criminal justice system, have acted for the benefit of their clients, at the expense of legitimate companies and individuals, and frankly, manipulated the system.

Briefly, this case involves an individual who, when presented with evidence that she embezzled a large sum of money from her employer, went to a criminal defence attorney to help her reduce the risk that she would be charged with these crimes. He took what some regard as an improper step; suing the victim.

(1) Her attorney, Richard J Diaz, of Coral Gables, Florida, then filed a civil action against her employer, though it was totally devoid of any legal merit, and without any factual basis, probably because he knew that the overworked State Attorney's Office in Miami, is inclined to avoid filing criminal cases that are already embroiled in civil litigation. He was gaming the system, seeking to evade the filing of state criminal charges. His client's cooperation with Federal law enforcement was his scheme to avoid any Federal charges, through skillful management of his client's relationship with thr Drug Enforcement Agency.

(2) Her lawyer has reportedly pressed hard for a settlement of the civil case, knowing full well that it would, for all intents and purposes, include a general release, and therefore eliminate the possibility that a criminal case will ever be filed against his client; More manipulation.

(3) The most egregious acts committed by Cajale, other than the embezzlement, were her unsolicited statements, made repeatedly to law enforcement and prosecutors, to the effect that her employer may have been involved in money laundering. She offered no factual basis for these bogus statements, and apparently law enforcement has taken no action to investigate her admittedly baseless allegations. Officers at the company that formerly employed her, where she embezzled funds, lost the ability to enter the US on business as the direct and proximate consequence, since her statements resulted in the revocation of their visas, due to the reports filed by law enforcement as the direct result of her untrue allegations. The net result is that company officers cannot come to the US to personally assist in the civil case, to testify at deposition, and help defend the lawsuit. if Cajale wins the lawsuit on the merits, the risk that a criminal case would be filed becomes microscopic.

(4) There is another issue; The inability of the two principal officers to be present in the US, due to Cajale's statements, has interfered with the company's ability to conduct its international business, resulting in a diminution in income. Was this not an intentional consequence of Cajale's unfounded statements to DEA, after she was terminated from her position at the company ? To decrease the company's chances of a successful outcome, which minimises any possible criminal charges, perhaps.

(5) According to her sworn testimony, Cajale and her attorney met, a number of times, with US law enforcement agents (DEA), in Richard Diaz' law offices. The testimony appears to confirm that she, and her husband Didimo Alberto Navarro, among others, have received preferential treatment, as the direct and proximate result of their "substantial assistance." In this case, they simply made up the information, and have benefited from it. Did Navarro receive an "S" Visa, which is given to individuals who assist US law enforcement ? I am sure that we will learn the answer to that question as the case unfolds.

If you are familiar with the Whitey Bulger scandal, you know that the FBI agents who gave a career criminal in Boston a pass on his criminal activities, in exchange for information, are now serving sentences in Federal Prison, because their actions strengthened Bulger's organisation. The same thing is happening, on a much larger scale, when US law enforcement gives narco-criminals immunity from prosecution, allows them to launder the proceeds of crime, to pass freely into and out of the United States, and thus allows itself to be grossly manipulated, in exchange for information that might, perhaps, result in future indictments. It is not worth it, in my humble opinion.

Members of the US Congress are disturbed by these methods of law enforcement; perhaps you should be, too.
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*When White Collar Crime Becomes Money Laundering (Parts One through Five)
http://rijock.blogspot.com/2011/10/when-white-collar-crime-becomes-money.html
http://rijock.blogspot.com/2011/11/key-witness-confirms-that-fraudster.html
http://rijock.blogspot.com/2011/12/when-white-collar-crime-becomes-money.html
http://rijock.blogspot.com/2012/01/when-white-collar-crime-becomes-money.html
http://rijock.blogspot.com/2012/02/when-white-collar-crime-becomes-money.html

IS DEA MONEY LAUNDERING PROGRAMME OUT OF CONTROL ?

2012-02-15T08:43:00.003-05:00

The flap over the seizure of bulk cash carried on board a chartered American business jet that landed in Panama demonstrates that the anti-money laundering programme run by the Drug Enforcement Administration needs tighter controls. The pilots, operating under the understanding that the funds they were transporting were the property of the US Government, appear to have unwittingly bulk cash smuggled criminal proceeds into Panama. They are not free to leave Panama, and the US Government does not seem to be assisting them.

The incident has publicly exposed the existence of an operation whereby DEA agents, in an undercover capacity, move dirty money for criminal organisations, ostensibly to learn more about the target groups. Unfortunately, in the process, the agency is assisting the criminal organisation achieve financial success. What's wrong with this picture ?

Unless the undercover operation results in a major intelligence coup, and resulting indictments of kingpins, and senior associates, laundering drug profits for an extended period is counterproductive. It only helps the narcotics traffickers. Perhaps this programme, if not subject to outside oversight, needs to be terminated, in favour of one that hurts, not helps, drug trafficking organisations.

LOWER COUNTRY RISK FOR SOUTH AFRICA

2012-02-12T07:17:00.000-05:00

Readers who have had concerns lately about country risk for South Africa will be interested in two pieces of favourable news, regarding the future of the country's politics, and private economy.

First, the ruling African National Congress (ANC) has affirmed a decision to suspend its polarising youth leader, Julius Malema. Mr. Malema, who enjoys widespread political support in the country, seeks to appropriate white-owned land, and has taken a radical nationalist anti-white position, which has resonated with many unemployed youths. He sang an anti-white song previously banned by the ANC as divisive at a political rally. Malema's suspension is for a period of five years.

Second, the ANC has indicated that it will recommend against nationalisation of the country's mines, and instead will support increased taxes on the mining industry. Investors had worried that state takeover in the mining sector would increase country risk, as there are doubts as to whether the government could effectively operate them.

In my opinion, these two events operate to reduce country risk for South Africa.

WHEN WHITE COLLAR CRIME BECOMES MONEY LAUNDERING - PART FIVE

2012-02-07T15:00:00.000-05:00

We continue to cover the Miami lawsuit* between an international Brazilian trading company and its former part-time clerk, Lourdes Mercedes Cajale, who is said to have embezzled large sums of money from her employer, and thereafter wired the funds to accounts she controlled in the Republic of Panama, which raises substantial issues of money laundering. To bring our readers up to date:

(1) The General Magistrate has filed her Second Report and Recommendation on Defendant's Motion to Compel Discovery.

For those readers who have not read the previous articles, and are not familiar with the facts, it is alleged that, after Ms. Cajale's embezzlement from company accounts became known, she slandered both the corporation and its president, by reporting to a Federal law enforcement agency that both the company and its president were involved in doubtful conduct. The company has asserted that there is absolutely no factual basis for her claims, and that it was done solely to distract attention from her criminal activities.

Mrs. Cajale's attorney, Richard Diaz, objected to deposition questions propounded to his client, on the ground that there was a Grand Jury proceeding somewhere, and that, if she disclosed details about her
statements to law enforcement, she might be exposed to "potential prosecution for Obstruction of Justice."

The Magistrate**, in a blistering critique of Cajale's counsel, further found

" Based upon the foregoing, the magistrate has concerns that the Plaintiff's alluding to the threat of criminal prosecution arising from some grand Jury, which may or may not have been convened, on matters related to the Defendant [company] and its president, may be more tactical, i.e. sought to gain an advantage in this civil action, than fact."

In other words, the Magistrate has suggested that Cajale's counsel sought to prejudice the Court against the company, by alleging, but failing to prove, that an ongoing criminal investigation exists. She was obviously not pleased by this tactic.

Additionally, she overruled other objections made to Interrogatories to Parties, which were directed to Ms. Cajale, and directed her to appear again, for the completion of her deposition. Those Interrogatories have now been answered under oath. Finally, I have not found that any objections to the Magistrate's Report have been timely filed by Ms. Cajale's attorney.

(2) the other troubling aspect of this case, which does not appear in the court file, are the links between Cajale, her attorney, Richard Diaz, her common-law husband, Didimo Alvaro Navarro Reyes****, and the celebrated Colombian criminal defence lawyer, Abelardo de la Espriella, whom we have profiled in earlier articles*****. Colombian media have reported that Sr. Espriella has been under criminal investigation by the Supreme Court of Colombia since 2011, for links to the AUC, and there is also a report of an earlier investigation, from 2010, regarding the fraudulent Colombian investment company, DMG and the AUC.

First, Sr. de la Espriella's legal website lists a Coral Gables, Florida address as one of its branch locations, though he is neither admitted to the Florida Bar as a practising attorney in that state, nor does he hold himself out there as a registered Foreign Law consultant on the law of Colombia. All the lawyers in his office list the Bogota office as their location. One wonders why a Colombian criminal lawyer lists a Florida office address if he is not practising law there. Individuals not admitted to the practice of law cannot be partners in a law firm composed of Florida attorneys. Curiously, this office is the one and the same as the law firm of Cajale attorney Richard Diaz; there is no separate office listing, nor can any separate entrance be seen.

Second, in a photo appearing in El Heraldo******, Didimo Navarro appears with Sr. de la Espriella, and several other individuals. One of these individuals has a prior money laundering conviction, and another is reportedly under investigation for influence peddling. Criminal defence lawyers are never permitted to fraternise with their clients, nor to perform legal services of a civil nature for them, lest they, wittingly or unwittingly, facilitate future crimes. Is this photograph evidence of an improper relationship ? We cannot say, but our investigation continues.

Third, Didimo Alberto Navarro lived in South Florida during the "Miami Vice" period, but I can find no information on his holding any gainful employment during that time, though he lived in a luxury apartment adjacent to Miami's upscale Brickell Avenue. He then did not enter the United States for a period of seven years, and only began coming to Miami after his wife Lourdes admittedly made statements to law enforcement agencies. Frankly, the only way that could gain entry, given his "colourful" past, is to hold an S-type visa, which is rarely issued, and only to individuals involved in major illicit activities who are assisting law enforcement, and their immediate families. S visas require ongoing cooperation with law enforcement authorities, especially those that allow multiple entry into the US, as exits by S visa holders are presumed to be granted to allows the holders to engage in continuing activities in their country of origin, generally collecting information about targets, their businesses, and other participants. It appears that these people have manipulated law enforcement authorities this far, for their own benefit, and that with an S Visa, they may continue to do so.

We are continuing to follow this case, and will report back to our readers again shortly.
____________________________________________________________________________
*Case No.: 09-64119 CA 15 ( Miami-Dade County Cir. Ct.).
** Dated 25 January, 2012.
*** Report and Recommendation, at 3.
**** I am endeavouring to determine exactly how Sr. Navarro, notwithstanding his background, apparently holds a valid US Visa. It may be in connection with the granting of immunity from prosecution for certain individuals involved in the Cali Cartel, when the kingpins pled guilty in US District Court in Miami in the early 1990s.
*****When White Collar Crime becomes Money Laundering, Parts One through Four.
****** http://www.elheraldo.co/node/22873/

RAISE COUNTRY RISK FOR EGYPT

2012-02-06T08:36:00.003-05:00

If you have not been following the events in Egypt, the government has announced that senior staff members of a number of foreign non-governmental organisations involved in supporting emerging democratic groups have been prevented from leaving the country, and that they will now be charged with criminal activities. A number of Americans are included on that list, including the son of the US Secretary of Transportation, Raymond La Hood. Other nationals whose exits have been blocked include those from a number of Middle Eastern Countries, and Germany. Their offices were previously raided and closed by law enforcement action, the contents carried away, and their funds confiscated.

Apparently the military government is employing an old law, left over from the Mubarak regime, that severely restricts the operation of foreign NGOs. This action has been condemned by the Government of the United States. American aid to Egypt, billions of dollars a year, is in jeopardy, and if it is cut off, as has been threatened by the US Congress, the Egyptian economy could be seriously affected, as will the operation of the military, which largely operates on this aid.

Watch American actions closely, and if it appears that aid will be diminished or cut, consider raising country risk for Egypt.

WHERE IS THE DIRTY SWISS FLIGHT CAPITAL GOING ?

2012-02-04T14:04:00.003-05:00

As expected, now American law enforcement agencies are targeting the regional and cantonal Swiss banks that picked up the American tax cheats who were fleeing the big banks, fearing that they would be reported. It appears that a targeted campaign directed at those tax evaders resulted in the placement of large sums of untaxed American money in a bank that boasted it had no US branch, agency or office, and that it completely observed the Swiss tradition of bank secrecy.

A few criminal indictments later, the realisation that Switzerland is no longer a safe place for your "flight capital" will sink in, especially after a number of Swiss bankers find themselves in Federal Prison.

Look then for creative money launderers to be dispensing advice on where to go for their offshore needs. Though The Far East is the logical choice, due in part to lack of US presence and influence, some of this money may be seeking a safe haven in other jurisdictions. Remember, in the business of money laundering, you are only limited by your imagination.

Have you seen any incoming wire transfers from regional, local or cantonal Swiss banks since last week ? If so, you are advised to examine them, the remitter, and your client, thoroughly.

KEN RIJOCK TO LECTURE AT FFIEC FINANCIAL CRIMES SEMINAR

2012-02-04T12:01:00.002-05:00

if you are with a Federal or state regulatory agency, and are planning on attending the Financial Crimes Seminar, sponsored by the Federal Financial Institutions Examination Council (FFIEC)*, 12-15 March, I will be making a special four-hour presentation there on 14 March, at 1:00 PM.

The programme, which is held several times each year at the FDIC Seidman Centre in Arlington, Virginia, is directed at OCC,FRB, OTS, NCUA, and other agencies, and is also attended by representatives from state regulatory agencies.

My presentation consists of:
(1) Confessions of a Money Launderer : my personal story of what it was like to be a career money launderer in Miami for ten years.
(2) Know your Customer : a practical lecture on how money launderers operate in financial institutions, designed for auditors in regulatory agencies.

if you are with another Federal or state agency, and are interested in attending, I will be presenting this lecture three times this year:

(A) 14 March, 2012
(B) 13 June, 2012
(C) 19 September, 2012

You can obtain details from the FFIEC at: (703) 516-5588. The Senior Programme Administrator is Darlene Callis.
____________________________________________________________________
*http://www.ffiec.gov/

TRUST, BUT VERIFY, YOUR DATABASE INFORMATION

2012-02-02T07:21:00.001-05:00

Has this ever happened to you ? You run a prospective client through your best high-risk database and get a negative. You then search the Internet for any recent major newspaper or magazine articles, and find out, to your dismay, that he is a major financial criminal. Why didn't your favourite database alert you to the danger ? The answers may surprise you.

(1) It is impossible to keep all the entries current, especially where there are more than one million individuals and entities in a database. Did you check to see when it was last updated ? How many years ago, please ? Can they update it for you by request ?

(2) If you performed an exact name search, the database will ignore even minute variations in spelling. Are you sure you have his correct name ? Financial criminals delight in changing one letter of their names, knowing full well that it confounds the computer. Remember, always supplement your exact name search with phonetic searches, and partial name searches. You may not have the individual's name right, or he may use a number of aliases. Doers your database cover known aliases ?

(3) Was the name transliterated from a language and alphabet that uses different ( i.e. non-Roman) characters ? Perhaps the translation is inaccurate, or it does not meet commonly-accepted standards for equivalent letters. If so, there may be a number of alternative spellings. have you checked them all ?

What about the flip side, where you get a positive, but the client says it is either incorrect, incomplete, or inaccurate ?

(1) Did the case occur in a jurisdiction where justice has a price ? Does the Rule of Law exist where the conviction occurred, or is it suspect by virtue of the jurisdiction itself ? Be sure before you act on such criminal history records.

(2) Was the client's criminal case filed purely for political, religious, or racial reasons ? If so, can you ignore it?

What I am saying is clear: do not blindly accept what you get from your database search as gospel, no more that you accept unaccredited information from the Internet. Check out the story behind the entry before you reject the client, based solely upon what the database tell you. They have been known to be wrong, outdated and incorrect.

VENEZUELA THREATENS TO NATIONALISE THREE BANKS

2012-01-30T08:47:00.001-05:00

Venezuelan President Hugo Chávez Frias reportedly stated yesterday that he would consider nationalising any banks that refuse to finance agricultural projects sponsored by the government. presently, approximately one-quarter of the country's financial institutions are government controlled.

The banks reportedly named by Chávez are;

(1) Banco Mercantil

(2) Banesco

(3) Banco Provincial

Whether this threat will actually result in the nationalisation of these, or other privately-owned banks, is not known, but due to the fact that the corrupt judicial system cannot be relied upon to redress such actions, and that compensation is rarely paid for nationalised property in Venezuela, there is a risk that bank owners could lose everything.

Risk managers whose banks deal with Venezuela would do well to monitor the situation closely.

BUSLOAD OF BULK CASH SMUGGLERS SENTENCED IN TEXAS

2012-01-29T14:55:00.000-05:00

Thirteen Mexican permanent residents of the US, living in Georgia, were sentenced to prison terms ranging from six months to three years, for bulk cash smuggling, in US District Court in McAllen, Texas*. The defendants, who all were on board a bus bound for Mexico, and interdicted at the Hidalgo-Reynosa border crossing in South Texas, were found to be smuggling $31.9m in US currency.

The defendants, who were expecting to be paid for their long journey from Georgia, were transporting cash sealed in air mattresses hidden their luggage. their sentences were:

6 months
18 months
18 months
Tine Served (27 months)
6 months
6 months
18 months
36 months
Time Served
28 months
21 months

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*United States vs. Blanca Tapia-Pineda et al, Case No: 10-cr-01508 (SD TX).

TRIAL OF ACCUSED PONZI SCHEMER ALLEN STANFORD GETS UNDERWAY

2012-01-29T14:19:00.000-05:00

Last week the long-awaited criminal trial, in US District Court in Texas, of alleged $7bn master Ponzi schemer R. Allen Stanford (Stanford International Bank) finally started. There are a reported 22 witnesses on the US Attorney's list, and the trial is expected to last several weeks.

To date, two early witnesses have presented extremely damaging testimony which corroborates the government's allegations about the Ponzi scheme nature of the bank's operations:

(1) A senor Stanford staff member stated that he saw that Allen Stanford has loaned an estimated $15m to himself out of deposits, when the bank told investors that all funds would be placed in conservative, liquid investments.

(2) A graphics designed charged with creating Stanford bank's annual report saw Stanford, and his CEO, who has since pleaded guilty, changing the figures in the report draft, to make it appear more favourable. They did so in such a haphazard manner that the addition was incorrect. The designer brought the inaccuracies to their attention, whereafter the two officers abruptly changed the figures again.

We will be closely monitoring the trial, and shall continue to bring you updates periodically.

___________________________________________________________________________

DO NOT PERFORM CURSORY INTERNET SEARCHES DURING DUE DILIGENCE INVESTIGATIONS

2012-01-26T11:16:00.001-05:00

For those readers who have not read any of my early articles on the subject, when using search engines to make due diligence enquiries about a prospective bank client, remember this: never perform searches based solely upon relevance. To put it another way, do not limit yourself to the first couple of pages, when examining results.

Internet manipulation has gone mainstream; firms now advertise that they can minimise, or even delete, adverse information of the world wide web. It is not new; criminal organisations have been doing it for years. Here's how it is done.

Let's say that you are a career fraudster, with a number of articles about your recent arrest, for securities fraud, in an Asian country. You go to a skilled operative, because you want then off the Internet, as it is frightening away prospective victims.

Since the search engines operate under the relevance of a query, the trick is to put up, in front of the offending material, favourable and positive postings, web pages, news items and the like, to push the
negative articles about the client further and further back. Some of the tactics employed:

(1) Have the "client" sponsor a local sports team and/or event. The Internet site of the team, local media, and a self-serving posting, will all end up on the Internet, ahead of the unfavourable articles, when a search for the target is made.

(2) Charitable contributions, donations to non-profits, and social and fraternal organisations, generally result in Internet entries, all of which keep pushing the negative material to the rear.

(3) Blogs, letters to the editor, and other web entries, all of which are indexed by Google and the other major search engines, all contribute further to filling the first couple of pages of a search result with positive information.

So, what does a compliance officer do when conducting due diligence or enhanced due diligence investigations ?

(A) NEVER stop looking at search engine enquiry results, until you get the last entry on the absolutely last page. That way, if there is something negative, and it has been cleverly shunted to the back of the query, you will still retrieve it.

(B) ALWAYS access multiple search engines when performing Internet searches of a client, including regional, local, language-specific, and lesser-known sites, to ensure that you do not become a victim of Internet manipulation. Whilst search engines are helpful to the compliance officer, guard against the techniques discussed here by performing a very complete search, and go all the way to the end of the line on search results.

CROATIA VOTES IN FAVOUR OF EUROPEAN UNION MEMBERSHIP

2012-01-26T01:00:00.000-05:00

Readers who failed to read my recent article* on the subject of the money laundering consequences of the vote, Watch for Large Funds Transfers to Croatia after Sunday, which originally appeared on 19 January, are urged to do so at this time, due to the results of the voting.

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*http://rijock.blogspot.com/2012/01/watch-for-large-funds-transfers-to.html

BERMUDIAN ON TRIAL FOR BULK CASH SMUGGLING

2012-01-25T01:00:00.000-05:00

A Bermudian who traveled from St. Lucia to Bermuda to Bequia, in the Grenadines, is on trial in Serious Offences Court in St. Vincent, charged with two counts of money laundering. Winston Franklin Robinson, of Sandys, is accused of secreting $1.7m in US Dollars within the freshwater tank of the sailboat.

His testimony to date has been that the cash represents his personal savings, earned since the 1980s, from his jobs in hotels and through fishing. What is interesting about the case is the fact that he probably picked up the cash in Bermuda. Since it might be difficult to amass such a large amount of currency in a small island nation with strict anti-money laundering laws, we ask the question: where did the money come from ?

Obviously, it was bulk cash smuggled into Bermuda, but how ? On a vessel, coming from the United States, delivering consumer goods ? By private aircraft, secreted in the fuselage ? By cash couriers, concealed on their persons, over a number of trips ? We cannot say, but it shows you that bulk cash smuggling, even into a jurisdiction not known to be a favoured destination, is alive and well.

COMPLIANCE OFFICER, PROTECT THYSELF

2012-01-24T01:00:00.000-05:00

A reader, writing about this column on a KYC website, declared recently:

"Great tips, found in between the quite opinionated commentary, from the bloke who wrote 'Confessions of a Money Launderer' on World-Check."

He was kind enough to include a hyperlink to this blog. So what about it, am I too opinionated, and if so, why ? My answer can be found in what I refer to as ...

THE COMPLIANCE OFFICER'S NIGHTMARE

Your spouse finally convinces you to take the children on a trip to Disney World. When you deplane at Orlando, and process through Immigration & Customs, you are unexpectedly detained by the authorities, and turned over to Federal Marshals, who transport you to the District Court.

There, after being held in a lockup for several hours, you are brought before a Magistrate Judge, and informed that a warrants exists for your arrest, on the charges of money laundering, and conspiracy to commit money laundering. You are stunned, for you have never gotten more than a speeding ticket before this day.

The Court advises you that you are but one small cog in a complex criminal indictment of over two hundred individuals involved in a global narcotics narcotics conspiracy. You know only one person in the entire case, a former client from years ago.

The judge finds that you have no ties to the United States, and are a flight risk, ruling that you shall be held in Pretrial Confinement, meaning that you cannot be released on bond. Your family lawyer in the UK quickly hires local defence counsel, who tells you that you are facing a potential twenty-year sentence, in a country where parole has been abolished by statute, meaning that one must serve 85% of one's sentence.

You vaguely recall the client who is your co-defendant as a good source of income for the bank at that time. You are fired by your employer, are crucified in the local press as a money launderer & danger to society, and your wife files for divorce.

The reason that I am so opinionated about many issues, is that I wish to spare all my readers that dreadful experience. In the compliance world, professional negligence may later develop into a criminal charge in a faraway jurisdiction where they are not very understanding about your failure to adequately monitor client activities.

If I can shake you out of your complacency about important topics, and cause you to be proactive as gatekeeper, and therefore effectively suppress money laundering in your shoppe, I will be as outrageous as I can be. I do not want you to have my experiences; going to prison for money laundering, and later working in compliance at a very large firm where a clandestine Ponzi scheme reigned.

Please, do not think that my strong opinions are not without cause; Thank you for your interest.

WILL US CHARGE PALESTINIANS UNDER ANTI-TERROR ACT ?

2012-01-21T14:27:00.003-05:00

Amongst those Palestinians released from prison by Israel as part of the agreement through which the hostage, Gilad Shalit, was freed are a number of individuals who were responsible for the deaths of 83 US citizens, as well as inflicting serious injuries on 53 others, all by terrorist attacks. There has been a call to indict those Palestinians in the United States for those crimes; Most of them were serving long prison terms before their release.

These terrorists released from a Israeli custody included "General" Mahmoud Awad Damra, who commanded a unit whose aim was to assassinate Israeli government leaders. He was responsible for directing terrorist attacks that resulted in the deaths of American citizens. Damra was subsequently appointed a personal advisor to the Palestinian Authority senior leader, Mahmoud Abbas.

The Parents Forum for Justice, an NGO composed of the parents of the American dead and injured, on 19 January, asked the US Attorney General, Eric Holder, to bring criminal charges, pursuant to the 1991 Anti-Terror Act,* which deals with acts of "international terrorism."

Compliance officers may be interested to know that some of these individuals, who were welcomed as heroes by the Palestinian Authority in the West Bank, and by Hamas in Gaza, are now living outside the Palestinian Territories, or are engaged in international travel. Some of them have publicly boasted that they intend to engage in new acts of terrorism in the future. Should they be allowed to open accounts, and later be indicted, not only is there a risk of reputation damage through media exposure of an account relationship, but of indictment for terrorist financing, or aiding and abetting.

You are reminded that these names have been transliterated from the original Arabic when appearing in the media in English; therefore, multiple variations in spelling are possible.

Ahlan Tamimi
Sana'a Shehadeh
Qahara Al-Saadi
Walid Al-Hadi Anjas
Fadi Muhammad Ibrahim Al-Jaaba
Maedh Waal Taleb Abu Sharakh
Muhammad Ynuis dar Musa

These men and women represent an unacceptable level of risk for any bank, including those located in the Middle East.
_____________________________________________________________________________
* 18 USC §2331

KEN RIJOCK TO SPEAK ON BULK CASH SMUGGLING AT BORDER SECURITY EXPO IN MARCH

2012-01-20T01:00:00.000-05:00

Readers of the many articles appearing in this blog on bulk cash smuggling can see me lecture on this important subject at the Border Security Expo 2012*, on 7 March. The event, which is presented annually by EJ Krause & Associates**, takes place this year on 6-7 March, once again at the Phoenix Convention Centre.

I will again be sharing the topic with Joseph Burke, Unit Chief of the National Bulk Cash Smuggling Centre. You may obtain event details by contacting EJ Krause VP Michael Rosenberg at: rosenberg@ejkrause.com/

_______________________________________________________________________
*http://www.bordersecurityexpo.com/
**http://www.ejkrause.com/

WATCH FOR LARGE FUNDS TRANSFERS TO CROATIA AFTER SUNDAY

2012-01-19T01:00:00.000-05:00

On Sunday, the voters in the Republic of Croatia will cast their ballots, in a national referendum, on membership in the European Union. It is believed that there will be sufficient "yes" votes to form a majority, meaning that, after approval of member countries, Croatia will join the EU on 1 July, 2013.

Why is this of interest to compliance officers at international banks ?

(1) History teaches us that money launderers and financial criminals regard EU new membership as a target of opportunity. The new member generally has poor and ineffective AML laws and enforcement, making it a prime candidate for placement of criminal proceeds.

(2) Illicit funds, once placed and invested in the new member, are often allowed to remain. The new investments then often appreciate, as the businesses and assets owned increase in value with the expanding economy. This is a typical middle, not short-term, money laundering strategy.

(3) When the country ultimately joins the Eurozone, a few years in the future, adopting the common currency, the cycle is complete. Profits can now be taken as Euros, and any chance that their illicit origin will be discovered is near zero.

Therefore, should you see any large wire transfers to financial institutions in Croatia, after Sunday's election, institute Enhanced Due Diligence on the sender, including all its officers and principals if a business entity. Scratch below the surface, and you may find that there is a Source of Funds issue; check it out.

STANFORD PONZI SCHEME TRIAL TO BEGIN 26 JANUARY

2012-01-18T01:00:00.000-05:00

The long-await trial of accused Ponzi schemer, R. Allen Stanford, is scheduled to commence on 26 January, in United States District Court in Houston, Texas. I am hoping that the testimony at trial, and the evidence introduced will answer a number of questions about Stanford Financial that remain unanswered:

(1) Is there any truth to the persistent rumour that Stanford accepted narcotics profits at his Antigua bank and thereafter engaged in laundering those funds ?

(2) Did Stanford Bank Venezuela evade taxes, and did Allen Stanford cause the Venezuelan Government to bring bogus criminal charges against the whistleblower, Stanford's then-manager, Gonzalo Tirado ?

(3) Did Stanford engage in a pattern of bulk cash smuggling, from North America to Antigua, of client funds, using corporate aircraft and Stanford Bank staff ?

(4) Was Stanford a Confidential Informant for a US law enforcement agency, and did that agency interfere with investigations into Stanford's solvency ?

Do you think these questions deserve an answer ?

COURT AFFIRMS THAT HOME CONFINEMENT IS NOT JAIL

2012-01-17T01:00:00.000-05:00

The Fifth Circuit Court of Appeals* has held that Peter Franklin Paul, who was under House Arrest (Home Confinement) for 53 months in a securities fraud case, could not receive credit for that time towards his Federal Prison sentence, and the Bureau of Prisons did not err in refusing to grant him credit in the computation of his release date. The case affirmed a District Court Decision* that challenged the BOPs sentence calculation. He had filed a Pro Se Federal Habeus Corpus petition, seeking immediate release from custody.

Paul, a former Miami attorney with a colourful history, pled guilty to Securities Fraud in US District Court in New York***, and was sentenced to ten years' imprisonment, three years Supervised Release, and Restitution of $11.4m. Did his controversial civil series of civil lawsuits, brought against Hillary Clinton, for whom he served as Hollywood fundraiser, until his narcotics conviction surfaced, cause him to be placed on home confinement for four and one-half years, or was it the government's failure to assess the measure of damages ? Either way, the sentencing was inordinately delayed.

The District Court made a factual finding that, whilst the US Attorney at the trial court level agreed not to oppose Mr. Paul's argument that he was entitled to credit for his home confinement time, the judge ruled that there would be no jail credit for time spent in home confinement. The appeals court, citing a US Supreme Court decision****, held that home confinement was not a "jail-type" environment, and that there was no statutory eligibility for credit for time spent in Home Confinement. It dismissed the appeal as frivolous ands without merit at law. Mr. Paul is currently scheduled for release on 26 December, 2014.
___________________________________________________________________________
*Peter Franklin Paul vs. Warden M. Travis Bragg, Case No.: 11-50728 (5th Cir).
**Paul vs. Biggs, Case No.: 10-cv-470 (WD TX).
*** United States vs. Paul, Case No.: 01-cr-00636-LDW (EDNY).
****Reno, Attorney General vs. Koray, 515 US 50 (1995) [a money laundering case].

WATCH FOR SYRIAN ASSETS IN MOTION

2012-01-16T01:00:00.000-05:00

You know that Syrian President Assad, his extended family, and those regime insiders that have been raping their local economy for decades, with their enforced monopolies and sundry other offenses, are already moving literally billions of US Dollars, Swiss Francs, Sterling, and other assorted hard currencies, out of Syria, as fast as they can. Unless you want to risk a EU or US sanctions violation, I humbly suggest that you follow these simple guidelines:

(1) Accept absolutely no present, or former, Syrian PEPs as clients, and make no exceptions.

(2) Watch carefully for increased and unexplained wire transfer activity involving any present client who has done business with Syrian companies. You do not want to unwittingly facilitate Syrian "flight capital" that your client's client is front for.

(3) Look carefully at the Place of Birth listed on any new Middle Eastern client's passport. Is he a Syrian PEP who was a dual national, or who managed to acquire residency or citizenship in the region lately ?

You can fully expect any future Syrian democratic government to aggressively seek the funds of PEPs who flee the country during the last year that the present regime is in power. Do not take suspect Syrian flight capital.

HEZBOLLAH FINANCED ARMS SHIPMENT FOR SYRIA

2012-01-15T01:00:00.000-05:00

Those readers who have been following the story of the M/V Chariot, the St. Vincent-registered freighter that carried an estimated 35 tonnes of bullets to the Government of Syria this week, deserve to know the backstory. The vessel, carrying munitions for Russian exporter Rosoboronexport, was boarded in Cyprus, when it was forced to make port in Limmasol for refueling, reportedly due to rough weather.

An inspection by Cypriot authorities revealed "dangerious cargo," suspected explosives, which was a violation of the EU ban on arms shipment to Syria. Cyprus is a member of the European Union.
Unfortunately, the ship's captain disregarded Cypriot orders to divert to Turkey, and docked at Tartus, in Syria. The moment that vessel dropped anchor in an EU jurisdiction, the sanctions law was violated.

Reliable reports say that payment for the ammunition was made by Hezbollah, from Latin America, using a Venezuelan corporation, to pay for the purchase. Are you verifying the beneficial ownership of Venezuelan companies, to rule out government-controlled entities, especially in countries where governments that actively facilitate terrorist organisations ? The company involved could only have been empowered to take such action if it was controlled by the Government of Venezuela.

Remember also that the senior officers of government-controlled companies are Politically Exposed Persons, or PEPs. That means that personal bank accounts of these officers are subject to extra scrutiny and monitoring. Have you identified any corporations as government-owned ? If so, do the personal accounts of the officers exceed their probable incomes ? Government-controlled companies engaging in international business are always to be regarded as high-risk, because they may have hidden, political or geopolitical, agendas. Watch yourself with them.

FORMER S.E.C. OFFICIAL TO PAY $50,000 TO SETTLE STANFORD FINANCIAL CONFLICT-OF-INTEREST ACCUSATIONS

2012-01-14T14:31:00.003-05:00

Spencer Barasch, who was the Director of Enforcement at the Ft. Worth Regional Office of the Securities & Exchange Commission for seven years, has agreed to pay a $50,000 civil fine, to settle conflict of interest charges. The fine levied is the maximum amount permitted by law in a civil case.

The Settlement Agreement, the complete text of which can be viewed here*, involved a dispute over Barasch's post-SEC representation of Stanford Financial Group before the Commission. The document, which also settles any potential criminal liability, recites that Barasch violated an SEC permanent bar to the representation of Stanford. Barasch performed services for, and billed, Stanford, after he left the SEC, which was actively investigating Stanford Financial Geroup's alleged $7bn Ponzi scheme during his employment there.

The Department of Justice press release** provides additional information for readers who require further details.
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*http://pdfserver.amlaw.com/tx/barasch.pdf
** Former Head of Enforcement for the Ft. Worth Office settles Conflict of Interest Allegations
http://justice.gov/usao/txe/2012/edtx-barasch-011312.html

FEMALE BULK CASH COURIER SENTENCED TO SIX MONTHS

2012-01-13T01:00:00.000-05:00

A Michigan woman who was transporting over $250,000 in cash has been sentenced to serve six months in jail by a Michigan court. The funds, which were secreted in the boot of her automobile, were being taken across the state line by a young mother, who had a prior case involving possession of a controlled substance.

The total amount seized, which was $265,800, was in a hidden compartment in the smuggler's Hundai automobile. She pled guilty to a single count of money laundering.

HEZBOLLAH THREAT IN WESTERN HEMISPHERE IS A CLEAR AND PRESENT DANGER

2012-01-12T01:00:00.000-05:00

I have always wondered why the United States Government has never disclosed publicly that five Hezbollah operatives were arrested at the US-Mexican border a couple of years ago. They were all carrying valid Venezuelan passports. Is there a reason why the United States does not want to alert the public to a danger literally in our backyard ?

Let's talk about those facts about Hezbollah that nobody wants to discuss:

(1) Many experts now estimate that Hezbollah narcotics trafficking activities in the Western Hemisphere are larger than those of any criminal organisation, including those in Colombia.

(2) The extensive Hezbollah money laundering programme in Panama, which involves using drug profits to purchase and later sell, real estate, ultimately results in clean sale proceeds cheques, which provide a major portion of Hezbollah global income. Most of it ends up in Beirut, using normal financial channels.

(3) Hezbollah narcotics operations in Venezuela, Colombia and Panama, all focus on its terrorist financing objectives. I imagine most bankers are not even aware that there is an active organisation called Hezbollah Venezuela. They've got their own website.

(4) Many Ethnic Lebanese living in these three countries are deeply involved in the facilitation of Hezbollah programme.

(5) Hezbollah is also deeply involved in training and assisting designated global terrorist organisations inside Colombia, especially the United Self Defence Forces of Colombia, also known as the Paramilitaries, or the Autodefensas.

From a banking perspective, the failure to educate the financial sector of these facts raises the risk that banks will fail to be sufficient vigilant, and that they may unwittingly facilitate terrorist financing of Hezbollah funds. Will regulators and law enforcement agencies then impose Draconian fines & penalties, Deferred Prosecution Agreements, and indictments ? Would it not be better to have an informed private sector, rather than classifying the information, and keeping it from the public ?

ONE YEAR FOR MONEY LAUNDERING IN ROSEMONT CASE ! ARE THEY KIDDING ?

2012-01-11T01:00:00.000-05:00

Giving the primary defendant in a major case a reduced sentence for providing what the US Sentencing Guidelines refer to as "Substantial Assistance," does not serve the ends of justice when he has inflicted serious economic damage upon individuals or entities not charged with criminal conduct. Often, when sentencing is delayed for a period of years, to allow the defendant to assist law enforcement, there is no media coverage of the lenient sentence.

The case against Rama Vyasulu, the manager of Rosemont Financial, in US District Court* in Boston, also involved the seizure, in Miami, of over $151m in deposits of 48 broker-dealers and non-bank financial institutions located in Venezuela after Vyasulu became involved in a money laundering sting brought by the DEA. Although there was no connection between the Defendant's criminal actions and his client's accounts, they were all frozen by a Federal Judge.

The broker-dealers were forced to negotiate the return of their client's money, a process that took many months, and they did not recover all their funds, because the US Attorney exacted hefty penalties for their lack of Federal, or state, money transmitters licenses. The economic costs, and resulting business losses, cannot be measured, but they were extremely high. Had Mr. Vyasulu not assured them that they needed no licenses, many of them probably would have been in full compliance with the registration requirements.

Two years later, the defendant comes up for sentencing; His sentence:

(1) one year and one day in Federal Prison ! If you were wondering why the additional day, it is a courtesy extended to him, allowing him to receive 2 months' gain time, for good behaviour, which will reduce his already short sentence to a mere ten months. As a prominent Miami criminal defence attorney is fond of saying, "You can do that standing on your head." He's not joking, and remember that money laundering has a maximum sentence of 20 years.

(2) The Court has recommended that he serve his sentence "in the Southern District of Florida," which is close to his family. Most defendants initially are sent far, far away from their home states. Preferential treatment as a reward for his cooperation ?

(3) A period of two years Supervised Release, the modern form of post-incarceration parole. Why he did not receive the customary three years is not known. A good attorney can seek early termination of the Supervised Release after several months, and he will certainly get no opposition from the US Attorney's Office, I am sure.

(4) No fine or restitution is ordered and adjudged; only a $300 court cost payment. The Judgment and Notice of Commitment stated fine waived. Whilst Rosemont Financial accounts seized were forfeited to the United States, no fine was imposed.

I doubt that the affected business owners, and their clients, even know that the individual responsible for their plight has received little more than a slap on the wrist. Was justice served ? I will let you be the judge. Vyasulu ruined a number of peoples' lives and businesses.

Reports received from Venezuela indicate that Mr. Vyasulu was not the owner of Rosemont, only the managing director. The true owners are several Caracas businessmen Why, I wonder, were the true owners of the company neither charged nor identified ?

One year for a money laundering case that resulted in the largest seizure of funds in the history of the criminal justice system; there's something very wrong with this picture.

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*United States vs. Vyasulu, Case No.: 09-cr-10081-JLT (D MASS).

INTERNAL REVENUE ANNOUNCES NEW VOLUNTARY DISCLOSURE PROGRAMME

2012-01-10T01:00:00.000-05:00

The Internal Revenue Service has announced that it will reopen its Voluntary Disclosure Programme, which affords taxpayers the ability to disclose hidden offshore accounts, and avoid potential criminal penalties. The individuals who avail themselves of the programme must disclose the names of the financial institutions where they have been secreting their overseas assets, which is a valuable tool for US law enforcement agencies investigating foreign financial institutions that actively assist American taxpayers in evading the taxman. The most egregious offending banks have paid extremely high civil fines to settle their transgressions.

Amended tax returns must be filed that reflect the individuals' true income; some taxpayers may be eligible for a mere 5% penalty, but the maximum rate that will be levied has increased to 27.5%. Whether this new round of Voluntary Disclosure results in many additional banks being called to account for assisting Americans in hiding their cash is not known, but rest assured there will be some naming & shaming in the future.
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* More information will be made available at: http://www.irs.gov/

ARE YOUR CUSTOMERS RECEIVING MONEY FROM SANCTIONED COUNTRIES ?

2012-01-09T01:00:00.000-05:00

The detailed disclosures, this past week, of how senior North Korean PEPs are able to obtain luxury items through China, is not a surprise, but it should serve to remind international bankers that, one way or another, payment must be made, directly or indirectly, for those goods. Therein lies a substantial amount of risk for bankers working in those countries in North America or the European Union where sanctions exist. I have analysed the problem logically:

(1) Somehow, somewhere, North Korea, or Iran, or Burma, or any other country against whom global sanctions lie, must find a way to pay for those expensive handbags, or sports cars, or premium liquor. When we see specific brands of products in photographs taken inside sanctioned countries, the manufacturer usually disclaims any responsibility. Their public relations department generally puts out a press release documenting how all their distributors are thoroughly screened, and only sell where authorised. Don't you believe it.

(2) In truth and in fact, so-called end users transship the goods to sanctioned jurisdictions, and there isn't much that can be done to stop this practice, as the countries where the transshipment occurs are generally chosen because the authorities there turn a blind eye to that sort of "commerce."

(3) Here's your problem: should your bank customer accept payment, in an indirect manner, for goods or services that have been sent to a sanctioned nation, and regulators discover it, you may be in for fines and penalties, or worse, in today's take-no-prisoners enforcement environment.

(4) Iran is definitely your worst problem; the America sanctions regulation that raises the benchmark on best practises to holding your bank responsible for any facts that are "knowable," holds you to a very high standard of compliance. Can you consistently maintain that level ?

(5) When international payment for goods or services comes, not from the country where your customer has sold & delivered, but a third country, ask yourself: is this a normal and consistent practice, and why ?

(6) If you do not have a satisfactory answer to (5), then it is time to observe "Know your Correspondent's Correspondent". Take the bank in the third country that transmitted the payment to you; who are its correspondents ? is there one or more in a sanctioned jurisdiction ? If so, you might want to consult with bank counsel about whether a Suspicious Activity Report should be filed, whether you might want to take certain protective actions regarding future business with your customer, including terminating the relationship.

(7) A smart sanctions evader might transfer the funds to at least one other local bank, domestically within the third country, before sending it to you, and there's no way to protect against that, unless the wire transfer room there gets careless, and fails to delete all the intermediary banks. Therefore, always check the information carefully.

Whilst sanctions evaders can be very innovative, these steps will greatly reduce the risk that your customers are using your bank to sell good and services to users in sanctioned countries; Good luck.

RAISE COUNTRY RISK ON VENEZUELA

2012-01-08T12:58:00.001-05:00

With presidential elections looming in October, Venezuela's President, Hugo Chavez Frias, has named General Henry Rangel de Jesus Silva as Defence Minister. Gen. Rangel was named, in 2008, as Specially Designated Narcotics Trafficking Kingpin (SDNTK), by the US Treasury Department, due to accusations that he was assisting the Revolutionary Armed Forces of Colombia, the FARC, transport drugs into, and through, Venezuela. The FARC is a Specially Designated Global Terrorist organisation.

A former head of the Venezuelan intelligence service, Rangel's appointment is not only a direct affront to the United States, it is a cause for major concern amongst country risk assessors.

(1) Will purchase contracts with Venezuelan government agencies, or military entities, be considered sanctions violations by US regulators ? What if Rangel, or his adjutant*, actually signs the contract ?

(2) Will he appoint other sanctioned Venezuelans, or entities, to posts in the Defence Ministry ? The authoritative publication El Universal listed no less than 35 Venezuelan individuals, and companies, that are sanctioned by the US for allegedly facilitating narcotics trafficking.

(3) Will the United States subsequently designate Venezuela a State Supporter of Terrorism, and/or sanction government agencies, and what will that do to pending contracts, Letters of Credit, goods en route, and accounts receivable ?

Bottom line: I humbly suggest that you consider raising country risk on Venezuela, and that you ensure that your financial exposure there is extremely limited.

UPDATE: The United States Government has advised that it is expelling Venezuela's Consul General in Miami. A recording of her seeking codes of nuclear sites in the United States appeared in the Spanish-language media, and her membership in the Venezuelan intelligence service has been revealed. She has 72 hours to leave the country.

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* A junior officer who assists a military commander with administrative tasks, generally on a full-time basis. The Adjutant is more than an agent; he or she speaks for (and signs for) the senior officer in many administrative matters, rather than the commander.

AMERICAN LAUNDERING PROFITS FROM CANADIAN TELEMARKETING SCHEMES IS SENTENCED

2012-01-07T14:03:00.000-05:00

Gregory Whitworth, an American who formerly resided in Bahrain, was sentenced recently, in US District Court* in Buffalo,New York, to serve a sentence of eighteen months in Federal Prison, for money laundering. Whitworth worked for a payment processing company that facilitated payments for a number of Canadian telemarketing schemes that reportedly defrauded consumers out of $20m. He cooperated with US law enforcement agencies in the case, and received a lesser sentence.

Apparently, the defendant continued to forward funds to Canada, to the fraudsters, even after he had actual knowledge of the illegal practises of the telemarketing firms. The principal of another company that was forwarding the proceeds of telemarketing fraud received a 2-year sentence for money laundering, plus a $100,00 fine, from the Court.
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* United States vs. Whitworth, Case No.: 10-cr-00324 (WD NY)

ARRESTED BULK CASH SMUGGLER ADMITS TO MULTIPLE TRIPS

2012-01-07T10:16:00.002-05:00

Concepcion Gomez-Alvarez was arrested* this month, by Customs and Border Protection (CBP), when he attempted to enter Mexico from Southern California. Charged with Bulk Cash Smuggling, the defendant's vehicle contained $442,113 in cash, in wrapped bundles.

The funds were concealed within the left- and right-rear quarter panels of his automobile. He claimed that he was going to Mexico to purchase some items. During questioning, he admitted to at least five prior trips, and stated to the arresting officers that he was paid only $700 per trip. Under Federal law, he faces a maximum of five years in prison for the offence. This case is but another verification of the law enforcement claim that many bulk cash smugglers engage in this activity on what seems to be a career basis, until apprehended.
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*United States vs. Gomez-Alvarez, Case No.: 11-mj-09780-PCL (SD Calif). [note that this is the Magistrate case number].

WHEN WHITE COLLAR CRIME BECOMES MONEY LAUNDERING - PART FOUR

2012-01-05T11:40:00.001-05:00

We continue to follow developments in the Miami civil case where Lourdes Cajale*, a staff member at an international export firm allegedly repeatedly embezzled funds from her employer, and then hid the funds in accounts in Panama, in what I consider to be the textbook example of how white-collar crime often turns into money laundering.

Here is what has transpired since we last reviewed the case :

(1) A Motion for partial Summary Judgment is pending, and will be heard on 10 January, 2012. Dealing with Ms. Cajale's purported claim for a percentage of the revenues of the company that employed her, a review of the court file indicates that there does not appear to be a factual basis for her claim.

(2) The Magistrate's Report and Recommendation, filed on 18 November, required Ms. Cajale to turn over emails to her. Additionally, she will be ruling on her refusal to respond to specific questions at her deposition. Her counsel has asked for an extension of time to translate the emails. There are unconfirmed reports that she is planning on leaving Florida for Colombia, and permanently moving out of the United States, in January. Should she leave the jurisdiction, and deliberately make herself unavailable for deposition, the court can, and probably will, impose sanctions, which may result in her losing the civil case. Is she seeking to evade something more serious ? We cannot say, but a review of the deposition transcripts of testimony taken so far does not show that she has been questioned about her travels to Beirut.

(3) We are still trying to understand why her attorney of record, in the civil case, is one of the most prominent criminal defence lawyers in Miami. In our last article, we discussed his link to a major Colombian attorney, known for his defence of individuals charged with ties to the Autodefensas, the Paramilitary organisation of Colombia, a designated terrorist group under US law.

An article in the Colombian press*** affirmed that Paramilitary leader Carlos Mario Jiménez Naranjo, who was extradited to the United States on multiple narcotics charges, would be represented by Mr. Diaz. He did not formally appear as attorney of record, and the defendant later pled guilty to two of the eighteen counts, (the money laundering count was dropped) and received credit for time he spent in Colombian prisons.A subsequent article**** in the Colombian media advised that he had withdrawn from representation of Sr. Jiménez over "conceptual differences." Jiménez was then sentenced to 396 months in Federal Prison**. What was his role in this case ?

Readers of this column will recall that I recently wrote about Sr. Jiménez in an article entitled Suit Against Colombian Paramilitary Leader in US Court alleges Government Corruption*****, a civil suit alleging war crimes, crimes against humanity, torture, and extrajudicial killing******.

We shall continue to monitor this case, until its conclusion; Stay tuned.
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* Ms. Cajale, who marital status remains unclear, is a Colombian of Lebanese ancestry who recently became a naturalised American citizen. It is unknown whether the outcome of this case will affect her immigration status, because she reportedly failed to disclose the details during the application process.
** United States vs. Naranjo, Case No.: 07-cr-20794-CR-JAL (SD FLA).
***http://www.cambio.com.co/archivo/documento/CMS-4149970
****http://www.cambio.com.co/archivo/documento/CMS-6120866
*****http://rijock.blogspot.com/2011/11/suit-against-colombian-paramilitary.html
******Jaramillo vs. Naranjo, Case No.: 10-cv-21951-EGT (SD FLA).

THE LAUNDRY MAN COMES OUT IN JUNE

2012-01-05T01:00:00.000-05:00

Readers who have enquired about the release date on my autobiography, The Laundry Man, please note that it will be released during the first week of June. You can pre-order it online at any one of a number of booksellers, and be the first in your office to have a copy. Alternatively, some book websites allow you to reserve a copy, or leave your email address for further information.

There will be a number of book tours; whilst they are in the planning stage, expect to see me in the United Kingdom, and the United States, this summer. Thank you for your interest in The Laundry Man.

MEXICAN KINGPIN PLEADS GUILTY TO MONEY LAUNDERING

2012-01-04T17:00:00.000-05:00

Tijuana Cartel Kingpin Benjamin Arellano-Felix has changed his plea to guilty in US District Court in San Diego*. The Plea Agreement, which saves him from a potential 140-year sentence, reportedly states that he will receive a maximum sentence of 25 years.

Arellano-Felix has pled to:
(1) Money Laundering Conspiracy
(2) Racketeering (RICO)

There is also a forfeiture of $100m in assets, which may not be recoverable in the US.

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*United States vs. Arellano-Feliz, Case No.: 97-cr-02520-LAB(SD CALIF).

EUROPEAN FRAUDSTERS OPERATING IN USA BULK CASH SMUGGLED THEIR ILLICIT PROFITS HOME

2012-01-04T07:21:00.002-05:00

A gang of Eurothugs*, defrauding online purchasers of automobiles in the US of an estimated $4m, have been charged** with a number of offences, including bulk cash smuggling and stucturing. Their method was to accept orders for cars, create bogus documents, accept payment, but never deliver the vehicles. They used more than 110 bank accounts to structure $9900.00 withdrawals, and purchase money orders for $2800 each, to avoid reporting requirements.

One bulk cash smuggling attempt alone involved $1,089,300 in cash. The charges;
(1) Money Laundering
(2) Bank Fraud
(3) Wire Fraud
(4) Structuring
(5) Manufacturing False Documents
(6) Bulk Cash Smuggling

Purchasing an automobile online, from individuals who are not established and known dealers, has now become a high-risk exercise.
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* The organisation's members came from Germany, Russia, Romania and Latvia.
**United States vs. Corneliu Stefan Weikum et al, Case No.: 10-cr-000579-GMN-RJJ (D Nev).

ARRESTED CASH COURIERS IN JAIL IN ANTIGUA

2012-01-01T09:54:00.000-05:00

Bulk cash smuggling appears to be alive and well over the holiday season, but fortunately law enforcement agencies are doing their jobs efficiently. The Government of Antigua & Barbuda now has four individuals in custody, and charged with attempting to smuggle cash into the country, as well as money laundering offences. They are nationals of:

(1) Dominica
(2) Venezuela
(3) Dominican Republic

Note that they attempted to smuggle in Euros as well as US Dollars, and that one flew in from St. Maarten with cash concealed on her person.

RISE COUNTRY RISK FOR NIGERIA ?

2012-01-01T09:21:00.003-05:00

The President of Nigeria, Goodluck Jonathan, has declared a State of Emergency in four northern Nigerian provinces, due to recent outbreaks of sectarian violence. Reports from Nigeria state that at least 52 are dead, and blame has been laid at the feet of an outlawed radical Muslim organisation, Boko Haram.

This far, the central government has been unable to stop the spread of Muslim vs. Christian violence, and for that reason, compliance officers charged with the assessment of country risk should review the situation, and make a decision on whether to raise country risk for Nigeria at this time,

HAS MONEY LAUNDERING CROSSED OVER AND BECOME MAINSTREAM ?

2012-01-01T09:03:00.004-05:00

This week, literally at the eleventh hour, the winning $14m ticket in the Iowa Lottery arrived to claim the prize. It would have been disqualified for tardiness, had it not come in when it did. Why is this of interest in the world of financial crime ? It seems that the claimant was not an individual, but a trust, and that it was sent in by an attorney, acting solely in representative capacity, and without identifying the beneficial owner. What's wrong with this picture ?

The last thing that I want to see in everyday application is the use of money laundering techniques of opacity to foil transparency in the world of legitimate commerce. I'm sorry, but I do not approve of this clever attempt at privacy. How do we know who the beneficial owner is, and whether he or she is the original ticket owner or not ?

I understand that the matter has caused no small amount of consternation in Iowa, judging by the huge amount of media coverage.. For those who are not familiar with this subject, the United States Supreme Court has held that, in the absence of unusual circumstances, the identity of an attorney's client is not privileged. A court of competent jurisdiction can compel the lawyer to identify his client.

Why am I am disturbed by the placement of a winning lottery ticket into a trust ? During my money laundering days, the quiet purchase of winning lottery tickets was a favoured method of legitimising drug profits. A particular client, working in Miami, would get the word out in San Juan that he would pay more actual winners more than the face value of the ticket. That way, the real winner had the cash in his pocket, unreported to tax authorities, and the drug trafficker could pass the winning ticket to any member of his organisation that needed to prove his income was legitimate.

Whilst I understand the need for privacy when you win $14m, the trust beneficiary could now be a career criminal, an individual specially designated by OFAC, or a foreign national involved in terrorist financing. I will sleep a lot better when we learn that the winner is an ordinary US person, who wants to hide his winnings from his friends and neighbors, because I pointedly do not like the way was structured.

HOW WILL MONEY LAUNDERERS EXPLOIT SINO-JAPANESE DIRECT YEN-YUAN TRADE ?

2011-12-28T01:00:00.000-05:00

Money launderers thrive on emerging opportunities. China & Japan have just announced that they have entered into an agreement that provides for direct Yen-Yuan trade. This means that, in their joint international trade, their respective currencies will no longer be converted first to US Dollars.

The elimination of the intermediate denomination of currency into US Dollars, which might be employed by prosecutors to confer that extraterritorial jurisdiction of the Money Laundering Control Act of 1986 exists, has not escaped the attention of the money laundering fraternity in Asia, I suspect. The risk of indictment by the US Attorneys' Offices may have decreased.

So, how will the international trade between the two countries, using Yen-Yuan exchange, be utilised by career money launderers ? Are we talking about trade-based money laundering ? Will bulk cash smuggling from one country to another, to facilitate the laundering of illicit profit though Sino-Japanese trade, be made easier ?

Whilst these musings are only theory, they are based upon the established fact that experienced money launderers often exploit even minor changes in the financial system to perfect new, and effective, laundering schemes.

IRANIAN SANCTIONS EVASION TECHNIQUES ARE OFTEN IMAGINATIVE

2011-12-27T01:00:00.000-05:00

A scandal is emerging in Israel this week; an Israeli software company that manufactures spyware that is reportedly highly effective in surveillance was apparently sold to Iran, notwithstanding the fact that such a sale not only violated international sanctions, the sale was to a country that poses an existential threat to Israel.

How did this sale occur ? It seems that the Israeli company had a relationship with a Danish company, and it was that company that sold the software to Iran. The moral of the story: sanctions facilitators can, and do, operate in a stable, Western jurisdiction that you would never expect that one would come from. Cast aside your preconceived notions that all Iranian sanctions evasions occur in the Middle East.

MEK TO BE RESETTLED OUTSIDE OF IRAQ

2011-12-26T08:28:00.001-05:00

The United Nations has agreed to resettle the members of the Mujahedin-e Khalq, more commonly known as the MEK, outside Iraq. The MEK, which opposes the present regime in Iran, which is a designated terrorist organisation under US law, has been lobbying extensively to have that designation removed, engaging the services of a number of prominent Americans who are former senior government officials. Reportedly, the UN and Iraq have signed an agreement providing for transfer of MEK members to third countries.

Several American military and government officials were assassinated by the MEK in Iran, during the periods when the Shah was in power, but the present US Administration supports the organisation, due to its opposition posture. The MEK is believed to be behind anti-government attacks on military forces and government facilities in Iran.

MEK members, who will be transferred from Camp Ashraf in northeastern Iraq to a location near Baghdad International Airport, whilst resettlement arrangements are being made, have been targeted in the past by Iraqi attacks, and it is feared that, after 31 December, such actions will continue, unless they are resettled outside the country.

STATE SAYS AL-QAEDA FUNDRAISER OPERATES IN IRAN

2011-12-25T14:34:00.000-05:00

The US Department of State is offering a $10m reward* for information leading to the capture of Al-Qaeda money launderer Yasin Al-Suri, also known as Ezedin Abdel Azil Khalil, a Syrian national. Al-Suri reportedly supervises fundraisers who work with donors in the Gulf states, and moves the money through Iran, to Al-Qaeda units in Afghanistan and Pakistan.

Iran has denied that he is located there. Please note that his photograph appears on the Rewards for Justice webpage, together with a number of additional aliases that he is known to employ.

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Rewards for Justice Programme
http://www.rewardsforjustice.net/index.cfm?page=suri

RAISE COUNTRY RISK FOR MALTA ?

2011-12-25T14:12:00.001-05:00

The fact that ten of the maritime transport companies, sanctioned last week by OFAC as Iranian fronts, (IRISL) were headquartered in the Republic of Malta, is disturbing. This is not the first time US regulators have come down on Malta for Iranian sanctions issues. When any country in the European Union allows itself to be used for sanctions evasion, it indicates a lack of adequate supervision over both financial services professionals, and government functionaries charged with processing filings. Who was at fault here ? I would certainly like to know.

Whether this was something that nobody caught, and negligent behaviour, or something intentional, I can guarantee you that US regulators, as well as law enforcement agencies, will be taking a cold, hard look at Maltese companies in the future. For that reason alone, compliance officers charged with assessment of country risk may want to reexamine their ratings for Malta.

COURT DECLARES ACCUSED PONZI SCHEMER STANFORD FOR FOR FRIAL

2011-12-25T12:48:00.000-05:00

The US District Judge handling the fraud case of accused $7bn Ponzi schemer R. Allen Stanford* has ruled that he is mentally competent, and fit to stand trial. Stanford's attorneys had argued that he was not able to assist in his own defense, or testify at trial because of a disability, caused by :

(1) Head injuries suffered during a 2009 prison assault; and
(2) The effects of the powerful anti-anxiety medications he was prescribed at the beating.

The US Attorney argued that he was competent to stand trial, and that he was faking total retrograde amnesia. The government alleged that he had failed all the tests given to him that were designed to detect
efforts to fake memory loss.

The Court found, by a preponderance of the evidence, that Stanford was competent to stand trial, and that he had suffered no brain damage. Trial is presently set for 23 January, though the defence has a motion for continuance pending.
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*United States vs. Stanford, Case No.: 09-cr-0342 (SD TX).

WHEN WHITE COLLAR CRIME BECOMES MONEY LAUNDERING - PART 3

2011-12-20T01:00:00.000-05:00

We are continuing to monitor the case of Lourdes Mercedes Cajale, the export firm clerk who allegedly embezzled funds from the company, moving them from Miami, through an unsuspecting Panamanian intermediary, to accounts she controlled in Panama, and then, after being discovered, had the nerve to sue her employer under a purported oral employment agreement*. Will she ultimately be charged with a violation of the Money Laundering Control Act of 1986 ? We cannot say, but recent developments in the case indicate that the case is heating up**.

(1) Her lawyer, Miami criminal defence attorney Richard Diaz, has moved for sanctions against Financial Crime Consultant Humberto Aguilar, who is reportedly analyzing the facts in the case, on behalf of the export company, to ascertain whether embezzlement and the techniques of money laundering have indeed occurred. Mr. Diaz is bluntly disputing Mr. Aguilar's professional credentials, which is puzzling. Aguilar, himself a former Miami attorney, served a term in Federal Prison for money laundering, and has become known as an international authority in the AML field. He regularly lectures at anti-money laundering conferences and financial crime seminars around the world. Is attorney Diaz questioning the competency of an obvious expert simply as a delaying tactic or is there another reason ?

(2) Reliable sources indicate that Ms. Cajale, who recently became a US citizen, failed to disclose the existence of this matter in either her application for citizenship, or any subsequent filing. Most experienced immigration lawyers agree that that concealing such material information is grounds for revocation of her citizenship, even after it has been granted. I submit that concealment of the fact that you have been involved in an embezzlement is material. Why did Ms. Cajale fail to disclose ?

(3) There's more; Cajale reportedly was granted asylum in the United States, based upon her allegation that she kept a residence for penniless Colombian youth, to keep them from joining the country's paramilitary groups, and that her life was threatened by members of the ELN, a designated Colombian global terrorist organisation, due to this activity. She also reportedly claimed that her handyman was himself an ELN agent, sent to report on her to his superiors in the terrorist group, and that he admitted his role to her. It has been alleged that this was a complete fabrication, that there was no such home, which conduct, if true, constitutes immigration fraud. A testimonial letter from local clergy was reportedly given to US authorities, to support her claim, which is curious due to the fact that Cajale reportedly ran no such programme.

If her original asylum in the US was obtained fraudulently, the subsequent naturalisation proceedings were tainted, and therefore revocable by the authorities. The asylum, residence and eventual citizenship of her family members, which was reportedly solely based upon her status, may also be in jeopardy.

(4) The production of bank records requested in a parallel proceeding in the Republic of Panama, alleging that the transfer of funds through a Panamanian intermediary who had no knowledge of their illicit nature, are expected to indicate that the $161,000 was split up into three portions, and transferred to accounts owned by Lourdes Mercedes Cajale and her husband, Didimo Alberto Navarro Reyes. These documents are scheduled to be released on or about the 22nd of December.

Where this matter will end we cannot say, but we shall continue to review the progress of the court file, ask questions, and report back to our readers on the final outcome; Stay tuned.

_________________________________________________________________________
*When White Collar Crime becomes Money Laundering - Part 1, Kenneth Rijock's Financial Crime Blog,18 October, 2011. When White Collar Crime becomes Money Laundering - Part 2, Kenneth Rijock's Financial Crime Blog,13 December, 2011.
** A recent high-profile California case, appearing in the media, involved employees who embezzled firm money to fund a transcontinental spending spree, appears to have a number of similarities with the Cajale case. The defendants in that case have been charged with a number of felonies.

PRE-ORDER "THE LAUNDRY MAN" ON AMAZON.CO.UK

2011-12-19T01:00:00.000-05:00

Readers who have been asking me when they can pre-order The Laundry Man, my book, for 2012 delivery, upon publication, can now do so on Amazon. Go to the Amazon.co.uk website:

http://www.amazon.co.uk/Laundry-Man-Kenneth-Rijock/dp/0241954177/

If you bring your copy to me during my forthcoming UK and US book tours, I will be happy to sign it for you. Details about tour dates and venues will appear here during 2012.

There is also information about the book on the Penguin UK website:
http://www.penguin.co.uk/

FRENCH COURT GIVES THE JACKAL ANOTHER LIFE SENTENCE

2011-12-16T01:00:00.000-05:00

A court in France has sentenced the terrorist Ilich Ramirez Sanchez, more commonly known as the Jackal, to a life sentence, for his involvement in four bombings on French trains. The Jackal, who is already serving a life sentence for a previous conviction for murder, received the maximum sentence permitted under French law.

National Bulk Cash Smuggling Centre Expands

2011-12-15T01:00:00.000-05:00

The ICE National Bulk Cash Smuggling Centre, located in Williston, Vermont, has expanded to larger quarters, and has added additional staff. Since it opened in 2009, the BCSC has been responsible for 270 arrests, and the seizure of over $170m in cash. We have previously discussed the importance of this law enforcement unit, whose Chief is Joseph Burke.

Remember, experienced money launderers working for narcotics traffickers do not always keep criminal profits in cash form at all times. They know that a successful transcontinental or international wire transfer, not identified and interdicted by compliance officers, can be later withdrawn in cash prior to exiting the Continental United States. Always check requests for large cash withdrawals, and ensure that it is for a valid business purpose, consistent with the client's lines of business, and account history. If not, take a hard look at the transaction.

If you have information on what you believe is an instance of bulk cash smuggling, you can report it by completing this form: http://www.ice.gov/exec/forms/bscs/bcsc.asp

For further information, visit: http://www.ice/gov/bulk-cash-smuggling-center/
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BEYOND ENHANCED DUE DILIGENCE

2011-12-14T06:51:00.001-05:00

There are instances where even Enhanced Due Diligence is insufficient. especially where Source of Funds, or absolute identification of Beneficial Ownership is a mandatory component of your investigation. Some instances where this is the case:

(1) Immigrant Investor Programmes. where government agencies require strict verification of Source of Funds information.

(2) Taking on a new business partner, mergers & acquisitions, and other complex transactions.

(3) Investing in the developing world, where a Western investor is taking a minority share in a local company. You do not want to be associated with someone who i a liability

There simply is no commercially available source of what I can only designate as Enhanced Due Diligence Plus, and it is sorely needed. Where would one go for such business intelligence ? Probably the larger private investigative firms, but they do not always have asset in the specific area you need.

There is a real gap here; I wonder when someone will devise a solution ?

WHEN WHITE COLLAR CRIME BECOMES MONEY LAUNDERING - PART 2

2011-12-13T11:16:00.000-05:00

New developments in the discovery phase of a case we have been covering here,* which involves litigation over funds allegedly embezzled by an employee in an international export firm, and deposited into Panamanian banks, paint a detailed picture of deceit involved in the movement of reputed criminal proceeds through what can only be described as the layering phase of money laundering. It should be required reading for all officers at companies engaged in international trade.

We have previously mentioned** the deposition of a Panamanian national who appears to have been the unwitting facilitator of the movement of the funds into, and through Panamanian financial institutions .. The transcript*** having since become available, we have learned more details, all taken from his sworn testimony:

(1) The witness, a longtime resident of Panama, and who had previously served as an auxiliary police officer in Colombia, was a childhood friend of Didimo Alberto Navarro Reyes, the husband of Lourdes Mercedes Cajale, the alleged embezzler. He owns a legitimate company in Panama.

(2) Didimo asked the witness to do him a favour, and accept a wire transfer coming from Lourdes, ostensibly because Didimo advised that his lawyer**** told him that the funds must be transferred from a company to a company account. The witness complied because he trusted Didimo, according to his testimony. He had never performed this favour before, nor has he done so since. He did not financially benefit from the wire transfer, which was in the amount of $161,000.

(3) The next week, it was requested of him that the received funds be divided up, and transferred into three accounts. Records of the bank, a major international financial institution, show that these are accounts of Didimo Navarro and Lourdes Cajale. Do these transfers constitute layering ? What do you think ?

(4) The witness was stunned when he subsequently received a visit from a Panamanian judge, accountant, and experts, all investigating the circumstances surrounding the wire transfer. He learned that there was a judicial inquiry into the propriety of the transfer. The witness ruefully admitted that he no longer trusts Mr. Navarro.

When someone you know asks you to assist with a "routine" funds transfer, solely as a favor to them, and not for any legitimate commercial purpose, you could be exposing yourself to money laundering charges, which in the United States can result in a twenty year sentence in Federal Prison. Always seeks competent professional advice before involving yourself, and your firm, in participation, no matter how minor, in any type of unusual transaction, lest you find yourself under investigation, or worse, for the facilitation of money laundering.

A second development in the case is also ominous; several relatives of the owners of the export company have been anonymously contacted in Colombia, and threatened with kidnapping. The caller advised that the only way that they could avoid an uncertain fate was to pay over $150,000 immediately. The threats were suspiciously made on the day that the above-described witness was subpoenaed for deposition.

These threats have been conveyed to Colombian law enforcement authorities, a formal complaint filed, and an investigation opened. Was this intended to intimidate and deter the owners of the export company from pursuing the judicial proceeding in Panama ? We cannot say, but we are waiting to see what the next deposition of Lourdes Cajale uncovers. Stay tuned.

___________________________________________________________________
*When White Collar Crime becomes Money Laundering, 18 October, 2011.
**Key Witness confirms that Fraudster Laundered Money through Panama, 21 November, 2011.
*** Deposition taken 17 November, 2011.
**** The identity of the lawyer who gave this advice to Mr. Navarro is not disclosed in the deposition, but sources in Colombia indicate that one of his attorneys is Abelardo de la Espriella, well known as defence counsel in the Colombian Para-politics scandal, where some members of the Colombian Parliament were accused of ties to the United Self-Defence Forces of Colombia, the Paramilitaries. Sr. de la Espriella's Miami office is in the same building in Coral Gables, Florida where Lourdes Cajale's attorney, Richard Diaz maintains his offices. Please note that Mr. Diaz, though a criminal defence attorney, is representing Ms. Cajale in the civil action.

SHOULD US LAW ENFORCEMENT LAUNDER $13M FOR TRAFFICKERS ?

2011-12-12T01:00:00.000-05:00

The announcement this week, that a major money laundering indictment has been issued in California, with a large number of laundrymen charged, begs the question : should law enforcement agencies ever facilitate the movement of huge amounts of drug profits just for the chance that the actions might result in arrests of high-profile defendants ? I join the arguments made by a US Congressman, who is asking whether aiding and abetting organized crime in laundering money justifies arrests. Was it worth it ?

I can tell you, the sad truth is this; so-called controlled obey laundering by undercover agents of law enforcement, solely to "follow the money" never results in a 100% subsequent seizure of all that money. Some of it ends up concealed and invested, and out of the reach of seizure and forfeiture actions. Other portions simply are disbursed as payment for services rendered, or the cost of goods sold, or profits.

As we have ruefully seen in the abortive "Fast & Furious" operation conducted by Alcohol, Tobacco & Firearms (ATF), even the best intentions often result in missed opportunities, and the unintentional facilitation of crime, generally due to poor planning, and a good understanding of Murphy's Law.

The $13m reportedly laundered in this case obviously transited a number of US banks, and it appears that some of those millions will not be recovered. That money will buy a lot of drugs, smuggling vessels and aircraft, weapons, bribe a number of corrupt foreign officials, and end up as investments abroad that merely increase the wealth and power of the narcotraffickers.

If you are going to follow the money, by all means, don't lose track of any of it.
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BOMBINGS OF UN PEACEKEEPERS IN LEBANON MAY INDICATE INCREASED COUNTRY RISK

2011-12-11T09:12:00.001-05:00

A roadside bomb injured five French peacekeepers serving with UNIFIL in Lebanon. The device, believed to be command-detonated, was employed near Tyre, in southern Lebanon. It is the third time this year that United Nations forces in Lebanon were injured by this type of explosion, which has been attributed by many sources to agents working for the Government of Syria.

Lebanon, beset by the problems of the Hariri investigation, Hezbollah's increased saber-rattling and vocal support of the Syrian regime, and internal political turmoil, presents a major headache for country risk assessors*. Another civil war, a second armed conflict between Hezbollah and Israel, and possible spillover of the Syrian violence, all threaten stability of the financial centre in Beirut.
____________________________________________________________________________
*Is Lebanon now High Risk ? Kenneth Rijock's Financial Crime Blog, 2 October, 2011; Raise Country Risk on Lebanon, Kenneth Rijock's Financial Crime Blog, 30 November, 2011.

BULK CASH SMUGGLER SENTENCED TO 41 MONTHS IN ARIZONA

2011-12-11T08:57:00.001-05:00

A man who attempted to smuggle $284,930 out of the United States, hidden inside the spare tire mounted underneath his vehicle, was sentenced this wee, in US District Court* in Arizona, to serve 41 months in Federal Prison, followed by three years of Supervised Release. he had attempted to leave the US at the frontier crossing in Douglas, Arizona.

He was arrested in 2010, and held in Pretrial Detention, after the Court found that there was a serious risk he would not appear for trial.

Adam Currasco, age 48, had a number of prior problems with the law:

(1) A felony narcotics case in 1991.
(2) A felony criminal damage case I'm 1984.
(3) An arrest in 2008 got transportation go illegal aliens.
(4) his vehicle was found to have a hidden compartment in 1998.

A final Order of Forfeiture for the funds seized was entered.
_____________________________________________________________________________
*United States vs. Carrasco, Case No.: 10-cr-02352-DCB-BPV (D AZ).

NORIEGA EN ROUTE PANAMANIAN PRISON

2011-12-11T08:16:00.001-05:00

Former Panamanian General Manuel Antonio Noriega is presently on board an Iberia airliner, on his way back to Panama, and facing imprisonment there for his conviction in absentia for two murders committed whilst he was serving as President of Panama, more than two decades ago. His extradition was recently approved by the government in France, where he was serving a seven year sentence for money laundering.

Noriega, who is now in the custody of Panamanian officials, including a doctor, left Orly Airport in Paris early today, bound for Panama, via a stop in Madrid. He will reportedly be held in El Renacer Prison upon arrival. Whether his return to Panama will destabilize the country is a question in the minds of many in the financial service industry; compliance officers involved with the assessment of country risk will be closely monitoring the situation this week.

FLORIDA LEGISLATORS INTRODUCE IRAN SANCTIONS BANKING BILLS

2011-12-09T01:00:00.000-05:00

Twenty eight members of the Florida Senate have co-introduced a bill* that will require Florida banks who have relationships with foreign financial institutions to maintain procedures that will determine if the foreign banks are facilitating Iran's banned WMD programmes. Local banks will further be required to annually certify that their foreign correspondents are clean, otherwise stiff civil fines will be imposed.

Here's the text of the official summary:

" Financial institutions; Requiring a financial institution that is chartered in this state and that maintains certain accounts with a foreign financial institution to establish due diligence policies, procedures, and controls reasonably designed to detect whether the foreign financial institution engages in certain activities facilitating the development of weapons of mass destruction by the Government of Iran, provides support for certain foreign terrorist organizations, or participates in other related activities; requiring the Office of Financial Regulation to to adopt rules establishing minimum standards for the due diligence policies, procedures, procedures and controls; requiring the Office of the Chief Financial Officer to make the annual report available to the public on its website; authorizing the Office of Financial Regulation to impose a civil penalty against a financial institution that fails to make the annual certification required by the act,"

The Florida House, the other chamber of the state legislature has a similar bill pending***.

If and when it becomes law, Florida banks with correspondent relationships with foreign banks will be expected to check, and then certify, that the foreign institutions are not facilitating sanctioned Iranian programmes. If this sounds to you like the "knowable" requirement of the Federal Iran sanctions law, you
understand the ramifications for Florida banks, and foreign banks with US-chartered subsidiaries. Things are about to get much more difficult for compliance officers.
_________________________________________________________________
*Senate Bill 792
**http://www.flsenate.gov/Session/Bill/2012/0792
***House Bill 613

IS YOUR NEW HIGH NET WORTH CLIENT REALLY A FUGITIVE FROM ARAB SPRING ?

2011-12-08T01:00:00.000-05:00

You are performing due diligence on a wealthy individual who wishes to open an account relationship with your bank. He plans on moving his substantial accounts over to you, but first, have you ruled out that he may just be a clever PEP, who is in reality fleeing a North African country that just became part of the Arab Spring ?

I hear you say that his passport is not from a Middle East country. Have you:

(1) Checked to see what's in the passport he is showing you ? I know that you have already verified its authenticity, using Passport-Check, or some other resource, but are there sufficient visa stamps in it to
indicate international travel during the last five years ? Is it basically clean ? Perhaps he holds dual nationality. is this passport new ?

(2) Where does it say is his place of birth ? is it in a Middle East country, even though his proffered passport is from outside that region.

(3) What about his accent ? Does it agree with his professed nationality ? is he comfortable speaking the language that you would expect, given the jurisdiction he says he is coming from ?

I am making these points to alert you to the possibility that a new client might just be in flight from one of the newly-emerging democracies in the Middle East, and that his wealth was stolen, obtained through bribes or kickbacks, or through some preferential business operated as a virtual monopoly in his home country. The new government in his country may soon be wanting that money back, leaving you with
reputation damage you could have avoided.

The lesson: ensure, through effective due diligence such as is detailed above, that you are not taking in some corrupt PEP, human rights violator, or an enemy of the state. Rule out any chance that he is a PEP on the run from North Africa, before accepting his money, please.

CRIMINAL DEFENCE LAWYERS SHOULD NOT LAUNDER MONEY

2011-12-07T10:07:00.001-05:00

Jerry Jarrett, a former criminal defence lawyer from Gary, Indiana, was sentenced this week to serve thirty seven months in Federal Prison, for laundering $67,000 of criminal proceeds for a client. The case should serve as a reminder that Federal prosecutors will often go to great lengths to convict criminal defence lawyers who have been skillful adversaries of the United States Attorney's office, and who are involved in criminal conduct.

Jarretts' jury guilty verdict, which was handed down back in 2004*, was overturned by the trial judge, upon the grounds of vindictive prosecution. Jarrett alleged that prosecutors were out to get him after he obtained a favourable result in a high-profile murder case in which he was lead counsel. The government appealed.

The Seventh Circuit Court of Appeals later reversed** the lower court decision, holding that there was no clear and objective evidence of vindictive prosecution. The Court stated that a defendant must show through objective evidence that the prosecutorial conduct at issue was motivated by some sort of prosecutorial animus, and that it requires direct evidence.

The case was remanded back to the trial court, and the jury verdict reinstated. An order of forfeiture, in the amount of $92,000, was later entered. Though the government asked for 63-78 months of imprisonment, the Court noted that Jarrett had been disbarred, unemployed since 2004, and owing taxes and student loans, gave him 37 months, and two years of Supervised Release.

Obviously, when criminal defence lawyers commit crimes, you can expect aggressive prosecution to follow.

___________________________________________________________________
*United States vs. Jarrett, Case No: 03-cr-00087 (ND IND).
** United States vs. Jarrett, 447 F.3d 520 (7th Cir. 2006).

NASRALLAH SAYS HEZBOLLAH HAS UPGRADED ITS WEAPONS SYSTEMS

2011-12-06T08:28:00.001-05:00

In a postscript to yesterday's posting regarding elevating Country Risk for Lebanon*, The leader of Hezbollah, Sayyed Hassan Nasrallah, making a rare public appearance in the south Beirut suburb of Dahiya for the Ashura observance, claimed that Hezbollah, which is a specially designated global terrorist organisation, has upgraded it weapons systems. He stated that the organisation will never disarm.

Nasrallah made a number of anti-American statements, and alleged that the United States was supporting the opposition in Syria; Hezbollah supports the regime in Damascus, with whom it is allied. Consider this information when assessing country risk for Lebanon.
_______________________________________________________________
*Elevate Country Risk for Lebanon, 5 December, 2011.

ELEVATE COUNTRY RISK FOR LEBANON

2011-12-05T01:00:00.000-05:00

Three disturbing incidents occurring in South Lebanon recently must be factored in by compliance officers who are calculating country risk for Lebanon. As you may not be aware of them, I will cover them in brief:

(1) Four rockets were launched, from Southern Lebanon, in Northern Israel, the first such attacks in two years. Though they were reportedly launched from Hezbollah-controlled territory, a Palestinian group later claimed responsibility.
(2) An unmanned drone, believed to have come from Israel, was captured on the ground by Hezbollah, and later taken to who has been described as an arms depot of that organisation. It is said to have been detonated in a massive explosion.
(3) Hezbollah agents claim to have uncovered, and have captured and displayed, a device it alleges was a remote listening post for electronic communications of the Hezbollah private communication network, which operates independently inside Lebanon.

It is too soon to say whether the risk of armed conflict on the border has increased, but since any military action, whether sustained or of brief duration, would have a disastrous effect upon the Lebanese financial industry, country risk watchers should monitor the situation accordingly.

BULK CASH SMUGGLER FAILS TO SHOW UP FOR HER SENTENCING

2011-12-04T09:13:00.001-05:00

Judges that allow arrest bulk cash smugglers to bond out always run the risk that they will run.Vanessa Weaver, who pled guilty to bulk cash smuggling in Federal Court in South Texas*, failed to appear at her sentencing. She was apparently working for a narcotics smuggling organisation whose ringleader was sentenced to 25 years in Federal Prison.

It appears from the record that she failed to agree to the government's version of the facts, at a hearing. When she failed to appear for sentencing, her bond was estreated and forfeited, and she was indicted for Failure to Appear at Sentencing, which carries a maximum penalty of ten years.

She subsequently appeared in court, with counsel, and was remanded into custody. She has not yet been sentencing on the bulk cash smuggling charges.
______________________________________________________________________
*United States vs. Arturo Gomez, et al Case No.: 11-cr-00207 (SD TX).
** United States vs. Weaver, Case No.: 11-cr-00793 (SD TX).

US SENATE PASSES BILL THAT WOULD CLOSE CORRESPONDENT ACCOUNTS OF FOREIGN BANKS WHO DEAL WITH IRAN'S CENTRAL BANK

2011-12-04T08:20:00.001-05:00

Last week, the United States Senate passed the bill* that would give the President the authority to sanction any foreign bank that was engaged in any transactions with the Central Bank of Iran, including the right to close correspondent accounts located in the US, which could threaten those bank's ability to service their international clients. If passed into law, and applied, that sanction could put those banks so affected out of business forthwith, as all of their clients with international trade with the US would head for their competition.

Here is the complete text of the provision, Section 1245, Imposition of Sanctions with respect to the Financial Sector of Iran:
"The President
(A) shall prohibit the opening or maintaining, in the United States, of a correspondent account, or payable-through account, by a foreign financial institution that the President determines has knowingly conducted or facilitated any significant financial transaction with the Central Bank of Iran, or another Iranian financial institution designated by the Secretary of the Treasury for the imposition of sanctions, pursuant to the International Emergency Economic Powers Act; and
(B) may impose sanctions, pursuant to the International Emergency Economic Powers Act, with respect to the Central Bank of Iran."

Will correspondent accounts of major foreign banks in the US actually be closed ? We cannot say; first, the bill must become law, and then we will look at enforcement. Stay tuned.
____________________________________________________________________
*Senate Bill 1867.

FSA WARNS THAT TRADED LIFE POLICIES ARE UNSUITABLE FOR RETAIL UK INVESTOR

2011-12-03T12:08:00.001-05:00

The UK Financial Services Authority [FSA] has issued a guidance,* warning that traded life policy investments** "are high risk, toxic products that are generally unsuitable for the majority of UK retail investors, and should therefore not be promoted to them." The regulator stated that it has found that traded life policies have significant problems with the way in which they are designed, marketed and sold.

The problems specifically cited:

(1) Should the insured exceed the estimated life expectancy, the return upon investment will decline.
(2) There may not be sufficient premiums in escrow to cover the payments if the insured lives longer than estimated and expected.
(3) There may not be an active market for the investment, should the investor need to, or choose to, sell his or her interest.
(4) The company responsible for final payment upon maturity is generally based offshore, making recovery subject to possible exchange rate fluctuation. * It is generally outside the FSAs jurisdiction.

Note that a large number of institutional investors, including major German banks, and some of the world's wealthiest men, have substantial holdings in traded life policies; the FSA limited its warning to UK retail investors.

Will traded life policy investments be eventually prohibited in the UK ? we cannot say, but there are hints to that effect. We will be closely following this story.
_________________________________________________________________________
*Guidance - Traded Life Policy Investments
http://www.fsc.gov.uk/guidance/gc11-28.pdf
** Also known in the English-speaking world as senior life settlements and life settlements, they are investments in the secondary life insurance market. The investor becomes the owner and beneficiary
of a life insurance policy on a third party, and collects when the policy matures after the insured's death.

$6m, BOUND FOR DUBAI, SEIZED AT LUANDA AIRPORT

2011-12-03T11:14:00.001-05:00

Six million US Dollars has been seized, by local law enforcement, at the airport in Luanda, Angola, aboard a TAAG Angolan Airlines airliner. The pilot in command, and six crew members of the aircraft, which was bound for Dubai, UAE, have been taken into custody and reportedly charged with money laundering. The were in possession of the funds.

What is most important about this incident is the opinion of a senior law enforcement agent, quoted by local media, that this was not the first time this crew was engaged in such activity. Note also that there are reports of 140 individuals deported from Angola recently, for "money laundering and terrorism."

IF CHINA'S ECONOMY DECLINES, BE ALERT FOR THE REPATRIATION OF DIRTY MONEY

2011-12-03T10:28:00.001-05:00

A number of forecasters are claiming that the decline in both housing sales and manufacturing in China indicates that the country may be headed for the same place as the West; an economic downturn. If this is indeed occurring, or is about to occur, be advised that money launderers for certain elements will be on the move:

(1) Corrupt PEPs who have, through bribes, kickbacks, or sweetheart deals on government contracts handled by relatives and associates, moved their illicitly-acquired wealth offshore, may need to now repatriate some of it, to support their lifestyles, or prop up struggling businesses that they own through fronts. If business is bad, bribes become more infrequent. They may actually need to bring some cash onshore.

(2) Criminal organisations, regularly laundering and banking their profits offshore, may now need some of their funds for "operating capital."

(3) legitimate business owners, who have been diverting a small portion of their profits to offshore financial centres, in tax evasion schemes, may have fallen upon hard times, and need to access some of their external assets, to maintain profitability.

Individuals in the above groups will depend upon the money launderers who moved their dirty money out, to safely and quietly repatriate a portion of it, as needed.

Look for:

(A) Payments made to Chinese companies, whether in Hong Kong or Mainland China, that have no history of international sales.

(B) Loans to individuals or entities from known tax haven jurisdictions.

(C) Large payments purporting to be for claims submitted to foreign insurance companies for alleged losses covered by existing policies.

(D) Payments that recite that they are investments by foreign lenders or entities.

There may be well-documented, but unusual, transactions, covering the return of illicit wealth. If it looks suspicious, apply Enhanced Due Diligence.

TWO PONZI SCHEME FACILITATORS ARRESTED IN ROTHSTEIN CASE

2011-12-02T10:43:00.001-05:00

The bookkeeper uncle of convicted Fort Lauderdale attorney/Ponzi schemer Scott Rothstein, who helped perpetrate the massive fraud by preparing bogus trust account bank statements of the law firm, and an administrative assistant who supervised illegal campaign contributions calculated to obtain political influence for Rothstein, were both charged in US District Court with conspiracy yesterday.

Criminal Informations were filed against William Boockvor* and Marybeth Feiss** in Federal Court in Fort Lauderdale yesterday. The details:

(1) Boockvor actually placed his falsified bank statements in genuine bank envelopes, which were presented to new investors. One incident had him creating a non-existent $20m account, which was used to lure in $10m in new money.

(2) Feiss had law firm partners make political contributions in their own names, though they were essentially Rothstein's. They were later reimbursed through payments shown as law firm bonuses and other compensation.

These new charges, filed long after Rothstein was sent to prison to serve his 50-year sentence for operating a massive Ponzi scheme, disguised as a lucrative investment programme relying upon the participation of court settlements, indicate an ongoing investigation of all those involved.

________________________________________________________________________
*United States vs. Boockvor, Case No: 11-cr-60281-DTKH (SD FL).
**United States vs. Feiss, Case No.: 11-cr-60282-KAM (SD FL).

NORIEGA'S EXTRADITION TO PANAMA EXPECTED SOON

2011-12-02T01:00:00.000-05:00

A spokesman from the French Foreign Ministry has stated that all the judicial preconditions have been met, and it is expected that the former Panamanian President, General Manuel Antonio Noriega will be extradited to his native Panama within the next few weeks. Whether Noriega's arrival will affect the Republic of Panama is a unknown, but he enjoyed substantial support during his presidency. Panama is enjoying prosperity and political stability, and country risk watchers are anxiously awaiting a public response, or lack thereof, to his impending his arrival and presence, after serving more than 20 years in an American prison. Panama has greatly expanded its role as an international banking centre since the Noriega era, and it is in the best interests of the financial sector that his arrival not become a distraction.

The other issue is whether he will, pursuant to Panamanian law, be placed under house arrest (home confinement), due to his advanced age (77), and reported health problems. We shall continue to monitor the situation, for country risk purposes, and report back to our readers upon his arrival in-country.

WHO WILL BE THE NEXT WACHOVIA ?

2011-12-01T01:00:00.000-05:00

I am still hoping that American bankers long remember the bitter lessons of Wachovia's compliance malpractice, and the fatal consequences thereof. For a number of years, I watched in amazement, whilst the bank desperately tried to upgrade their unsatisfactory Latin American compliance files, whilst it continued to be the only major US bank who were not using World-Check to vet their clients, and whilst its senior compliance staff remained totally monolingual, notwithstanding the bank's immersion in the Mexican market. What on earth were they thinking ? That Mexico's economy had a multi-billion dollar surplus that needed their bank's services ?

Can any US bank seriously think that they can adequately control risk when dealing with Mexico's casas de cambio? Many of them are believed to be owned or controlled by criminal organisations. You simply cannot win.

Years ago, I gave a private lecture to the officers of one of the most prominent banks in the Dominican Republic. Afterwards, I asked the bank's owner how it deals with Dominican foreign exchange houses, many of whom are suspected of being conduits for drug money. His answer simple; they don't allow any of them to open accounts at his bank.

I know that the US government has a policy of encouraging banks to engage with NBFIs, but when it comes to Mexico, you are literally playing with fire. Not only will US law enforcement agencies and regulatory agencies investigate, target, and possibly cause your bank to be a party to a Cease & Desist order or indictment, but you could incur the displeasure of cartel leaders themselves, with potentially violent consequences when you terminate their window into the US financial system.

Should US banks decline to open any accounts for Mexican casas de cambio ? Should they close all existing accounts ? Unless the bank has actually sent a officer regularly to the Mexican NBFI location, understands exactly what the company's customers to for a living, and who controls the business, I suggest the answer must now be yes, lest your bank end up as a footnote in a criminal case, gone and forgotten, its branches and clients owned by a bank with a better compliance programme.

RAISE COUNTRY RISK ON LEBANON

2011-11-30T02:30:00.000-05:00

The Lebanese Government, speaking through its Foreign Minister, has stated that Lebanon will not enforce Arab League sanctions against Syria. This means that any transactions that your bank clients engage in with Lebanese financial institutions, non-bank financial institutions, and that country's private sector could be sanctions evasions for the Syrian Government. Do you really want that exposure ?

Add Arab League sanctions to this the existing EU and US sanctions in place against Syria, and you have a potential perfect storm for violations; your financial institution could be unwittingly facilitating international trade for Syria when it sends payment for goods and services to Lebanese banks, not knowing that they are fronting for Syrian Government interests, the true end user.

You could also run afoul of those Arab League sanctions, and have penalties imposed upon your Middle East branches when it is learnt that you facilitated Syrian sanctions evasion through Lebanon.

Bank officers charged with country risk assessment should evaluate the situation,and make an educated decision on whether to adjust their country risk rating for Lebanon, but, in my humble opinion, any transactions with Lebanese banks are now problematic. You do not know who is in the shadows.

OFAC STILL SEEKING CUBAN ASSETS CONTROL REGULATIONS VIOLATORS

2011-11-30T01:00:00.000-05:00

The Office of of Foreign Assets Control has, very publicly, named & shamed a major German bank for violations of the Cuban Assets Control Regulations. The violation, which appeared in the OFAC Enforcement Information for 29 November, 2011, was given to the bank's New York branch. The statement of facts advises that the bank was the advising and confirming bank for a letter of credit, in connection with trade documents that contained the names of a Cuban Specially Designated National (SDN).

The Miami branch of an unnamed foreign bank issued the L/C in favour of a Canadian Bank. The amount of the transaction was $ 884,157, and the fine levied by Treasury was $ 175,000 .

When regulators find the name of a sanctioned entity in trade documents, you can be sure that they are looking very carefully at international trade documents for violators of Cuban sanctions.

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*http://www.treasury.gov/resource-center/sanctions/CivPen/Documents/11292011.pdf

VENEZUELA-TO-PANAMA-TO-CHINA LAUNDERING PIPELINE ?

2011-11-29T00:30:00.000-05:00

A well-respected source in Venezuela has published an extensive account of officially-sponsored financial crimes occurring in that country. Whilst we certainly want to see proof, evidence to support these sordid allegations, one jumps out at me, almost begging to be exposed. Since the purpose of the blog is, amongst other things, to expand its readers' perspective on money laundering tradecraft, we will summarise it here.

The reputed money laundering route for illegally diverted public funds coming from Caracas is:

(1) large amounts (totaling billions) of US dollars are shipped, via official Venezuelan Government aircraft to Panama, where it is delivered to Chinese diplomats, who deposit it into private accounts, controlled by the Chinese Government.

(2) The funds eventually are transferred to bank accounts in Hong Kong, and on into banks in Mainland China.

Is this scenario feasible ? If I was a money launderer working for senior Venezuelan PEPs who are engaged in stealing dollars from government accounts, I would want my money placed in the one jurisdiction where the United States has absolutely no influence; that country is the People's Republic of China.

Fact or fiction ? Let's see how this drama unfolds; the truth will undoubtedly be exposed by the next truly democratic government in Venezuela, as they will want to repatriate that stolen money. We will follow up on this story when additional information surfaces.

WHEN CHILDREN OF PEPS ATTEND UNIVERSITY NEAR YOU

2011-11-28T08:30:00.001-05:00

There was a bit of a flap earlier this year when it was revealed that the child of a very senior Chinese government official was studying at an Ivy League university in the United States under an assumed name. In the compliance world, we call that an alias, and it creates a number of potential problems when deciding whether to classify a wire transfer, or other payment, as a reportable suspicious transaction.

Yes, we know that the privileged children of PEPs often attend university in the UK and the US, but what is disturbing is the fact that a number of them are studying under aliases. Why, do you ask, is this a common occurrence ? Since some of the countries where their fathers are senior government officials, general officers, or the managing directors of government-owned companies are dictatorships, or have abysmal human rights records, the schools' management fear, correctly, that they will be targeted for protests, ostracised, identified, or otherwise made uncomfortable for their fathers' sins.

Since PEPs in a number of countries illegally control lucrative private businesses, and might even enjoy a monopoly in a particular industry, at the expense of abused and underpaid workers, or even slave or convict labour, their wealth becomes a compliance issue. They may also be collecting bribes and kickbacks, in violation of the Foreign Corrupt Practices Act or the UK Anti-Bribery Act.

Thus, should the PEPs child receive a substantial amount of money, ostensibly for his or her schooling, but in reality to launder and invest locally, performing due diligence on the student as a bank client becomes problematic when you have a passport carrying an assumed name, not linked to the PEP parent. It is also a compliance issue for a university that accepts payments from a parent whose published annual earnings are less than the cost of tuition and fees.

What we are concerned with, of course, is the receipt, by a foreign student at your local university or college, of a substantial amount of money, which is far more than is necessary for an education. Factor in these issues, when deciding whether to file a SAR, or take other action:

(1) The amount received. Is it substantial ?
(2) The account history. have there been prior payments ?
(3) The home country of the student. Is it known for corruption ?
(4) The jurisdiction where the funds originated. An offshore financial centre perhaps ?
(5) The student's other known account relationships. Does he have accounts at other local banks ?
(6) The declared home address of the student in their own country. Is it in a known neighborhood where senior officials reside ? Is it merely an accommodation address ?

After looking at these potential red flags, you will be in a better position to make an informed decision.

THE UNINTENDED CONSEQUENCES OF ARAB SPRING

2011-11-28T00:30:00.000-05:00

When democratic regimes come to power in the Middle East, expect them to seek to recover the fortunes of corrupt PEPs in the former regimes, in addition to bringing criminal charges when possible. These individuals have, for the most part, secreted their illicit cash in offshore financial centres. Why is this of concern to compliance officers at international banks, whether located in the Middle East, or elsewhere ?

There is abundant evidence to suggest that many corrupt Middle East PEPs, including Syrians, have deposited illicit fortunes in financial institutions located in the Gulf. Good money launderers never let "flight capital" repose indefinitely in any jurisdiction where its existence there becomes general knowledge. They move the funds, whether to places like Lebanon or Cyprus, or further afield, to Asian destinations, such as Hong Kong and Singapore.

When the dust settles in newly-democratic Middle East Nations, expect extensive investigations following the money to its final destination, followed by the very public filing of civil suits to recover it, with a major amount of reputation damage sustained by those banks found to be, literally, holding the bag.

Therefore, should you see fresh wire transfers, of extensive wealth, from banks in the Middle East, with an unusual amount of opacity regarding beneficial ownership, decline the funds until and unless EDD rules out PEP status; Watch yourself here.

CONSENT ORDER PROVIDES WINDOW IN REGULATORS' CONCERNS

2011-11-27T10:40:00.001-05:00

The recently released Consent Order* filed by the OCC against Saddle River Valley Bank, of New Jersey, affords compliance officers valuable insight into what some regulators deem important in BSA/AML compliance.

(1) The bank may not initiate any international wire transfers until it has an "automated system for the processing of wires that will enable the bank to identify potentially suspicious activities, and monitor and aggregate transactions by originator and beneficiary."

(2) There cannot be any further Remote Deposit Captures**until the "bank has implemented risk management systems, written policies and procedures, and a BSA/AML programme ... that will result in due diligence on the bank's customers, their lines of business the parties to whom their customers are providing services through the bank, and those customers' lines of business, and the effective monitoring, detection, and reporting of suspicious accounts, in the processing of RDC transactions."

(3)A Look-Back Report, which appears to focus on previous international correspondent banking relationships.
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*Consent Order
http://occ.gov/static/enforcement-actions/ea2011-153.pdf
** The bank customer scans in an electronic image of cheques which he or she wishes to deposit, and then transmits them to the bank.

IS IT TRUE CRIMINAL ACTIVITY, OR AN OFFENCE BROUGHT PURELY FOR POLITICAL REASONS ?

2011-11-27T09:37:00.001-05:00

Whenever you are performing due diligence on a potential client, and you run their name on a commercial off-the-shelf database of high risk individuals, prior, or pending, criminal charges sometimes appear. Whilst a felony record, especially if financial crime is involved, usually disqualifies the person, that is not always the case.

Before you dismiss the individual, out of hand, as an unacceptable risk, ask yourself these questions:

(1) Could the charges possibly be politically motivated, rather than a valid criminal case ? Remember, countries like China, Russia and Venezuela often bring criminal charges against members of the opposition, or individuals that these government perceive as threats, whether commercially, or politically. Look carefully at the country that brought the charges.

(2) Is this something that was brought years ago, never went to trial, but which was never dismissed, due to the nature of that country's criminal justice system ? Notwithstanding the total absence of a factual basis for the charge, it may linger in some systems indefinitely, through corruption, neglect, poor case management, or political influence.

(3) Was a conviction reported by local media, even though a conviction never occurred ? bribes paid to journalists, on behalf of persons with interests adverse to the individual you are investigating, can result in totally fabricated stories.

(4) Did the individual leave the jurisdiction where the criminal charges were filed, not to avoid prosecution, but to escape a corrupt criminal justice system, where either bribes, or government influence, trumps the rule of law.

Therefore, in criminal cases brought in jurisdictions where justice does not generally prevail, things as seldom what they seem.

NEW SOUTH AFRICAN LAW WILL DECREASE EFFECTIVENESS OF DUE DILIGENCE

2011-11-26T14:43:00.001-05:00

The South African Parliament has passed the Protection of Information Act*, which severely restricts the publication of any information that is deemed to be classified. With criminal penalties ranging from 5 to 25 years, this new law will seriously discourage not only whistle-blowers and reformers, but it will seriously handicap all efforts to conduct effective due diligence on South African companies, and individuals.

Information deemed to be a state secret may not be published for 20 years. This new law, once it becomes effective, will especially interfere with the activities of compliance officers looking to vet PEPs who may (or may not) have accepted bribes or kickbacks, in connection with their official duties. Investigative journalism and whistle-blowing by media will be dealt a fatal blow.

As a former compliance officer, I know that frank and candid business intelligence is necessary for any enhanced Due Diligence investigation; negative information will simply not be available and accessible, even when it is a known and documented fact, in internal South African journalistic circles.

This new law essentially makes it impossible to rule out corrupt activities of South African Politically Exposed Persons (PEPs), with the result being that country risk will increase for the Republic of South Africa.
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*http://www.info.gov.za/DownloadFileAction?id=118894

IS $2bn INSTRUMENT FROM CENTRAL BANK OF VENEZUELA REAL ?

2011-11-25T00:30:00.000-05:00

Venezuela has seen its share of cleverly forged instruments sting foreign investors; bogus bonds, promissory notes and other purportedly legitimate negotiable instruments, so forgive me if I ask that someone verify that the $2bn Sovereign Guarantee, allegedly issued by the Central Bank of Venezuela, in favour of a new Isle of Man company, is valid and has value.

The story, as it appears on the blogs, is that the money was destined for charitable purposes, the first one being the construction of a hospital in St. Kitts. A letter, ostensibly written by a US law firm, has strangely appeared, as well as a number of additional "Red Flags" that should cause a compliance officer performing due diligence to avoid the transaction entirely. Some, but not all, of the participants have declined to talk to the press.

Whilst the truth is often elusive in the world of financial crime, let me point out two constants:

(1) If the documents are real, a charitable activity in the billion dollar range, but vague in scope, on the part of a national bank of a country known to be riddled with corruption, screams corrupt diversion of government funds and/or money laundering.

(2) If this is a bogus transaction, it is well-documented fraud, intended to fool third parties, expertly prepared, with inside information on the workings of Venezuela's central bank. If so, who or what is the intended target ?

Venezuela's economy is reeling; the president of its central bank could not prudently authorise this level of charitable gift when his own country has needy citizens. is this simply a sophisticated means of moving government funds offshore, before President Chavez dies, and his utterly corrupt regime collapses ? we cannot say, but if you see any sort of "unusual" transaction originating from Venezuela, think long and hard before agreeing to participate; you may get badly burned.

ACCESS THIS BLOG THROUGH COMPLIANCE ALERT

2011-11-24T16:30:00.000-05:00

Readers of Compliance Alert, which serves Lebanon, the Middle East and North Africa, can now access this blog directly from the Compliance Alert webpage (www.calert.info/ws/index.html). Click on my caricature on the right-hand side of the home page to go to Kenneth Rijock's Financial Crime Blog.

Our thanks to Compliance Alert for providing the link.

BOUT LAWYER: "LORD OF WAR' MOVIE PREJUDICED JURY

2011-11-24T08:37:00.001-05:00

Though it has not yet appeared on the official court docket, the attorney for convicted arms dealer, Viktor Anatolievich Bout, has reportedly written to the trial judge, Shira Sheindlin, advising that the jury was prejudiced by the Nicolas Cage film Lord of War, which purports to be Bout's life story. Attorney Albert Dayan is said to have based his position on a post-verdict interview of the jury foreperson, who stated that she had seen the film.

Dayan has asked for a new trial, or, in the alternative, an evidentiary hearing, to determine whether members of the jury were prejudiced against Bout, prior to the trial, due to the motion picture.

Bout, who is scheduled to be sentenced on 8 February, 2012, faces 25 years in Federal Prison*.

The controversial role of the Confidential Informant in the case continues to trouble court observers. the CI, whose identity was revealed at trial, is said to have earned $9m over the last fifteen years, for his assistance to US law enforcement. Whether he engaged in entrapment in the Bout case remains an issue.
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*United States vs. Viktor Bout, Case No.: 08-cr-00365-SAS (SDNY).

FRENCH COURT SAYS NORIEGA CAN BE EXTRADITED TO PANAMA

2011-11-24T00:30:00.000-05:00

Reports from France confirm that former General Manuel Antonio Noriega, who is presently serving a seven year sentence in that country for money laundering, can be extradited to his native Panama. Noriega, who has been convicted in absentia of murder, embezzlement and corruption, will be headed to Panama as soon as the French prime Minister executes a decree, authorising his extradition.

Noriega, who reportedly had a stroke, and suffered from prostate cancer, whilst he was serving a long sentence in the United States, is believed to be eligible for house arrest in Panama, due to his advanced age. Whether he will become a destabilising force in Panamanian politics, due to his support base, is unknown, and Panama watchers will be closely observing the statements of the current government, and the media, after he arrives in country.

MEXICO SEIZES $15.4m IN NARCOPROFITS AT BORDER TOWN

2011-11-23T01:00:00.000-05:00

US law enforcement interdiction, at the border, of southbound smuggled bulk cash, continues to be ineffective. Mexican law enforcement authorities have reportedly now seized just under $15.4m in narcotics profits in the border town of Tijuana. The funds were linked to a major cartel. Just how does a shipment of this size elude detection at the US-Mexican border ?

Remember, since it is basically impossible to place US Dollars into the Mexican financial structure, due to new and effective legislation that bans anything other than token dollar deposits, that money, if it was not seized en route, was probably bound for Guatemala, Honduras or Panama. Are you accepting large wire transfers from those countries for the first time ? Where did the funds come from ?

DESIGNATION OF IRAN AS JURISDICTION OF PRIMARY MONEY LAUNDERING CONCERN ELEVATES RISK TO UNACCEPTABLE LEVELS

2011-11-22T00:30:00.000-05:00

The decision, taken by the US Treasury, to designate Iran as a jurisdiction of "Primary Money Laundering Concern" is a wake-up call for any financial institution whose clients are trading with Iran, whether directly or indirectly. It doesn't matter where your bank is located, there is increased risk:

(1) If a US financial institution, you risk fines & penalties in the highest multi-million dollar range, plus possible indictment for providing material support to a terrorist organisation, for assisting that country's WMD and ballistic missile programmes.

(2) If a non-US entity, you risk not only Draconian fines, but the distinct possibility of being shut out of the US financial structure, a situation certain to result in eventual bank failure, due to your inability to service your international clients' needs.

(3) All your clients' trade transactions involving the Middle East, especially Dubai and the rest of the UAE, must now receive special attention, lest you fail to identify shipments of goods that end up being transshipped to Iran.

(4) All the newly-sanctioned Iranian companies*, government agencies and shell entities should be closely examined, to ascertain whether any of your bank clients had historical dealings with them. You do not want any surprises later regarding OFAC violations.

(5) Those countries that are known to trade with Iran have a greater chance of facilitating sanctions evasion; are they purchasing dual-purpose goods that Iran is especially interested in ?

Remember how the global banking community abandoned contact with North Korea when it was similarly designated, to minimise the risk of incurring the wrath of US regulators and law enforcement ? My considered opinion is to advise your bank client to exit all Iran business forthwith, and if that does not happen, terminate the client.
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*http://www.treasury.gov/resource-center/sanctions/OFAC-Enforcement/Pages/20111121.aspx

KEY WITNESS CONFIRMS THAT FRAUDSTER LAUNDERED MONEY THROUGH PANAMA

2011-11-21T05:30:00.000-05:00

The deposition of an important witness, taken this week in a Miami civil suit pending between a Brazilian cattle export company and an employee accused of embezzling funds and thereafter wiring them to accounts she had access to in Panama, has confirmed that the fraudster used part of the money to pay off what appears to be a debt in Panama, and then had the balance remitted to the personal account of her husband, Didimo Alberto Navarro, reportedly adding her on as a signatory.

The case, involving the former clerical employee, Lourdes Cajale, which was detailed here recently in an article entitled When While-Collar Crime becomes Money Laundering*, is a classic illustration of the fact that, when the proceeds of most crimes (known as predicate acts) are deposited into the global financial system, or even when such deposits as attempted, unsuccessfully, the crime of money laundering, with its maximum 20-year penalty under US law, generally occurs.

Since the last article, further discovery in the case has indicated that Ms. Cajale, who left a number of unhappy creditors behind in her native Colombia, including one who holds an unsatisfied final judgment, moved some of the stolen funds from the US, into Panama, and back into the United States. The extended family of the owner of the company has recently received a number of kidnapping threats, telephoned to relatives in Barranquilla, in an attempt to discourage them from seeking justice in the United States. That is an indication of the true character of the individual who embezzled from her employer.

Thus, even a minor white-collar crime will frequently morph into a money laundering event. In addition, prosecutors often also charge individuals having relatively minor roles with money laundering conspiracy. The significant penalties that these charges bring often convince defendants to enter guilty pleas to lesser counts, rather than risk a potential long sentence upon conviction after trial, for laundering. The next time that a client asks you to do a favour for him or her, and facilitate a financial transaction that is unusual, think twice, if you want to keep your freedom and your job.

Will the evidence produced in the civil case** result in a Federal criminal money laundering indictment against the fraudster in Miami, and others who facilitated the financial transfers in Panama ? We cannot say, but we will continue to follow all developments in this case, as they occur.
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*The article first appeared on 18 October, 2011.
http://rijock.blogspot.com/2011/10/when-white-collar-crime-becomes-money.html
**Case No.: 09-64119 CA (15) Eleventh Judicial Circuit, in and for Miami-Dade County, Florida .