Monday, October 31, 2011


Notwithstanding official press releases that allege Venezuelan President Hugo Chavez Frias has beaten his cancer, medical professionals in a position to know have estimated that he has from a couple of months to no more than two years to live. It is rumoured that his family has asked him not to run for president in the next election.

This is not good news for the following special-interest groups:

(1) The so-called Bolivarian Elite, those businessmen who have special contracts with the Government of Venezuelan that bring them millions of dollars each every year.

(2) The military officers who are assisting narcotics trafficking groups ship drugs into North America and to Africa, reaping obscenely high monetary rewards.

(3) Corrupt PEPs who have been looting the government treasury, funds from PdVSA, the government-owned oil company, or taking bribes and kickbacks.

Now that Chavez' days appear to be numbered, these individuals see an uncertain future for Venezuela; you can expect that they will begin to move their dollars into financial institutions in the stable countries of North America and the European Union. They already have accounts in places like Panama, Hong Kong, Switzerland and Lebanon, but look for them to place additional funds in the UK, US, and elsewhere.

 You should now initiate Enhanced Due Diligence for any new Venezuelan clients bringing substantial accounts to your bank, and also ensure that the clients are not PEPs; Watch yourself, lest you be forced to deal with the next democratic government that takes office in Venezuela.


Sunday, October 30, 2011


Ravi Menon, the Managing Director of the Monetary Authority of Singapore, in his Keynote Speech recently*, at the  Wealth Management Institute 8th Anniversary, in Singapore, has promised enhanced penalties for AML/CFT violations. These include

(1) Making tax evasion a predicate act under the country's money laundering laws.

(2) Doubling the manpower of the Suspicious Transaction Reporting Office.

(3) Increasing the penalties for white-collar crimes.

We are 100% per cent behind the efforts of the Government of Singapore to upgrade its anti-money laundering regime, and further support its recent arrests of individuals who were sending improvised
explosive devices to Iran, for use against NATO forces in the Middle Eastern Theater, in close coordination with the United States.

That being said, we challenge the Government of Singapore to examine the following:

(A) The accounts of Burmese Generals in Singaporean banks. Exactly how did those officers earn all those millions, I wonder ?

(B) The facilitation of North Korean ballistic missile & Weapons of Mass Destruction (WMD) sales to Iran, and Syria.

(C) The newly-arrived accounts of American tax cheats and narcotics kingpins who are fleeing the onset of transparency and reporting of their accounts to US regulators and law enforcement.

We hope that you will take the appropriate action.

The speech, in its entirety, can be found on the Authority's website;


Compliance officers at North American banks who are charged with the assessment of country risk should look carefully at the situation in Honduras, now reputed to be the transit point for one-half of all cocaine shipments headed for the United States. This expansion of the illicit drug trade in the country has resulted in a major increase in the size, and power, of local organised crime groups.

 Of course, once profit is realised, through wholesale distribution in America, repatriation follows. The number of interceptions of bulk cash smugglers, with their contraband cargo, is occurring more often in Honduras.

Since money launderers generally react quickly to increased risk, it is logical to expect that they will seek alternative routes, including but not limited to, wire transfers. Given that corruption permeates both the political system, and the commercial sector, you can expect local bankers and managers of casas de cambio to cooperate in moving funds along, and into their final destinations in Panama and Colombia.

Therefore, examine carefully all large wire transfers, requests for bulk shipments of US Dollars, and transactions of import-export firms doing business with Honduran companies. It may also be prudent at this time to raise country risk on Honduras; I suggest that you do so immediately.
For further reading:
Department of State International Narcotics Control Strategy Report - Country Report Honduras 

Saturday, October 29, 2011


The Financial Action Task Force (FATF)* last week published its updated list of high-risk jurisdictions,  and we list them below for your information:

Jurisdictions with Substantial AML/CFT Risks
(A) Iran
(B) Democratic Peoples' Republic of Korea [North Korea]

Jurisdictions with AML/CFT Deficiencies
(1) Cuba
(2) Bolivia
(3) Eithiopia
(4) Kenya
(5) Myanmar (Burma)
(6) Nigeria
(7)Sao Tome´and Príncipe
(8) Sri Lanka
(9) Syria
(10) Turkey

Refer to the FATF website for details of each jurisdiction's deficiencies, and efforts to correct them.


I received a call a few months ago from someone who had read some of my articles about corruption in Latin America; she is working for a new online anti-corruption organisation. We were discussing the organisation's staff of contributors when she named a prominent journalist in Miami, recently reportedly fired for chequebook journalism.

it seems that the writer had allegedly accepted a large sum to interview, and write, a highly favourable article, about a very bad man. I know that many compliance officers accept as gospel the open-source references from major news media in the EU and North America, and only take news articles from the developing world with a grain of salt, but that is not always accurate. Corruption and so-called news management occurs where you least expect it.

For example, if you ever wondered why there are so many positive articles written about the regime in Venezuela, know that some journalists, in the United States, are extremely well compensated to not only praise Venezuela's so-called progress, but ignore negative news, especially involving Venezuela's connections with designated global terrorist organisations.

I will be writing in the near future about an article, placed in a prominent Panamanian newspaper, that falsely reported that a pillar of that country's banking community was convicted of stealing money from a depositor at his bank, when no such order or final judgment was ever entered, and there was no factual basis for the case, where the sole witness was a convicted Mexican drug trafficker, whose claim had been denied in other courts. Was there bribery of a journalist involved ? What do you think ?

Do N0T blindly accept the stories that appear in the profiles of high-risk individuals in commercial off-the-shelf databases without enquiring further. Some helpful hints:

(1) Is there a systemic climate of corruption in the country where the article appeared ? Does it extend to journalists ?

(2) Was the information in the article not widely reported elsewhere in the media ? Why not ?

(3) Is the subject of the article, or major participant, a career criminal, or individual with access to wealth ?

(4) Is the article part of a possible pattern of news management, unofficial or official censorship, or possibly written for a political purpose ?

Never assume that even articles from a country's most prominent and authoritative newspaper are accurate, until you check out the author, and look for the "red flags" I have listed above.


The earthquake that occurred yesterday, with its epicentre off the coast of Peru, is of topical interest to compliance officers in North America and the EU. The event, which registered 6.9 on the Richter magnitude scale, which makes it a strong to major quake, has reportedly resulted in damage to residences, and an unknown number of injuries, but details are lacking.

Remember that clever money launderers frequently hide their actions amidst the flood of aid funds that occur after natural disasters. They employ bogus or controlled charities and NGOs as a cover for the transmission of illicit funds to the stricken area or region.

It is important to remember that Peru is an major source of coca production, and narcotic profits earned in North America and Europe are generally repatriated. This natural disaster provides a new avenue for money launderers, operating for smuggling organisations, to bring home some of their illicit profits, disguised as humanitarian aid.

Therefore, know your charity; any organisation that seeks to send relief or reconstruction funds funds to Peru through your bank must be the subject of enhanced due diligence, unless your bank has a long and positive personal experience with the charity or NGO.  Alert bank staff to notify you of any wire transfer requests labeled as aid.

Friday, October 28, 2011


This week's OFAC Civil Penalty press release* was a small one; or was it ? A token $7,000 penalty levied upon an export firm located in South Florida for a violation of Iranian sanctions regulations, due to an attempted export to Iran. Why bother to give this apparently small violation its own press release ? Why not roll it over for the next Civ Pen list ?

The company had no prior sanctions violation history, but it had no compliance programme in place to check for OFAC issues.That, in and of itself, for a company primarily engaged in exporting, demonstrates a serious lack of judgment. But why the very public name & shame ? Perhaps there's more to this company's activities than the press release states.

Here's what I see, from my perspective:

(1)  The company is also an importer, and it has recent business with companies in China.

(2)  The company is located in Weston, Florida, which happens to be a strictly residential town on the very edge of the Florida Everglades. Weston also happens to have a large population of Venezuelans.

(3) The company also exports Chinese products to Venezuela.

Iran has been going to great lengths to evade global sanctions, and China and Venezuela are two of the participants who have repeatedly facilitated Iranian avoidance of the sanctions, by moving goods through their countries. Are we seeing here a very public demonstration of Treasury's ability to see the big picture, and to bluntly warn any potential Iran sanctions violators that American regulators can see through the smokescreen of sanctions evaders and identify & very swiftly punish them ? This may be a simple exercise in deterrence.

Thursday, October 27, 2011


A US District Judge in Miami has sentenced a man to fifteen years' imprisonment for violations of the Foreign Corrupt Practice Act , the longest prison sentence pronounced to date in an FCPA case. If the Court was trying to send a message to the business community, it was surely heard, loud & clear; this is a long sentence in a non-violent, non-drug offence.

 Joel Esquenazi was convicted* of:

(1) Conspiracy to violate the FCPA and Wire Fraud.
(2) FCPA violations - seven counts.
(3) Money Laundering Conspiracy.
(4) Money Laundering - 12 counts.

The defendant, and five others also convicted and sentenced to terms as long as seven years, paid more than $890,000 to shell companies, as and for bribes, paid to officials of Haiti's state-owned telecommunications company, Telecommunications D'haiti SAM, more commonly known as Haiti Telco. As the direct result of those bribes, Esquenazi's company, of which he was president, Terra Telecommunications Corp., obtained a number of lucrative business advantages involving contracts with Telco to provide telephone service to Haiti.

Haiti's financial intelligence unit assisted in the investigation. Payments to the officials were accomplished through the use of shell companies that paid consulting services for services never intended to be performed, or actually performed.

Esquenazi also must make $2m in restitution, and had a judgment entered against him for $3m. Whether this sentence is an indicator of the new use of long sentences in FCPA cases, to deter this conduct, or whether it is merely an example of the "take no prisoners" attitude seen lately in these cases, we cannot say; Stay tuned.  
*United States vs. Joel Esquenazi et al, Case No.: 1:09-CR-201010-JEM (SD FLA). 


Wednesday, October 26, 2011


Remember the scandal that brought down Riggs bank ? The bank's largest single depositor at the time, with over $700m,  was reportedly the Republic of Equatorial Guinea, a major African oil producer. The US Senate Permanent Subcommittee on Investigations Report later exposed the bank's willful blindness, though curiously, none of the responsible bank officers and board members were ever charged with a crime. Access to Riggs Bank accounts, where the country's oil revenues were deposited, was freely available to members of the country's inner circle of PEPs.

The eldest son of the country's president for the past 30 years (who came to power in a coup d' état)  is Teodoro Nguema Obiang Mangue, who earns a salary of less than $100,00 per year as minister of Agriculture and Forestry, but has a reputed $70.8m in assets in the United States. How did he manage to accumulate all this wealth ? Through corruption at an extreme level. He forced timber companies working in Equatorial Guinea to pay him obscenely high fees, and he also collected mandatory contributions, allegedly for public improvements, but which he kept for his own use. He also used the threat of criminal action to coerce payments from foreign companies.

The United States Department of Justice has filed a civil forfeiture* suit in Rem against real property and personal property of Obiang, alleging that he acquired his wealth through embezzlement, extortion, theft of public funds, and money laundering, all specified unlawful activity, and "property involved in acts of money laundering."

The style of the case says it all:
United States of America vs. One White Crystal-Covered "Bad Tour" Glove, and other Michael Jackson Memorabilia, Real Property Located in Sweetwater Mesa Road in Malibu, California, and One 2011 Ferrari 59 GTO.

The house is reportedly worth $30m, there is a Gulfstream G-V business jet, 24 luxury cars, and much more, including $2m of Michael Jackson Memorabilia.

Is this just the tip of the iceberg, and will more assets of ill-gotten gains of the world's corrupt leaders be seized ? We cannot say, but it will be extremely interesting to watch the responses of the other corrupt leaders who hold assets in the US. Will they flee ?
Case No.: 2:11-cv-3582-GW (CDCA).

For further reading:
French Police Seize Eleven Luxury Cars in Paris in Money Laundering Investigation,  6 October, 2011. (scroll down to read this article).

Tuesday, October 25, 2011


If you were looking for additional proof that Mexico's laws severely limiting the deposit of US Dollars into Mexican financial institutions and NBFIs are working, look no further. Mexican authorities have taken into custody a German national, and charged him with money laundering. The individual reportedly was engaged in bulk cash smuggling of Dollars and Euros, through Mexico and Panama, and finally into Colombia; he was reportedly working for a major narcotics trafficking cartel. Since the organisation could no longer bank its US Dollar profits within Mexico, it was forced to repatriate it through bulk cash smuggling.

Please note that Euros were also being smuggled, meaning that the individual arrested was probably also repatriating drug profits earned in the Eurozone. 

Monday, October 24, 2011


If you think that the Tamil Tigers terrorist financing apparatus is dismantled, following the defeat of their army on the battlefield in Sri Lanka, think again they are as active as ever, extorting money from Tamil expats in the diaspora.

A Dutch court last week reportedly sentenced five LTTE members to prison terms up to six years for extortion and terrorist financing. it appears that they were hard at work, pulling money out of overseas Tamils residing in the Netherlands, The defendants, themselves all Dutch citizens, employed Tamil front organisations in their illicit fundraising activities.

Pay particular attention to this if you bank Tamils in North America, where LTTE representatives have been particularly active, especially in Canada. if your client is withdrawing his life savings, find out why.

Sunday, October 23, 2011


For those readers who have been waiting for the oft-delayed sentencing of the so-called "Mini-Madoff," Nicolas Cosmo, a US District Judge* in New York has given the Ponzi schemer twenty-five years. Cosmo, who created bogus investments that were purportedly 100% collateralised by commercial assets liens, took $413m from his victims.  The precise amount of their losses are not yet known.

Will this sentencing start a trend of  long-term sentences for major Ponzi schemers ? We cannot say; perhaps the Mini-Madoff label placed upon him by the media unofficially operated to enhance his sentence, but Cosmo will not be  able to fleece any  additional innocent investors for a long, long time.
* United States vs. Cosmo,  Case No.: 2:09-cr-00255-DRH-ETB (EDNY).


A United States Government official was quoted recently stating that there are approximately thirty US citizens engaged in combat operations in Somalia, fighting with Al-Shabab, an OFAC- designated Foreign Terrorist Organisation [FTO].  It is believed that at least two dozen of these individuals are from the Twin Cities* area.

Add to this the recent conviction** of two Somali-Americas, both citizens, in Minneapolis, for sending funds to Al-Shabab, and you have an increased risk of terrorist financing activity by Somali-Americans in the United States. Amina Farah Ali and Hawo Mohamed Hassan, have been found guilty of Providing Material Support to an FTO, and Conspiracy to Provide Material Support to an FTO.

The defendants raised funds amongst the Somali expat community, ostensibly for the poor, and orphans, but the evidence showed that they deemed it more important to support Al-Shabab, and considered the US their enemy. One of the defendants was found to be in direct criminal contempt of court for her  repeated failure to follow court rules of decorum, namely her failure to rise during the proceedings.

Should you have Somali-Americans within your client base, it may be prudent to monitor  international wire transfers from these clients, looking for any which are inconsistent with the client's trade or business, or payment history. Note that the total amount sent was only $8600, a good indicator that the United States is effectively practising "zero tolerance" regarding Somali sanctions violations.
* Minneapolis-St. Paul, Minnesota.
**United States vs. Ali et al, case No.: 10-cr-00187-MJD-FLN (D Minn).


Bulk cash smugglers often charter bizjets available in the commercial market for criminal purposes. A Gulfstream G-III business jet, recently used by Texas Governor Rick Perry on the presidential campaign trail, was reportedly previously used to transport illicit bulk cash between Baltimore and Los Angeles. The jet, N213BA, is owned by Marquez Brothers, a California Mexican food company, but was operated by a private jet management services firm.

The pilot and other individuals were reportedly convicted of money laundering and conspiracy to distribute cocaine in California*. The negative publicity surrounding this information reminds us that bankers, and their clients, often need to perform due diligence on vendors, companies performing services, agents, and other individuals and entities, to avoid being associated unfairly with criminals and unsavoury activities.
  *United States vs. Ricky James Brascom et al, Case No.: 2;10-cr-01236 (CD Calif).


This week's earthquake, whose epicentre was located in Eastern Turkey, has reportedly* resulted in an unknown number of deaths, and major damage. Remember well that terrorist financiers frequently choose to employ natural catastrophes, which generally result in aid shipments, and funding from charities and NGOs, to hide their funding activities. Note well that the designated global terrorist group PKK** operates in the region.

Whilst we do not suggest that you decline to open accounts, or wire funds, for charities wishing to aid earthquake victims, I have suggested that you ask the following questions, when presented with a new, or previously inactive, client who claims to be sending funds for Turkish earthquake relief:

(1) Is the charity known in the community, and does it have a history of providing aid in natural catastrophes ? Some newly-organised "charities" have been formed purely for the purpose of funding terrorist organisations. What's the NGOs record ?

(2) Who are the leadership of the organisation ? Are they individuals previously linked to other charities, or people with a "colourful," or even criminal, past. Run the names of the leaders on all the high-risk databases you subscribe to.

(3) Has the NGO asked you to fast-track their aid payments, or take shortcuts with due diligence, or your compliance protocols, due to the urgent needs of the victims ? if you see this red flag, coupled with either of the others previously mentioned, it is suggested that you immediately initiate Enhanced Due Diligence, before wiring funds for this new client, lest you later learn, to your dismay, that it was a front for terrorist financing.

Remember, the vest majority of international aid is legitimate, and we do not want to delay that in any way, but watch carefully for an NGO whose characteristics fit the above profile.
**Kurdistan Workers' Party

Friday, October 21, 2011


Testimony offered at his ongoing criminal trial, taking place this month in US District Court* in New York, indicated that accused arms trafficker Viktor Bout, though not charged in that case with money laundering, offered to assist the undercover US law enforcement agents with that issue, when making payment to him for weapons destined for the FARC in Colombia. He volunteered that he could launder the funds through Venezuela, Belarus or Russia. Think about that the next time you are assessing country risk.

He also said that an unidentified foreign diplomatic mission had agreed to supply the FARC, with whom they had a good relationship, with sufficient documentation to cover the arms shipments in international transport. Though that country was not identified, it is believed that he was speaking about Venezuela. One  more item for you to consider when adjusting country risk.
*United States vs. Bout et al,  Case No.: 1:08-cr-00365-SAS (SDNY) 


Please do not be taken in by today's press release from ETA the Spanish Basque terrorist organisation; they may have claimed to renounce violence, but it is now, and will be for the foreseeable future, a designated terrorist organisation who must finance its operations one way or another. ETA maintains a number of individuals who reside in the Western Hemisphere, far from the long arm of Spanish law enforcement.

These ETA members, who are by and large each wanted in Spain for crimes they have committed, are living in Venezuela, amongst other countries. Their support, for living expenses, has to come through financial institutions, so there is a real risk to banks of drawing a Providing Material Support to Terrorism  charge in the US.

Lest you think I am making to much of the threat, I have seen such a transaction pass through an American bank, not too many years ago, that was even designated as an ETA payment, so be aware. The bank let it through, and it has since paid the price.
* Full Text -Basque Ceasefire Declaration


I wish to express my appreciation to the Association of Bermuda Compliance Officers (ABCO)* for sponsoring my seminar on Emerging Threats and Tradecraft yesterday in Hamilton. Thanks also to HSBC for kindly providing the venue for the programme.

Wednesday, October 19, 2011


An attorney from the American territory known as the Commonwealth of the Northern Mariana Islands has received a sentence* of five years probation, after pleading guilty to two counts of laundering of monetary instruments, in US District Court in Guam. Danilo Aguilar,  who reportedly participated in a scheme originating in Hong Kong, where only lawyers are involved, passed two counterfeit cashier's cheques in a local bank.  The court file reflects that there will subsequently be an Amended Judgment requiring restitution in the amount of $184,947.49, which is the bank's loss.

Mr. Aguilar, who cooperated in the criminal investigation, has had his license to practice law suspended in Guam, and also in Hawaii.
*United States vs. Aguilar, Case No.: 1:10-cr-00053-001 (D Guam)

Tuesday, October 18, 2011


To illustrate how easily ordinary white-collar crime turns into a possible Federal money laundering charge, with the maximum sentence of 20 years, I have chosen an interesting case unfolding in court in Miami. Lourdes Cajale, a recently naturalised US citizen of Colombian origin, was working in the Miami office of a Brazilian cattle exporter.

Her duties included paying the company's bills in the ordinary course of business. According to allegations* made by the company, she stole or embezzled funds of a total of $259,000, and unsuccessfully attempted to take an additional $574,000. Here's how she did it:

(1) She wired $161,000, without company authorisation, to a company controlled by a friend, in the Republic of Panama, first alleging that it was her salary, then later denying it. The friend has filed a sworn statement in a Panamanian court proceeding that the funds were from her, and returned to her. 

(2) She wired $56,000 to a Panamanian foundation controlled by herself, her former husband, Didimo Alberto Navarro**, and her son, all of whom are directors.

(3) She admitted in her videotaped, sworn deposition that she withdrew an additional $42,000, without company authorisation.

(4) She obtained a cashier's cheque, again without company authorisation, in the amount of $574,000, and flew to Panama to personally deposit the cheque. The bank refused to accept it, due to the fact that the name of the payee foundation was incomplete as written on the instrument. Thereafter, she returned the cheque to the company's lawyers, to avoid the threat of legal action.

Finally, in what might be the most arrogant act I have seen in a long time, she brought a bogus civil suit against her former employer, claiming that she took the funds because she was due "commissions" or other remuneration. Her attorneys later changed the theory upon which she bases her claim. During the suit, which is still pending, she admitted to Spoliation of Evidence in her deposition. It appears that she did not report the funds she took as income for US income tax purposes.

 Her attempt to secure her employer's trade secrets was denied by the Court, and she has refused to admit whether he gave untrue information about her employer to a US law enforcement agency, resulting in the cancellation of  his visa to enter the United States. The company's lawyer has moved to strike her pleadings and enter a Default in the case, due to her conduct; the company has filed a counterclaim. 

She's got another problem. She reportedly failed to disclose the details of her problem with the alleged embezzlement in her citizenship application, which could constitute immigration fraud, leading to the revocation of not only her citizenship, but any relatives who have obtained residency status through her. Unfortunately, those records are not public, so I could not ascertain the status of that matter. 

Why is this case of topical interest ? When she transferred the proceeds of her alleged embezzlement and theft*** to a bank in Panama, and when she personally attempted to deposit that $574,000 cashier's cheque in a Panamanian bank, she appears to have committed multiple violations of US laws against money laundering. All the individuals who assisted her, including her Panamanian associates, and her husband and son, could be charged with money laundering conspiracy, as well as other crimes. 

We shall continue to follow this interesting case, and will report further on all important developments as they occur.

* Case No. : 09-64119 CA 15 (11th Judicial Circuit, Miami-Dade County, Florida).
** Mr. Navarro, who resides in Colombia, is reportedly employed by a businessman who was indicted, by the United States, in the Cali Cartel case, and whose court file contains information under seal. 
*** Predicate acts listed in the Money Laundering Control Act of 1986, as amended. 

Monday, October 17, 2011


Several Middle East media outlets have published the list of 477 Palestinian prisoners released by the Ministry of Justice, and reportedly appearing on the website of the Israel Prisons Service. I have chosen the list that was published by Al-Jazeera, as it has the dates of birth, and destination of each individual. Note that prisoners designated to be relocated abroad, or to be relocated to Gaza or abroad, constitute those who could potentially present themselves for account opening at your EU or Middle Eastern bank.

The Al-Jazeera List

An additional 550 prisoners will be released in phase two; their names have yet to be released.

Sunday, October 16, 2011


The Arab media this week is full of reports that just under $400m was laundered for Iran by Kuwaiti PEPs. Additionally,  some commentators are suggesting that one of the the unnamed banks involved in payment for the plot to assassinate the Saudi Ambassador to the United States may have been in Kuwait.
The reputed routing of cash through Amsterdam and Moscow, if true, is extremely disturbing, as are reports that UK and EU banks are also involved.

Rumours and reports of pending investigations into alleged money laundering for Iran abound, and compliance officers at international banks who have exposure in Kuwait, or whose clients do business there, should carefully monitor unfolding events, as they may need to consider elevating country risk for Kuwait. The report that the International Monetary Fund recorded that there were 210 cases of money laundering discovered by the authorities, with only a small portion resulting in criminal charges and convictions, should alert compliance officers that there is a well-placed fear that Iran is laundering money through the State of Kuwait.

You need to examine the evidence, as it emerges, and assess country risk based solely upon that evidence.


Readers kindly note that there is now a hyperlink to MONEY LAUNDERING BULLETIN on the right-hand corner of this blog. Just click on the MLB icon to access that website.


Alejandro Diaz-Flores, a Mexican national holding a US Visa, was charged with bulk cash smuggling* in US District Court in Nevada, after $150,000 was found hidden in a vehicle he was driving north, from Las Vegas, Nevada to Salt Lake City, Utah. Flores, who stated to local mesquite, Nevada police at a traffic stop, that he was en en route to visit a friend, later changed his story after the hidden cash was found in the boot, claiming that the money was to pay a debt owed to meat supplier. His story could not be verified.

The defendant had previously arrived in Las Vegas from Mexico via commercial aviation; Mesquite, where the traffic stop occurred, is close to Nevada's border with Arizona. He was remanded into custody after the Court found that there was a risk of flight, and that no set of circumstances could serve to guarantee his appearance in further proceedings. His stated residence is Torreón, which is near Monterrey, a substantial distance from the US-Mexico frontier.

Unfortunately, US law enforcement rarely intercepts inbound bulk cash smugglers; perhaps information acquired in this case can assist criminal investigators in dismantling a pipeline for inbound illicit cash.
* United States vs. Diaz-Flores, case No.: 2:11-mj-00666-CWH (D NV) [Note that this is the Magistrate Case Number only].


Readers should always be aware that even minor acts of facilitation can, and do, constitute money laundering, which is a Federal felony with the maximum punishment of twenty years' imprisonment and/or a $500,000 fine.A Rhode Island automobile dealer, who assisted an individual who represented himself to be a narcotics dealer, who illegally misrepresented the cash sales price of four vehicles he sold, and who facilitated the construction of a hidden compartment in one of the automobiles, has pled guilty to a single count of money laundering* in US District Court in Providence.

Domingo Lopez, who was told by an undercover law enforcement agent posing as a narcotics dealer that the vehicles he was selling were to be used by narcotics couriers, has been remanded to Federal custody, as he was found by the Court to constitute a flight risk. In court filings, his attorney argued that he was married to a US citizen, but candidly noted that he did not have lawful permanent residence status.

The Plea Agreement signed by the defendant noted his acceptance of responsibility for the offence, which does reduce his offence level but stated that the any punishment pronounced by the court would not involve probation, meaning that a sentence of incarceration was expected. The Court announced that sentencing would occur on16 December, 2011.

*United States vs. Lopez, Case No.:  1:11-cr-00165-ML-LDA (D RI).  


Readers who access this blog on their way to work will be pleased to learn that they can now access a special version designed for mobile users only, with short summaries of the new articles, and links to the complete texts. The URL is:  but your mobile device should automatically load the mobile version when you type in the URL that you presently use,

For those who want the full version, which lists all articles on the right-hand side of the page, there is a hyperlink on the mobile page to assist you. Thank you for your interest in the Financial Crime Blog.


The current government in the Republic of Haiti now contains several high-ranking members, including the Prime Minister, who are the children of senior officials from the notorious dictatorship of Jean-Claude Duvalier, more commonly known as Baby Doc. Some believe that the installation of these individuals is connected to the political power still wielded by Duvalier, who recently returned to Haiti from a twenty-five year exile. It is extremely disturbing that he has not been charged with any of the corruption, murders, and human rights violations, that his administration committed whilst in office. He is still a powerful force in Haitian politics.

Why is this important to compliance officers ?

(1) Haiti is the most corrupt nation in the Western Hemisphere, after Venezuela, and before 1999, it was at the top of my personal list, having experienced it firsthand whilst consulting in both banking and governmental matters there. Frankly, I felt more uneasy in Port-au-Prince than I did in Vietnam during the height of the war.

(2) Many Haitian PEPs bank in the United States, and hide money stolen from Haiti's public funds, bribe & kickback money, diverted charitable contributions, foreign aid, and payments from NGOs. South Florida banks are the primary recipients of these funds.

(3) Many Haitian PEPs have second homes in the United States, multiple mistresses that they support, and businesses that they employ to obtain lucrative contracts with their own government, keeping their beneficial ownership a closely-guarded secret; FCPA issues abound here.

(3) These second-generation PEPs may be holding illicit funds secured by their parents, which means probable OFAC issues, as the regime of the older generation was ousted in what is generally regarded as a popular revolt.

(4)  Haiti remains a key transit point both for Colombian cocaine en route the United States, and the proceeds of crime being repatriated from North America. It is prudent to expect that at least some of these new members of the government have learnt their craft from their fathers; A sad reality, but true.

Therefore, it is humbly suggested that you ensure that any substantial prospective depositor, of both Haitian nationality or origin, receive enhanced due diligence to guarantee that he or she is not an undisclosed Haitian PEP, and/or a declared Florida resident who is, in reality, a resident of Haiti,
who is hiding that fact from your bank.

Watch yourself here, especially if you are at a South Florida bank; these individuals can be adept at creating a fictional non-PEP identity.

Friday, October 14, 2011


It is anticipated that 1027 individuals, presently being held in Israeli prisons, will be released next week, in exchange for the Gilad Shalit, the soldier who was kidnapped several years ago, and who has been held in the Hamas-controlled Palestinian Territory of Gaza by an undisclosed Palestinian faction. Egypt is brokered the prisoner exchange, which has reportedly been the subject of negotiations for some time.

The issue for bankers is whether any financial institution with clients who engage in international trade afford to accept these individuals as clients, in light of international counterterrorism sanctions in place. The potential penalties can be severe, and there are several questions which to date remain unanswered:

(1) A large portion of the released prisoners, whose names reportedly must be published prior to release, under Israeli law, are linked to Hamas, a designated global terrorist organisation. Will US regulators take action against financial institutions that choose to bank them ? What about regulators in other Western countries ?

(2) What about those prisoners who are members of the Palestinian Islamic Jihad, and the PFLP ?

(3) A substantial portion of those released are reportedly incarcerated for homicides committed in Israel. Are these unacceptable clients by definition, in a risk-based compliance programme ?

(4) Are you providing material support to terrorism, by banking a group whose leadership has openly stated that these individual will be going right back to their previous occupations, mainly opposition to  Israeli dominion over the West Bank ?

On the other hand, on humanitarian grounds, do you not want to help these individual reintegrate themselves back into their communities. It is a difficult problem, with no apparent solution.

Israel has publicly stated that it will expel or deport some of those released, so they potentially could be appearing in Europe, or elsewhere in the Middle East, requesting to open accounts, so you may have to deal with this issue sooner rather than later; think about it.

Thursday, October 13, 2011


The United States Congress has passed the pending Free Trade Agreements with the Republic of Korea, Republic of Colombia and Republic of Panama. These agreements minimise, and in some instances, abolish, import duties and tariffs on goods coming from these nations. Whilst this event is believed to result in the creation of additional jobs in the US, there is a concern that compliance officers should be aware of.

These free trade agreements could increase the chances that money launderers working these countries may resort to the increased use of Trade-Based Money Laundering, both to repatriate drug profits earned in North America, and to facilitate the investment of cleaned criminal proceeds in the US.

If you are not familiar with the methods and tactics of Trade-Based Money Laundering, it is humbly suggested that you access the excellent material on the subject in the International Trade Alert* webpage, or review one or more of the many articles on the subject by Professor John Zdanowicz, and also a number by yours truly.

Basically, by increasing or decreasing the sales price per item, money launderers are able to move millions of dollars per month, in or out of the United States, right under the noses of bank compliance officers, who are generally unable to ascertain whether pricing is at the global market rate, especially when we are dealing with high-tech products. Exports actually occur, but the items shipped are vastly over- or under-priced, resulting in an uninterrupted flow of criminal proceeds, hidden within the huge amount of international trade transactions.

I am particularly concerned with Panama as a target for increased use of this method of repatriating drug profits for Colombian or Mexican cartels. Should you see new international trade payments, where none existed before for specific clients, please enquire to the extent necessary to rule out Trade-Based Money Laundering.


Wednesday, October 12, 2011


Good compliance officers have learnt to focus on new and large funds transfers to a European country if EU membership appears possible. Whenever  news reports indicate any positive movement towards EU accession occurs, experienced money launderers take note, as you must as well.

They often think far ahead of short-term results for their largest "clients," and have been known to transfer funds to the potential new EU member, banking upon the knowledge that, upon entry into the Eurozone,
overburdened local regulators, and law enforcement agencies, often cannot check Source of Funds and Beneficial Ownership of corporate entities. A substantial amount of suspect funds end up in Euro form.

This week, Macedonia received favourable mention in the 2011 Enlargement Package adopted by the European Commission. Additionally, the deadlock brought about due to the issue, with Greece, over the country's name, appears to be moving closer to a resolution.

Also be aware that AML/CFT laws and enforcement in countries in Southeastern Europe has lagged behind the rest of the continent, as has the implementation of banking best practises. Money launderers have taken full advantage of these shortcomings in the past.

Therefore, it would be prudent to flag any large and unusual funds transfer passing through your bank, en route Macedonia, particularly if the funds are coming from offshore financial centres.


The designation, by OFAC, of four senior officials* in the Iranian Revolutionary Guard Corps-Qods Force [IRGC-QF], due to their reported involvement in the failed attempt to commit an assassination and other terrorist acts in the United States, and elsewhere, is not just a reason for you to check these names against your client records. There's more to the compliance problem, and it is not limited to US-based financial institutions.

Treasury has correctly noted that the IRGC-QF is involved in providing material support to Hamas, the Palestinian Islamic Jihad [PIJ], Hizballah, and the PFLP. The individuals operate under one or more of  several aliases, and if they were supporting this operation, they probably have been involved in the organisation of international terrorist plots elsewhere.

Therefore, wherever you are, check the names thoroughly, and of course also check the US-based individual who has been formally charged with the crime; he is also on the 11 October sanctions list.

Tuesday, October 11, 2011


The Mujahedin-e Khalq [MEK], an OFAC-designated Foreign Terrorist organisation [FTO] that opposes the regime in Iran, has today published an Open Letter in the New York Times*, requesting that the organisation be removed from the list of FTOs.  The letter, which was directed to President Obama, was signed by fourteen former American ambassadors, mayors, cabinet ministers, general officers, governors, congressmen, and the former director of the Federal Bureau of Investigation [FBI]. 3400 MEK members reportedly presently reside in Camp Ashraf in Iraq. there have been two major incidents where Iraqi troops have entered the camp and killed MEK members, and questions have been raised as to reason for the absence of US troops to prevent these acts.

The MEK, which committed terrorist acts, including the assassination of US military officers, in the past, argues that the group, which was disarmed, has not committed any terrorist acts since 2001, and no longer meets the statutory requirement for listing as an FTO. This conflicts with information reportedly contained an FBI report, dated 2004, that alleges post-9/11 terrorist planning. The EU and the UK have delisted the MEK, but it remains designated in Canada and Australia.

Readers of my articles may recall that I have previously discussed** what I feel are flaws in their argument, and I am concerned that so many former US government officials, now private citizens, appear to be acting as lobbyists to attain the delisting. Frankly, there are valid points to be made by both sides, but in an overabundance of caution, it may be best, for the time being, to maintain the FTO designation, lest this group, after delisting, commence a major fundraising drive in the US. This could expose US banks, through whose accounts contributions may flow, to increased risk of violation of existing Iran sanctions, or to financial crime risks, for some groups are known to engage in criminal
activities to raise funds.

Finally, their loyalties regarding the West are still a subject for debate, due to their prior history of violence against US nationals. I would leave the sanctions in place, if I were OFAC, to minimise risk to US financial institutions.
*Page A9, 11 October, 2011.
**Iranian Terrorist Organisation Seeks removal of FTO Sanction, World-Check 4 July, 2011. 

Monday, October 10, 2011


The Interior Ministry of the Palestinian Territory of Gaza has reportedly mandated today that all foreigners wishing to enter the Gaza Strip must first obtain a visa, effective immediately. Whilst this new regulation will most likely delay entry for aid workers and charitable officers, as well as impose a fee for this service, it also poses a sanctions risk for non-governmental organisations, especially charities.

Charitable organisations that operate in the UK, EU, or US are bound not to deal directly with Hamas, as it is a Specially Designated Global Terrorist (SDGT) in the United States, and similarly sanctioned in Europe. How will charities avoid exposure to fines & penalties when they apply for visas ? What about the visa fees; how will they be paid, and will the act of doing so expose the charities' banks ?

Banks who clients are charities that render aid in the Gaza Strip may be well advised to create, through bank counsel, some sort of certificate of compliance, whereby the charity affirms that it is not, directly or indirectly, involved with Hamas, or any of its agencies and agents. Will this insulate you from regulatory fines and penalties ? We cannot say, but i know that if I was still a compliance officer, and my bank had NGO customers who disbursed aid in Gaza, I would want to reduce my risk.

Sunday, October 9, 2011


An insurance executive, who sold fraudulent liability insurance policies written by shell companies located in Caribbean tax havens, has entered a plea of guilty to conspiracy to commit money laundering in US District Court in Texas*. Edmund Benton faces a maximum sentence of ten years in Federal Prison, plus a substantial fine. Two other defendants have elected to go to trial, still others remain overseas, and their extradition is being sought.

The scheme involved the use of insurance companies with no assets located in St. Vincent & the Grenadines. The fraudsters wired the proceeds of their criminal enterprise to Canada, and to Caribbean and Central American banks.When an insured filed a major claim, due to loss of life in a maritime accident, it was discovered that the entities providing coverage were shell companies with no assets. The policies were worthless.

If you have been in the compliance business a while, you may remember the case of the offshore insurance company that insured high-risk businesses in Los Angeles two decades ago. After an earthquake, the insureds were unable to obtain any payment upon their policies, because the tax haven jurisdiction did not adequately monitor corporations, and it was a corporation secrecy jurisdiction. The company had no assets to pay claims. In this case, accepting insurance coverage from any entity located in offshore jurisdictions is playing with fire; you will probably get burned.

*United States vs. Benton et al, Case No.: 10-cr-814-S (SD TEX).


On Tuesday, 11 October, 2011, Section 104(e) of the Comprehensive Iran Sanctions, Accountability, and Divestment Act, or CISADA, becomes effective, according to the Final Rule published in the Federal Register* online yesterday.

Upon receipt of an Information Request from FinCEN, a US bank must enquire of specific foreign banks are are correspondents of the US bank, to determine:

(1) Whether the foreign bank has a correspondent account for any Iranian-linked financial institution designated under the IEEPA**.

(2) Whether the foreign bank has processed one or more funds transfers, within the past 90 days, directly or indirectly, for a designated IEEPA Iranian-linked financial institution, other than through a correspondent account.

(3) Whether the foreign bank has processed one or more funds transfers, within the past 90 days, directly or indirectly, for the Islamic Revolutionary Guard Corps (IRGC), or any agents or affiliates that are IEPPA-designated.

It is also noteworthy to remember that CISADA Regulations prohibit US banks to open or maintain a correspondent account, or payable-through account, for a foreign bank found to knowingly facilitate significant transactions, or to provide significant financial services for Iranian-linked financial institutions, or designated IRGC affiliates.

If I was a compliance officer at a US-based international bank whose clients trade with the Middle East, I would be already creating CISADA-compliant files, by collecting the information, from my correspondent banks, in advance; be prepared.
*Vol. 76, No.196, at 62607-62625.
**International Emergency Economic Powers Act. 50 USA §§1701-1707.

Saturday, October 8, 2011


Buried in this week's  articles detailing that alleged US Diplomatic cables identified Arab Bank as a facilitator of payments for illegal weapons of mass destruction/ballistic missile shipments, involving North Korea, Iran and Syria, was a curious, anonymous opinion. The writer, ostensibly an American diplomat, opined that the bank may have been an unwitting tool of North Korea.

What he is reportedly saying is that the bank failed to identify the aliases and front companies employed by North Korean financial professionals. What's wrong with this picture ? I am sure that the bank will tell you that they maintain both AML software, and a leading database for high-risk individuals and entities. This, unfortunately, is obviously not enough to identify determined (and talented) money launderers.

Orthodox banking best practises simply does not work against imaginative money launderers. What does work, in my humble opinion:

(1) Follow the lead of America's biggest financial institutions, and acquire access to ALL the major databases of high-risk individuals & entities. What one database, even the best, has omitted, may be covered in a lesser-known competitor. Take them all, and disregard the cries, from management, that there is duplication. If you catch only one major money laundering attempt with the information, you avoid a potential multi-million dollar fine from regulators.

(2) Create an in-house Financial Intelligence Unit, and place as its commander a former/retired law enforcement agent with actual money laundering investigative experience, or a former money launderer, if you can find one. You need someone who is qualified to perform Enhanced Due Diligence, both for the results you will get, and to lessen the burden upon your compliance staff; They have enough on their plates.

(3) Teach your compliance staff the actual techniques of money laundering. They cannot interdict, on a real-time basis, a money laundering scheme if they do not recognise it.

(4) Make sure that your compliance staff is updated, at least weekly, on region-specific emerging threats, so that they know what new issues to look for.

If you elevate your compliance programme to the level at which it becomes effective, you reduce the risk that money launderers will be able to move their funds into, and through, your bank; Good luck.


Lawrence Perlmutter, a Massachusetts criminal defence lawyer, has executed a Plea Agreement, admitting to Federal charges of money laundering, and money laundering conspiracy. He has agreed to accept a sentence of 66 months for conducting a money laundering operation designed to clean narcotics profits through the porting of bail of criminal defendants arrested in Massachusetts on state drug charges.

The scheme operated in this way:
(1)  Defendants arrested on heroin or cocaine charges in Massachusetts would send a representative to a Perlmutter confederate, who operated a notary & tax preparation centre, and pay over the full amount needed to post a bond for the individual, plus a substantial fee.
(2) The cash then was deposited into Perlmutter's Trust Account, which is supposed to be used to hold client money. The remitter was marked as an associate of the defendant.
(3) A cashier's cheque was purchased immediately, and the cheque delivered to cover the in-custody individual's bond. Permutter was generally not the lawyer for the defendant being released.
(4) The member of the defendant's organisation named as remitter made the bond payment.
(5) After the case was over, the bond money, less any fees, was returned, in cheque form, to the declared owner. This in effect resulted in the narcotics traffickers obtaining a cheque for their illicit cash.

What was this lawyer thinking ? All those cash deposits, none of which actually qualifies as funds of a client being held in trust. The money was immediately converted to cashier's cheques, which is a major red flag of money laundering. Such activities were bound to be found suspicious, sooner or later, by bankers or law enforcement agents.

An investigation initiated by the Boston Police Department resulted in the indictment of Perlmutter and his co-conspirator. Sentencing has been set for 12 January, 2012.

*United States vs. Perlmutter, Case No: 1:10-cr-10061-NMG (D Mass) .


If you are with FDIC, FRB, NCUA, OCC, OTS or one of the state banking regulatory agencies, and are planning on attending one of the three Financial Crimes Conferences sponsored by the Federal Financial Institutions Examining Council* in 2012 at FDIC, be advised that I will be presenting my extended seminar on Money Laundering Tradecraft at those events. Tradecraft explains the advanced and esoteric money laundering methods currently used by laundrymen, in the context of their money laundering strategies, tactics and objectives.. It will be the first time that I deliver this hands-on presentation at FFIEC.

For further information, contact the Examiner Education Staff at FFIEC. They have a page on the agency's website.

Thursday, October 6, 2011


French law enforcement agents have seized eleven of the most exotic automobiles in the world, reputedly worth a total of £5m, all located at the £15m French mansion of Teodoro Obiang Nguema Mbasogo, the leader of Equatorial Guinea, reportedly in connection with an ongoing money laundering investigation.

The vehicles, which are amongst the most expensive automobiles in the world, include:

(1) Two Bugati Veyrons
(2)  Ferrari 599 GTO
(3)  Maserati
(4) Rolls Royce Phantom Drophead Coupé
(5) Aston Martin
(6) Porsche Carrera GT
(7) Ferrari Enzo
(8) A couple of Bentleys

Obiang's son, Teodorin Obiang Mbasogo, reportedly drove a number of these automobiles; father and son  each owned some of these cars.

French media have stated that the automobiles were allegedly used in a money laundering operation.


A judge in British Colombia has sentenced Robinderpal "Robin" Rathor, a corrections officer who also ran two currency exchange outlets, to a Conditional Sentence of two years, minus one day *. Two special conditions, that he is confined to his residence from 10 PM to 6 AM the first year, and that he perform 100 hours of community service, were imposed. Cash was also seized by Canadian law enforcement.

 Rathor, whom pled guilt to Laundering the Proceeds of Crime, was caught in a sting operation run by undercover officers of the Royal Canadian Mounted Police (RCMP), who posed as marijuana and cocaine dealers who needed to convert their US Dollars into Canadian notes. American customers generally pay Canadian narcotics traffickers in American currency, which the criminal must then exchange for Canadian. Rathor exchanged US$560,000 .

The sentence is basically the functional equivalent of probation or parole; so long as Rathor satisfies the conditions of his sentence, he avoids incarceration completely. Is this sufficient deterrence, to keep other Canadians who might be tempted to make some fast money by laundering drug proceeds ? I doubt it,.

The function of sentencing, in my personal experience, is:
(1) To deter others from committing the same offence.
(2) To protect society from individuals who have demonstrated their willingness to commit the offence.
(3) To incapacitate the offender, taking him out of society, so that he cannot continue his criminal activities.
(4) To demonstrate to the public the seriousness of the crime.

How does a non-custodial sentence, that does not involve jail or prison time, satisfy those requirements ? An aggravating factor here is that the defendant was himself a part of the criminal justice system. I fully understand that Canada, to reduce the number of individual incarcerated, has Conditional Release, but in light of the seriousness of the crime, I do not believe that it should have been imposed here, lest others be tempted by what was, in my humble opinion, a slap on the wrist.

Was justice served ? I will let you be the judge.
* It appears that a Conditional Sentence, under Canadian law, is generally imposed for property crimes, and must be less than two years.

Wednesday, October 5, 2011


Readers in the Bermuda Islands please note that I will be lecturing at the Bermuda Compliance Seminar, to be conducted by ABCO in Hamilton on Thursday, 20 October, 2011, from 9:30 AM to 3:30 PM. the goal of the programme is to equip financial institutions and senior managers to deal with real-time compliance issues more effectively, through a hands-on and interactive learning experience. The facility is being provided courtesy of HSBC Bank Bermuda.

The seminar will be presented in three parts:
(1) TRADECRAFT: covering both advanced and esoteric money laundering techniques, together with the methods of detecting them on a real-time basis.
(B) EMERGING THREATS: detailing both new and potential issues that have appeared in 2011, and which may appear in 2012.
(C) LIFE EXPERIENCES: My journey from bank lawyer to career money launderer to Federal prisoner to compliance officer. This section will also cover the techniques and strategies I employed, in the application of enhanced due diligence, to identify and interdict money launderers, whilst serving as a compliance officer.

The details:

Date: Thursday, 20 October, 2011.
Venue: HSBC Bank Bermuda Ltd.
            Harbourview Centre
            37 Front Street
Speaker: Kenneth Rijock, Financial Crime Consultant
Start Time: 9:30 AM
End Time:  3:30 PM
Refreshments and a light lunch will be served.

An announcement has gone out to ABCO members.
All others, please contact: Tanya Esdaille

Tuesday, October 4, 2011


Michael McNerney*, formerly a name partner at one of Fort Lauderdale most prominent law firms, but now awaiting sentencing for his role in the billion dollar Mutual Benefits Ponzi scheme, was seeking a judicial determination that he was not guilty of concealing material facts from investors. His counsel filed a Motion to Strike Allegations of Concealment in the Indictment, arguing that he did not make any misstatements of material fact.

The Court, speaking through District Judge Adalberto Jordan, denied his motion, citing to a decision that held "the duty to disclose is a general one, and arises whenever a disclosed statement would be misleading, in the absence of the disclosure of additional material facts needed to make it not misleading." In other words, if you remain silent when you should speak up, to correct a misleading statement or impression, you are still concealing information. Remember that the next time you are at an important meeting, and something is said that needs correction, or clarification, and you fail to say anything; it could come back to bite you.

What about Mr. McNerney ? Why was he so intent on minimising his role in the fraud ? He may have his eye on returning to the practice of law eventually, and he might have sought to strike the concealment allegations so as to increase his chances of readmission. However, he did sit in on meetings with investors, and the presence of the firm's attorney, in the face of misleading statements made by sales staff,  was certainly reassuring to the investors.

By the way,  the judge sentenced him to five years in Federal Prison, (the maximum sentence for Conspiracy to commit Mail & Wire Fraud) to be followed by three years of Supervised Release, a form of parole, and ordered him to make restitution in the amount of $826m. He is due to self-surrender on 26 October.

 He will most likely be called upon to testify against his principal client, and the attorney-client privilege has an important exception; if you are engaged in a crime or fraud with your client, the privilege no longer attaches.
* United States vs. McNerney, Case No.: 1:08-cr-21158-AJ (SD FLA).

Monday, October 3, 2011


Accused master arms trafficker Viktor Bout, known in the media as the Merchant of Death, and the Lord of War, is scheduled for trial, on the 11th of October, in US District Court* in New York. He was extradited from Thailand after allegedly agreeing to supply arms and missiles to the FARC, a designated global terrorist organisation, to be used against American military and government officials in Colombia.

 Bout faces multiple Federal charges:
(1) Conspiring to kill US nationals.
(2) Conspiring to kill officers and employees of the United States.
(3) Conspiring to acquire and use anti-aircraft missiles.
(4) Providing material support to a designated terrorist organisation.

Recently, the trial judge issued an Opinion and Order suppressing his statements to DEA officers after his arrest in Bangkok, ruling that his constitutional rights were violated. The Court has also reportedly indicated that his role in earlier criminal activity was limited to transport, and denied the government's request to introduce his long reputed arms trafficking history, in Africa and the Middle East, at trial as other criminal conduct under Rule 404 of the Federal Rules of Evidence.

We will be following this case closely next week; look for an update shortly. His codefendant,  the Syrian-American accountant Richard Ammar Chichakli,  remains at large, and was last seen in Moscow.
*United States vs. Bout, case No.: 1:08-cr-00365-SAS (SDNY). 


OFAC and the Department of Commerce Bureau of Industry and Security (BIS) have jointly settled multiple sanctions with Texas-based Flowserve Corporation* for slightly more than three million dollars**. Flowserve is a global provider of flow control products, such as pumps, valves and seals, to the oil & gas, chemical and power industries.

The admitted violations:
(1) The unlicensed export, by domestic & foreign affiliates,  of the company's products, indirectly, to Iran.
(2) The company's foreign affiliates engaging in the unlicensed export of products to Sudan.
(3)  Transactions, by the company's  foreign affiliates, involving property in which Cuba, or a Cuban national, had an interest.

OFAC stated in mitigation that there was voluntary self- disclosure, and that there had not been any enforcement action taken against the company in the five years prior to the transactions at issue. Nevertheless, the action was taken because:
(A) "Several of the apparent violations reflected a reckless disregard for US sanctions requirements..."
(B)  "... and involved awareness by facility supervisors of the conduct giving rise to the apparent violations."

The penalties are $502,408 to be remitted to OFAC, and $2.5m to be paid to BIS. It should be noted that the company fully cooperated, and has now instituted major remedial measures, including exiting all business with sanctioned countries, and conducting a one-time, post-settlement compliance audit, according to a press release dated 3 October, 2011, and appearing on the company's website.

US regulators continue to exact fines and penalties upon American  corporations committing sanctions violations, especially violations of Iranian sanctions.

Sunday, October 2, 2011


The present government in Lebanon has reportedly abolished all visa requirements for Iranian nationals, and this development, which has been reported in a number of Middle East media, is cause for serious concern. The Comprehensive Iran Sanctions Accountability and Divestment Act, which became effective on 1 July, 2010,  more commonly known as CISADA, imposes a due diligence requirement higher than banking best practices. If information is "knowable," meaning that it exists as open-source, then US persons or entities are charged with that knowledge, whether they happen to have it or not.

If I am an Iranian PEP committed to evading UK, US, EU, UN and all other existing ballistic missile & WMD global sanctions against  Iran, I hop a flight to Beirut, without the inconvenience of obtaining a visa, and process my purchases through one or more of its commercial banks. Since a number of Iranian banks have correspondent relationships with Beirut banks, either directly or indirectly through third parties, I will not have a problem obtaining my funds.

 I may even be using a passport I acquired legitimately, several years ago, in a nation within the Schengen Zone. At the other end, the Western banker handling the matter has no clue that payment for goods en route to  a "safe" Middle East destination, will ultimately end up in Tehran. Identity of Beneficial owner, or Source of Funds ? You're kidding, of course; bank secrecy is the order of the day, frustrating any enquiry.

Unfortunately, the Western banker, and his bank, could be liable for major sanctions under CISADA, because he is charged with the knowledge that all transactions originating from Lebanese banks could be Iranian purchases, and need to be thoroughly vetted. But he has no answers and that's the problem.

Has Lebanon now reached the point where you must classify it as high risk ? We cannot say, but you need to give it some serious thought the next time a large transaction from or to that country crosses your desk; think about it.
* 75 Fed. Reg. 49836 (16 August 2010). 


The money laundering conviction last week, in Isleworth Crown Court, of Jean Rogerson, an 83-year old woman said to be living on benefits, for depositing more than £122,000 in her bank account in a single day, reveals an aspect of money laundering that can be utilised, by bank frontline staff, to identify laundrymen on a real-time basis.

Money launderers, like the Defendant in this case, are sometimes tasked to place notes into the financial system that may soon either be obsolete, or will become of such high profile that their placement itself could trigger a Suspicious Activity Report. Ms. Rogerson was depositing cash that reportedly consisted of mainly £20 banknotes bearing the image of English composer Edward Elgar. The notes were then due to be withdrawn from circulation in less than two months, after which time only the Bank of England was obligated to redeem them*; acceptance was them only optional at commercial banks.

The notes had most likely been the proceeds of crime, and held in storage for some time, outside the banking system, to evade law enforcement detection. Since they were being replaced with ones containing more advanced anti-counterfeiting features, the old ones were about to expire.

That is where Ms. Rogerson came in; she reportedly stated, in response to to the bankers' query as to Source of Funds, "they give me the money, and  give it to them back." It was anticipated that she would be withdrawing the funds in current notes.

If you have read my article, Watch for Money Launderers depositing Old Series US$100 Notes**, you know that the new US$100 note, when released sometime next year, will make the old, pre-1990 and older series notes extremely visible when placed for deposit at financial institutions. I have advised that money launderers should be now moving those old notes into bank accounts, and taking out the funds in newer series notes, for probable storage. Have you seen any lately, in large numbers ?

Therefore, always be conscious of developments in local currency; when new issues are due to come out, when old series are to be retired, and when design changes make the old notes a curiosity, and raising the risk that bankers may enquire further, or raise suspicions. Money launderers always want to blend in with the legitimate customers, and they will seek to rapidly discard notes which could raise attention in the future; Watch for them.


The Supreme Court of British Columbia, in a landmark decision* this week, has held that lawyers will not be required to maintain certain financial records on their clients in their offices, where they may be accessed by Canadian law enforcement or regulators, on constitutional grounds. The case, which was brought on behalf of the fourteen provincial & territorial legal societies that regulate the legal profession, will reportedly have national implications, due to a prior agreement with the Attorney General's office.

 The Proceeds of Crime (Money Laundering) and Terrorist Financing Act  of 2001, and subsequent regulations, required solicitors to maintain financial records, involving fee transactions with their clients, and to retain these records in their offices, where they could be subpoenaed by law enforcement agencies. Interlocutory injunctions were thereafter issued, in several provinces, staying lawyers' obligations under the law, pending a ruling by a court of competent jurisdiction.

The lawyers argued that compliance with the Proceeds of Crime law violated:
(1) The attorney-client confidentiality and privilege.
(2) A lawyer's duty of loyalty to their clients.
(3) The independence of the Bar.

The Court, speaking through Justice Laura Gerow, held that the anti-money laundering laws violated the Canadian Charter of Rights and Freedoms "as it applies to lawyers and law firms because, because it puts both lawyers and their clients' liberty interests in jeopardy by requiring lawyers to collect and retain information available to the government to aid in combating money laundering and terrorist financing."

It should be noted that the profession has had a "No Cash Rule" in effect since 2004; this limits cash fee payments to under C$7500, and mandates cash refunds to clients, if the amount is over C$1000.There is also a "Client ID Rule" which requires that client personal information be secured through proper identification documents.

Will this decision hinder Canadian money laundering and terrorist financing prosecutions ? We cannot say, but we will be paying close attention, in the future, to the actions of Canadian law enforcement agencies in money laundering investigations.
*Federation of Law Societies of Canada vs. Attorney General of Canada, 2011 BCSC 1270. Opinion entered 27 September, 2011, Docket No.: L013117. 

Saturday, October 1, 2011


If you have read my personal story, Confessions of a Money Launderer, and wondered what personal laundering experiences were censored from that blog, I have included them in my new book, The Laundry Man, which will be published by Penguin Books UK in July 2012.* Those of you who have seen the adverts on have seen the cover; for others, it appears on the far right of this page. When the actual publication date is announced, it will be promptly posted here. Details of the forthcoming book tour, in the UK and the United States in 2012, will also appear here first.


Imperial Holdings, Inc*, a Boca Raton, Florida company that was involved in life insurance and structured settlements, was raided by the Federal Bureau of Investigation last week, under the authority of a search warrant issued by a Magistrate Judge in US District Court for the Southern District of Florida. Reports indicate that the investigation originated in the District of New Hampshire. Trading was halted in the company's publicly-traded stock on the New York Stock Exchange, which plunged 60% after the raid. A number of the company's officers and directors are also reportedly under criminal investigation. Some reports state that the company's offices are closed, but this is unconfirmed.

Imperial was engaged in three categories of finance. First, making purchases of structured settlements, which are generally long-term annuities, where the recipient agrees to receive a discounted lump sum from the company, and sells the rights to receive future payments . Second, Premium Financing, where holders of life insurance policies borrow the money necessary to purchase, or maintain, the policies. Finally, the company purchased what are known as life settlements, (in the UK called traded life policies) life insurance policies from the owners and beneficiaries, who receive a discounted payment, and assign over the death benefits to the company.

The company has announced that it is cooperating in the investigation; The company's CEO** has stated that "we are not aware of any wrongdoing, and will cooperate fully with all relevant authorities to assist in their investigation."

Companies involved in Life Settlements in the United States have been targeted by law enforcement agencies since the billion-dollar Mutual Benefits Corp.*** scandal a decade ago.

** Antony Mitchell
*** SEC vs. Mutual Benefits Corp., 408 F.3d 737 (11th Cir. 2006), affirming SEC vs. Mutual Benefits Corp., 323 F. Supp. 1337 (SD Fla. 2004).


A high-level meeting last week in Tokyo, between Japanese defence officials and ASEAN leaders, appears to have resulted in the strengthening of mutual ties, due to China's increasingly aggressive territorial posture in the disputed South China Sea area. Longstanding unresolved territorial and economic claims by several countries, including Vietnam, the Philippines, Taiwan, Malaysia and Brunei, in the maritime region, conflict with recent Chinese actions in support of its position, that it has exclusive sovereignty over the territories and waters. Whether it will result in incident that degenerate into armed conflict is a concern among compliance officers charged with the assessment of country risk.

The recent Chinese warning to an Indian warship visiting Vietnam, to the effect that it was in Chinese territorial waters, is but the latest in a series of incidents that is troubling from a country risk point of view, involving Vietnam, the Philippines, Malaysia and Taiwan.

Japan and the Philippines have reportedly entered into a strategic partnership agreement involving security matters. The United States has also become involved, partially to insure freedom of  navigation in this strategic maritime route to Northeast Asia, and China has indicated that it is displeased with American involvement.

The most disturbing development last week was the publication, last week, of an opinion article appearing in the government-sanctioned publication Global Times, entitled "Time to Teach Those around South China Sea a Lesson*,"  written by a strategic analyst, Long Tao. The article states that it is a good time for China to take military action against Vietnam and the Philippines, alleged to be the most vocal critics of China's recent actions in the South China Sea, and states that the United States is too preoccupied with the Middle East to respond. It cites the American failure to respond to Russian military intervention in the Republic of Georgia in 2006 as authority for that belief.

Whilst the Chinese Government has distanced itself from the article, which is also critical of Australia, Japan and India for upgrades in military capabilities, it is in line with a number of statements coming from other quarters in China, notably some of its retired senior military officers.

It is suggested that compliance officers at international banks whose clients, or the bank itself, have financial exposure in Vietnam and the Philippines pay close attention to unfolding developments in the South China Sea. It could also serve as a pretext for action against Taiwan, who claims many of the islands in the region. Monitor all incidents if you have an interest in the countries bordering the South China Sea.
* Filed on September 29, 2011.