Sunday, January 1, 2012


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. 

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