Thursday, May 31, 2012


Mr. Burnbaum leaving Federal Court in New York in 2011. 

The Supreme Judicial Court of Massachusetts, that state's highest court, has notified attorney Michael Burnbaum that it intends to impose discipline upon him, after it learned that he had failed to advise the court that he had resigned from the Florida Bar in 2000, in lieu of disciplinary proceedings. Burnbaum was convicted in Federal Court in Miami of a narcotics charge, Conspiracy, with Intent to Distribute, Cocaine, and he was incarcerated for several years.

He apparently failed to notify Massachusetts of either his criminal conviction, or his Resignation in Florida, and last year he appeared, in Federal Court in New York, on behalf of a client, in a criminal case.* When the fact that he had a criminal conviction surfaced in open court, during that case, the Massachusetts Bar filed a Petition for Reciprocal Discipline**, and Notice of Conviction of a Serious Crime. The court in Massachusetts admitted the Florida disciplinary record into evidence in those proceedings.

The 30-day period for the Respondent to show cause why discipline should not be imposed expires in late June. We shall continue to keep our readers advised in this case.

*Lawyer with Felony Conviction exposed Representing a Client in a Criminal Proceeding
**In Re: Michael W Burnbaum,  Case No.: BD-2011-121 (Mass. Sup. Jud. Ct. 2012).

Wednesday, May 30, 2012


This week's deadly earthquake in northeast Italy, which has resulted in at least 16 deaths and over 200 injuries, at last count, registered 5.8 on the Richter Magnitude Scale. A previous earthquake hit the area on 20 May, and there were reportedly hundreds of tremors recorded after that event.

Compliance officers should always be mindful that creative money launderers, working for narcotics trafficking organisations, often exploit major disasters to move illicit profits. They know that charitable donations to aid quake victims are rarely examined, and that a properly set up bogus charity or nonprofit, acting in the immediate aftermath of a disaster, would be able to send illicit funds into an affected area, and then divert them in a manner that would ensure a successful outcome.

Therefore, since Afghan heroin being imported by traditional Italian organised crime groups, and then sold in Western Europe, resulting in illicit proceeds that need to be returned to Italy, if I was still in the money laundering business, and if I was working for the Mafia, I would certainly be tempted to repatriate my client's profits through purported earthquake relief payments.


The Special Court for Sierra Leone has pronounced a fifty-year sentence upon former Liberian President Charles Taylor today*. Taylor who was convicted of war crimes by the tribunal recently, has stated through his attorneys that he plans to appeal.

There are a number of earlier articles on the Taylor case on this Blog. kindly use the blank search box, in ther upper left-hand corner of the page, to access this content.


Tuesday, May 29, 2012


The news from  Buffalo, New York is disturbing. HSBC has announced that it is closing its regional Anti-money Laundering Centre there, which reportedly had a staff of 77. Whilst the work that the centre performed is to be shifted to two other existing locations, a global financial institution should be expanding, not closing, its regional AML offices, if it wishes to stay a couple of steps of the money launderers in the area. Local AML/CFT professionals generally have knowledge of money laundering tactics and strategies, including tradecraft, specific to the area, which is on the US-Canadian border.

To make matters worse, a bank that has had its share of AML compliance deficiencies, should not be looking to cut costs in their compliance department. it may look good to the company's internal auditors, but any major AML failure could wipe out the cost savings when US regulators impose large fines & penalties.

HSBC, or any bank for that matter: you close an AML unit at your peril.

Monday, May 28, 2012


If you paid attention to the professor in Economics class, you may recall a lecture on the Excess Profits Tax, also known as the Windfall Profits Tax, which is a corporate tax levied upon profits above a certain level. It has been enacted by national governments to claw back excess profits enjoyed during wartime production, or when demand outstripped supply to such an extent that prices skyrocketed to an astronomical level.

Excess Profits Taxes, which have been known to be as high as 95% of all profits over normal levels, are a method for governments to recover, for their population and national treasuries, obscene profits. When the next democratic government takes office in Venezuela, you can expect to see such a tax imposed upon those financial institutions, and their principal owners, for all the excess profits they have derived from exceptionally favourable arrangements that they have had with the Chavez government, in official contracts, and in their financial relationships.

This highly effective tax, which will effectively return wealth that rightfully belongs to the people of Venezuela, and the National Treasury, has been proposed by Venezuelan opposition leader, and former Anti-Drug Czar, Thor Halvorssen Hellum. Sr. Halvorssen, who was also a member of the Venezuelan diplomatic corps in a previous government, argues that the disgorgement of excess and illegal profits is the only way to secure economic justice for Venezuela, whose national wealth has been plundered by the so-called Bolivarian Elite, which includes those bankers close to the Chavez Government. He says the money is needed to rebuild Venezuela.

 Ambassador Halvorssen is eminently correct; Venezuela will require massive repairs from the damages to infrastructure, the oil industry, the environment, and the private sector, wrought by the Chavez regime since 1999, and an Excess Profits Tax is a just and equitable way to fund it.

Also, since a large portion of those excess profits have been transferred out of Venezuela, assets of the Bolivarian bankers in other countries will be targeted to pay the tax assessments, which could be in the billions for some financial institutions and their principal shareholders. If, for the sake of argument, I were in the (theoretical) Office of Revenue Recovery for the next democratic Minister of the Treasury, the first three candidates for a new 2013 Excess Profits Tax would probably be:

Juan Carlos Escotet Rodríguez

Victor José de Vargas e Irausquín

I wonder how many Venezuelan bankers (and their lawyers) will go on the Internet tonight to see how the Excess Profits Tax might affect them, how it has been applied historically in the United States, and elsewhere, and to learn how little room there is to maneuver when it is assessed against you or your business; Happy landings, Bolivarian Elite.

Sunday, May 27, 2012


Recently published statistics show a large exit of capital from bank accounts located in the Principality of Liechtenstein has already occurred in 2012.  Much of the "capital flight" has been attributed to the fears of American depositors that their identities will shortly be required to be reported to US tax authorities, under FATCA in 2012, and funds that will be withheld in the future. Banks in that country have sent notices to clients located in America to that effect, and some tax cheats will undoubtedly want to move their funds to Asian financial institutions, or elsewhere. Treaties with EU countries are also responsible for the list of a reported one third of assets in local banks in the last three years.

There is another group of Liechtenstein account holders that will be moving their funds out; organised crime, whether they be narcotics traffickers, illegal gambling operators, smugglers of counterfeit goods, or any other illicit trade, whose "entrepreneurs" have been secreting their criminal proceeds in Liechtensteiner banks for decades, long before effective and enforced compliance procedures were in place.

Should you routinely demand detailed (and verified) Source of Funds and corporate Beneficial Ownership information on all transfers originating in Liechtenstein ? Absolutely; to do any less probably falls below banking best practises. It may even reach a risk level that will rule out accepting any such funds. You make that decision, but it is humbly suggested that you weight the potential risks to your bank's reputation if it the media publicised its new "tax haven" policy; Be careful.


                                                                      George Elia

An accused Ponzi schemer who flew from Florida to his native Cyprus, to escape justice, was arrested by the authorities upon his arrival in Las Vegas, and returned to Fort Lauderdale, to face Federal criminal charges*, a civil suit against him by the Securities & Exchange Commission**, and at least two civil suits by defrauded investors.

George Elia has been indicted and charged with Wire Fraud. It is alleged that he targeted the gay community, that he made materially false statements to investors, and that he engaged in concealment and the omission of material facts in connection with securities investments he purported made for clients. Other individuals who reportedly facilitated the Ponzi scheme have also been named in two civil suits, one brought in Broward County, Florida, by local investors, alleging a $2.5m loss, and one from a California family, claiming a $4m loss.

The SEC lawsuit, which also seeks Injunctive Relief, alleges an $11m fraud, misstatements of material fact, and the use of bogus financial statements. Readers please note that the name of his company was International Consultants & Investment Group Limited Corp.

*United States vs. Elia,  Case No.: 12-cr-60077-KMW (SD FLA).
**Securities & Exchange Commission vs. Elia,  Case No.: 12-cv-60616-WPD (SD FLA).

Friday, May 25, 2012


The Federal Bankruptcy Judge presiding over the civil suit against Atlantic Rim Funding Corp. and Dean Kennedy, for the return of their missing six-figure escrow deposit, has entered an Order regarding the entry of a Default Judgment against these defendants.

Both Atlantic Rim Funding and its reputed president, Dean Kennedy, had Defaults entered against them on 3 May. Remember, these defendants have blatantly ignored court orders to make discovery, produce documents, and appear for deposition. Atlantic Rim never retained counsel, nor did it respond to the Complaint. When does a company that claims it has access to $13bn in assets not get a lawyer when it is sued ? Not when it is a fraud and a thief of supposedly escrowed funds.

Also, neither defendant has applied to set aside the defaults entered, which is extremely unusual, as neither can file any pleadings until the defaults are lifted. Readers may remember that the Court set aside defaults once before, and these defendants still failed to file anything in their defence. They have no respect for the rule of law.

Here's the text of the Court Order, entered on 24 May by US Bankruptcy Judge Eric Frank. It sounds like he has had enough of the defendants' utter contempt for the law:

" It is hereby ORDERED that:

1. NOTICE IS HEREBY GIVEN to Defendants Dean Kennedy ("Kennedy") and Atlantic Rim Funding Corp. ("Atlantic Rim") that a hearing will be held on June 13, 2012... to consider WHETHER A DEFAULT JUDGMENT SHOULD BE ENTERED against Kennedy and Atlantic Rim for the amount requested in the Plaintiff's Complaint (and attorney's fees) as a SANCTION for said Defendants' failure to provide discovery to the Plaintiff as required by the rules of the court and the orders of this court. "

Please note that the CAPS and BOLD PRINT you see appeared in the Order the judge entered. I have not added any emphasis, or altered the text. The language of the order speaks for itself.

If there is anyone out there who still believes in Atlantic Rim Funding's promises, this should serve as a wake-up call. There will be no happy endings for the unfortunate individuals who gave Atlantic Rim Funding "escrowed" funds, awaiting funding that will never come.



This is NOT a United Parcel Services delivery vehicle; it merely posed as one, with the intention of circumventing US law enforcement at the Mexico-US frontier, conducted by human smugglers. Unfortunately for the individuals who were running this operation, they failed to remember the one critical element which is mandatory when criminal pose as legitimate businessmen: Attention to Detail.

The UPS logo at the rear of the van was crooked; inside Federal agents found thirteen Mexican nationals, who were being smuggled into the United States. Those misspellings and incorrectly placed logos or designs will trip up the criminals every time.

Human smugglers have been using what appear to be legitimate commercial or government vehicles of late, in numerous cross-border operations. They have used bogus California Highway Patrol and Imperial Irrigation District vehicles, and even tried one time to dress illegals up in full uniform, with regulation haircuts, as US Marines. Unfortunately for the driver, the government agent was a former Marine, and he was asked for the date of the Marine Corps birthday. (he failed)

The lesson here for compliance officers is that these guys are simply imitating what money launderers have been doing successfully for years in the Continental United States: using commercial vehicles to artfully conceal bulk cash headed north or south, to our national borders.

The difference is, money launderers actually form real, operating businesses that involve transport. Those vehicles will survive a cursory check, and much more. They may really be carrying antiques, classic automobiles, food or beverages, or other bulk goods. Many money launderers make sure that their vehicles are on bona fide deliveries, with real goods on board. The cash is just secreted in a clever manner.

Money launderers hauling millions of dollars of narco-profits will not, I assure you, have misspellings on their truck or van.

Thursday, May 24, 2012


It appears that the fifty-year sentence meted out to Fort Lauderdale Ponzi schemer-lawyer Scott Rothstein has had a impact amongst federal judges. Yesterday, a US District Judge in Charlotte, North Carolina* sentenced Keith Simmons to 50 years in prison, coupled with an order for restitution of $35.3m, in connection with what was known as Black Diamond, a purported foreign currency trading programme.

Simmons promised 48-137% return on investments, but spent most of the money on himself. More than 400 investors are believed to have ben victims of the Ponzi scheme. He paid out $18m in bogus interest payments to investors.
                                                                       Keith Simmons      
Bank compliance officers will be interested to know that a local bank, CommunityOne Bank, was fined $400,000, for failing to catch the Ponzi scheme, and for facilitating its operation. Just one more reason why it is in everybody's best interest to ensure that bank clients are periodically vetted, and that Enhanced Due Diligence is always to be applied in high-risk situations.
*United States vs. Simmons,  Case No. 10-cr-00023-RJC-DCK (WD CAR)


                                                     George Levin and Scott Rothstein

The Securities & Exchange Commission has filed a civil suit, in US District Court in Miami, against Fort Lauderdale businessmen George Levin and Frank Preve, for the sale of unregistered securities, in connection with the massive $1.2bn Scott Rothstein Ponzi scheme. Levin was the managing member of a hedge fund that was involved in making investments in Rothstein's purported legal settlements; Preve managed the day-to-day operations of the investments.

The SEC complaint states that Levin's hedge fund sent an estimated $157m, collected from 173 investors, to Rothstein, Though a bankruptcy filing of the hedge fund alleges $775m. The legal settlements,  allegedly of sexual harassment and employment discrimination claims, were completely bogus and fictitious.  The defendants reportedly sold promissory notes backed by these non-existent cases.

The principal SEC charges include these allegations:

(1) That the defendants misrepresented to investors that they had procedures to in place to protect the funds.

(2) That the defendants represented that, prior to any settlement purchases, they would obtain documentation to insure the safety of the investment. In truth and in fact, the investments were often purchased without any documentation whatsoever.

(3) That, even as the Rothstein Ponzi scheme was falling apart, the defendants still sought to bring in new investors. They knew it was a Ponzi scheme, and that it had ceased to make interest payments, but they continued to bring in new investors.

The relief requested by the SEC:

(A)  The disgorgement of all the illicit profits earned by the defendants.
(B)  Financial penalties.
(C)  Permanent injunctive relief against the defendants.

Rothstein is presently serving a 50-year sentence for his crimes, and he is cooperating with law enforcement investigators. Whether Levin and Preve will also be indicted is not known at this time.

* Case No: 12-cv-21917-UU (SD FLA).

Wednesday, May 23, 2012


Andrew Smulian,  ex-South African Air Force airman and ex-air cargo company operator, was sentenced* this week to five years in Federal Prison for his role in co-conspirator Viktor Bout's attempt to sell weapons and missiles to the FARC. Smulian, who was also sentenced to five years of Supervised Release after he serves his sentence, has already spent the last 50 months in Pre-trial Confinement, all of which will be credited to his sentence.

                                                          Andrew Smulian

Smulian cooperated with US law enforcement after his arrest; he waived extradition from Thailand, and an Information was subsequently filed against him in US District Court, a probable indication that he was engaged in rendering substantial assistance to the United States at that time.

the Government's Sentencing Memorandum, it was stated that "Smulian was a critical witness in the government's trial against Bout. he testified for a total of two-and-one half days during the trial..."** The quality of his assistance resulted in the Government's motion to depart below the Guidelines, pursuant to Rule 5k1.1 of the USSG. Bout is presently serving a sentence of 25 years; he has filed a Notice of Appeal.

                                     Does Bout's appeal have a chance of obtaining a reversal ?
* United States vs. Andrew Smulian,  Case No.: 08-cr-000711-SAS (SD NY).
** Sentencing Memorandum at 12.

Tuesday, May 22, 2012


Panama is buzzing with the backstory behind last October's imposition of Weapons of Mass Destruction Proliferators OFAC sanctions* against six Panamanian corporations, which have reportedly now been stricken from the registry of corporations by the Government of Panama. It's not about the companies, which were attempts to crate fronts to evade international maritime sanctions against Iran's government-controlled shipping line, IRISL, it is all about the cast of Panamanian professionals and politicians  who were the organisers and facilitators creating those companies. Is this was Panama has come to now, a facilitator of WMD activities ? Isn't that the definition of state-sponsored terrorism ?

First, here are the Panamanian companies involved:

(1) Galliott Maritime, Inc.
(2) Indus Maritime, Inc.
(3) Kaveri  Maritime, Inc.
(4) Melodious Maritime, Inc.
(5) Mount Everest Maritime, Inc
(6) Rishi Maritime, Inc.

Now what's NOT in the OFAC SDN information regarding those sanctioned companies, all of whom listed their offices on the 14th floor of Torre Banesco in the Ocean Business Plaza Building.

(A) Who were the clients who requested that these companies be formed ? Certain Venezuelan nationals of Lebanese descent, working for the Government of Iran.

(B) How did these companies pass a Due Diligence check by the Ministry of Commerce and Industry ?  Perhaps because the Minister, Ricardo Quijano, personally approved them. Someone should ask him about how he could approve obvious fronts. One might also want to look closely at the minister's Venezuelan son-in-law,  Pedro José Rojaswho not only owns a Panamanian Financiera, but is responsible for issuing Mastercards to Lebanese nationals in Venezuela. That is a primary money laundering vehicle which is employed to clean illicit dollars.

(C) Who were the lawyers who formed these companies ? The Law Firm of Veleiro, Mihalitsianos & de la Espriella.  These lawyers are closely connected to Panamanian President Martinelli, as well as his sons Enrique and Ricardo junior, and are directors of companies controlled by the sons. One of the lawyers, a dual US-Panamanian citizen, actually was a former aide to US Speaker of the House John Boehner.

(D) Who were the original directors and bearer shareholders of these front companies ? VM & E of course. They immediately resigned their directorships upon learning of the OFAC sanctions. How thoughtful of them. Haven't they ever heard of Know your Client ?

Did President Martinelli approve the formation of these companies ? How else did they get approval to open and operate bank accounts at Global Bank,  which Martinelli reportedly owns and controls.

Is it not time to aggregate all the Hizbollah, FARC, Hamas, MEK,  and IRGC operations that are not only allowed to flourish in the Republic of Panama, but are facilitated and encouraged, for profit, and consider Panama a de facto State Sponsor of Terrorism ? The government simply does not care to suppress either the activities of terrorist training camps, or their money launderers and fundraisers who work in Panama.

 Don't wait for the United States to make that pronouncement (for I am sure that certain US intelligence services still find Panama the perfect money laundering venue for their own sordid activities), but consider all Panamanian contacts high-risk until proven otherwise through Enhanced Due Diligence. To do otherwise, you expose your bank, and perhaps yourself, to potential terrorist financiers.

* 27 October, 2011.


The disclosure that an individual who had been sentenced to 36 months for a bulk cash smuggling conviction was subsequently involved in other criminal conduct does not surprise me. Probation is NEVER a sufficient deterrent for money launderers; I should know, having been one for ten years. You must make the offender pay for the transgression, lest he think he committed only a minor infraction.

Please, members of the judiciary, let the punishment serve to deter not only others, but the offender himself. 

Sunday, May 20, 2012


In the Adversary Proceeding pending in Federal Bankruptcy Court in Pennsylvania, against accused Ponzi schemers Dean Kennedy and Atlantic Rim Funding Corp., the Plaintiff, Land Conservancy of Elkins Park, Inc., has filed a proposed Second Amended Complaint. This new pleading charges the Escrow Agent, Texas Attorney J Mac Rust, also known as Jay Mac Rust, with Professional Negligence, more commonly known as Malpractice, and for breach of Fiduciary Duty. Frankly, the allegations are damning.


These are verbatim quotes from the Second Amended Complaint. I have included the paragraph number to aid any readers who plan on reviewing the complete document.

First, from the Malpractice Count:

119. Rust held himself out as a competent attorney well versed in transactions of the type involving the Debtor and Atlantic Rim.

120. Rust blithely assured Debtor and Debtor's counsel, as attorney and Escrow Agent, that the Deposit was "safe" and could be liquidated readily since it contained "marketable securities."

121. rust knew that the debtor was not consenting and would not consent to any portion of the Deposit or its proceeds being used to cover losses incurred by other Atlantic Rim customers.

122. Rust made the same representations as the escrow Agent holding the deposit, and again indicated that the Debtor's Deposit was safe, fully collateralized and could be returned to the Debtor immediately.

123. Rust had a duty to the debtor as an attorney, and as a third party Rust knew the Debtor was relying upon his representations...

126. Rust negligently failed to disclose real time information to the debtor relating to the value of the Deposit.

128. The Deposit was in fact not "safe". The Deposit was not protected, the securities were not marketable, and the value was substantially below that which was represented and insufficient to return the Deposit to the Debtor.

129. The Debtor also avers that Rust was negligent in his handling of the Deposit in that he negligently allowed the proceeds of the Deposit to be used to refund other Atlantic Rim customers their deposits, when Atlantic Rim failed to close their loans.''...

132. Rust was the proximate cause, or the principal contributing cause of the failure of the Debtor to recover the Deposit....

135. The Debtor has been damaged by the loss of $240,000 of the Deposit.

Next, the breach of Fiduciary Duty Count;

137. Rust acted as a fiduciary with respect to the Deposit....

139. Rust breached the Escrow Agreement by allowing the Deposit to be used to satisfy the obligations of other Atlantic Rim customers without the Debtor's affirmative consent.

140. Rust breached the Escrow Agreement by failing to disclose, in the face of an obligation to do so, material facts which would have demonstrated the Deposit was at risk.

141. The acts complained of herein constitute breaches of Rust's fiduciary duties to the debtor.

I hope someone has notified the State Bar of Texas, as well as Jay Mac Rust's Malpractice insurance carrier. This individual has knowingly facilitated a number of Atlantic Rim Funding/Dean Kennedy advance fee schemes/Ponzi schemes, and caused serious financial losses of the victims. The authorities need to determine whether he is to be permanently disbarred, arrested and convicted of fraud. I wonder if the Texas Attorney General's Office in Austin is paying attention.

*Land Conservancy of Elkins Park Inc. vs. Atlantic Rim Funding Corp et al, Case No. 12-00007 (ED PA BKCY).



Narcotics investigators in the frontier city of El Paso, Texas seized $1,413,296 in cash, in the bedroom of a residence in a working-class neighborhood. The money, found in 129 wrapped bundles, was one of the largest bulk cash seizures to date made by the West Texas Stash House Unit, whose primary role is to locate places where narcotics arrived from Mexico are temporarily stored, before being distributed in the United States.

Bulk cash narcotics profits, earned in the United States, and en route to Central America, are typically aggregated and stored just prior to being cross-border smuggled into Mexico.  Some of the recent cash seizures in the El Paso border area:

(1) $304,389 seized in a pickup truck bound for Juarez, Mexico, in November, 2011.

(2) $982,000 was found in a condominium in February, 2011.

(3) $400,000 seized in a southbound automobile, in January, 2011.

(4) $530,000 seized at the Stanton Street Bridge in 2010; a follow-up investigation seized $212,000 in the same neighborhood where the $1.4m was seized this week.


Compliance officers who have been following the disclosure of disturbing information in the Bo Xilai scandal in China should consider modifying their procedures regarding high net-worth expat Chinese clients.

                                    Bo Xilai and hi attorney wife, who used multiple identities

My advice:

(1) Take all steps that are necessary to properly identify the Chinese client ; could he be a PEP masquerading as a businessman? Does his account manager describe the client as arrogant, with a strong sense of entitlement, rather than the personality of the typical international businessman, anxious to establish a new commercial relationship ? Client attitude can betray a carefully constructed fictitious persona. You must rule him out as a PEP; otherwise, you have major monitoring ahead of you; with automatic notification to you if account activity exceeds stated objectives, funds come in through an obviously circuitous route, or suspicious activity is observed.

(2) Verify the client's Source of Funds, and occupation/profession, through the most accurate third party sources you can find. Do NOT accept commercial off-the-shelf data on the critical issue of occupation. PEPs can easily establish private commercial identities. Is he or she a possible "princeling," and do you want to turn away that business ?

(3) Meet the client yourself, if possible, and ascertain, with precision, the intended purpose of the account, lines of business claimed by the client, and types of international transactions contemplated. Make sure that the account parameters are not violated six months later;  do not drop your guard.

The purpose of these Enhanced Due Diligence queries is to ensure that illicit funds, whether earned through bribes and kickbacks, through incestuous business dealings with government, or financial crime, are not later funneled through accounts at your bank.

Finally; Don't let the children of PEPs snow you. University students, classified low risk by most compliance officers, can be money launderers, too.

                                                              Son of Bo Xilai