Friday, November 30, 2012


Bank Audi S.A.L., Lebanon;'s largest bank, has announced that it will open in Iraq in 2013, joining Byblos Bank, IBL Bank S.A.L. (Intercontinental Bank of Lebanon), and BBAC (Bank of Lebanon and the Arab Countries), which are already operating there, mainly in the Kurdish city of Erbil. reportedly, Audi will employ its newly-opened Turkish subsidiary of Odeabank in its Iraqi venture.
Add Bank Audi, and the other Lebanese banks in-country to the existing presence there of the principal Iranian financial institution, the sanctioned Bank Melli, and you have a potential recipe for evasion of the global sanctions imposed upon Iran for its outlawed Weapons of Mass Destruction and Ballistic Missile programmes. Is anyone paying attention to all this ?

The question : if you are a compliance officer at an international bank in the EU, or North America, and your clients are trading with Middle East customers who pay them through Lebanese banks, what are you doing to ensure that the end users of those product are not in Iran ?   Though we generally employ End User certificates for military equipment, or sensitive communications or computer products, should you not establish an SOP for your clients,  requiring them to obtain such documents ? I welcome your comments and suggested procedures, which you can enter below, or email me privately at:

Thursday, November 29, 2012


Some of the seized funds
A Female suspect, from Brownsville, Texas was arrested in rural Kleberg County, during a routine traffic stop on Route 77, south of Corpus Christi. She was reportedly nervous when officers spoke to her, and a subsequent search found $189,000 .

The funds, still encased in protective wrapping
The money, bound in 30 bundles, was encountered near a wheel well of the vehicle, a 2008 Toyota Corolla. The unnamed individual was charged with money laundering, under Texas state law.

The scene of the crime ( area of concealment)
Note the care with which the funds were packaged, and the fact that only US twenty dollar notes appear to be in the cache. Is this a laundryman's response to the effectiveness of the Mexican laws prohibiting the deposit of large amounts of US Dollars in local banks and casas de cambio ? In the money laundering business, the hundred dollar note is king; anything else is chicken feed, and too bulky to transport, if you need to move large sums great distances, but these smaller denomination notes could be used to make purchases from parties who cannot pass, or deposit, hundreds. A teachable moment, perhaps. Launderers adapting to changed circumstances in Mexico ?

Our thanks to alert local law enforcement officers


The Independent Joint Anti-Corruption Monitoring and Evaluation Committee has published its extensive report on rampant corruption at the failed Kabul Bank, which resulted in a loss of $935m. The committee found a "reckless disregard" for sound banking practises.

The report details a boatload of fraudulent and corrupt activities on behalf of bank staff:

(1) Opening loan accounts for proxy borrowers, on instruction of senior management.

(2) Forging applications, financial statements, and using counterfeit corporate stamps and seals.

(3) Transferring loan proceeds, through creating bogus SWIFT messages, and then disbursing cash and electronic transfers.

(4) Bogus transfers to non-existent "overseas suppliers."

(5) Paying salaries to non-existent employees, paying excessive bonuses, advance payment of  rent and salaries, payment for fake assets.

(6) Payments to Pamir Airways, who passed through the funds to others.

You can read the entire report here:

Report of the Public Inquiry into the Kabul Bank Crisis


A US law enforcement agent has publicly disclosed, during an interview, that there are eighty-six Federal fugitives, all believed to be in the South Florida area, who are wanted on charges of Medicare Fraud. Some of these individuals are also accused of money laundering.

This is of relevant interest to compliance officers at South Florida financial institutions, and broker-dealers, because many of there fugitives have defrauded the United States out of millions of dollars in Medicare payments, and therefore have substantial assets. You are advised to look carefully at new customers who fit the following profile:

(1) High net worth individuals or closely-held corporations with larger amounts of cash to deposit.

(2) Dominican or Cuban nationality, or Cuban-Americans who are resident in Florida.

(3) Little or no prior credit agency history.

(4) Present or prior health care industry connections or involvement.

(5) Medical supply store owner or operator.

(6) Individuals who have been resident in the United States for a short period of time. Many medicare fraudsters import front men from the Dominican Republic, or the Republic of Cuba,  and return them to their native countries after the fraud has been successfully perpetrated. Is he totally monolingual, with no English-speaking ability ? If so, he may be a recent arrival. Does he exhibit regional slang in his Spanish that may indicate he is not a long-time resident of Florida ?

(7) Request to deposit US Government cheques in large amounts.

The above is not to be used to bar new customers, but to screen out any who may now need Enhanced Due Diligence to rule them out as white-collar criminals. This is all about Know Your Customer; if you vett the new customer properly, you will not unwittingly admit Medicare fraudsters into your client base.

Wednesday, November 28, 2012


The Federal Deposit Insurance Corp., and the Financial Crimes Enforcement Network, has levied a $15m civil penalty upon First Bank of Delaware, for BSA and AML violations. Reportedly, the bank's assets have been sold to Bryn Mawr Trust Company, and the bank's license has been cancelled.

 The regulators found that the bank had failed to implement an effective BSA/AML compliance program, with internal controls reasonably designed to detect and report evidence of money laundering, and other suspicious activities. You can read the complete text of the joint FDIC/FinCEN report here.

Amongst the transgressions found by regulators  were $22m in Automatic Clearing House transactions, for a foreign-based money service business, a major customer that the bank had failed to perform any meaningful due diligence upon. There were also major issues with third-party payment processors.


The Government of the Bolivarian Republic of Venezuela has taken delivery of the first two Chinese Y-8 military transport aircraft. Six others are expected to arrive during the first quarter of 2013. The Y-8,  which is a medium-range transport aircraft, is replacing Venezuela's aging American-made C-130 Hercules aircraft. The United States imposed an embargo on military sales to Venezuela in 2006.

The problem is that, although Venezuela has stressed the aircraft's "humanitarian aid" function as its intended primary role, the Y-8 is a troop transport. It can also serve as an Airborne Early Warning and Control, or AWACS, aircraft. That modification, which is available from the Chinese manufacturer, Shaanxi Aircraft Factory China, contemplates its use as an offensive weapon. This is, in and of itself, disturbing.

Is the Government of Venezuela planning a military operation outside its national borders ? Considering that Venezuela's President Hugo Chavez Frias is known to be afflicted with cancer, and may be at the end of his career, the risk that he is seriously contemplating offensive action has increased of late. A military conflict in Latin America, no matter how brief, would affect economies of all the nations in the region.

Y-8 as AWACS
 Rumours of war ? First, let's see if any of the additional Y-8s due to arrive in Caracas are equipped for AWACS duty.

Y-8 with Venezuelan crew


If you were paying attention to the regulatory reports out this year, you know that deficiencies were found when major financial institutions foolishly outsourced some of their compliance obligations, with unsatisfactory results.

I cannot understand how any entity, whether it be a financial institution, NBFI, or broker-dealer, can even think of outsourcing its Anti-Money Laundering/Countering the Financing of Terrorism compliance programme. Do you really want to trust an independent contractor, working outside your site, with OFAC issues ?
 How will you know when they made a difficult decision to pass a new client in a grey area ?

How can you tell when their best compliance staff are on holiday, or out sick, and the files are handed to an inexperienced  (read:unqualified) new employee ?

How do you know when your own New Accounts Reps or greedy senior staff are exerting undue influence over the outsourcing company, to pass new customers that should have been barred ?

How will you know if their other clients' work has so overburdened their staff that your Due Diligence assignments get only quick once over, instead of the attention to detail you need ?

Frankly, you need your compliance performed where you can monitor it on a real-time basis, and not through your inbox. You need to be sure that the people vetting your new clients are (1) trained, and (2) experienced. Never accept anything less. Do not delegate compliance.

Tuesday, November 27, 2012


If you have read the latest report on the Panamanian economy, as reported this month by the International Monetary Fund, concerning its most recent assessment, everything looks good. The problem is, that may not necessarily be true. Unofficially, some sources are saying that a few Panamanian financial institutions are undercapitalised, and at present unable to raise sufficient capital to lift themselves up by their own bootstraps. Is there financial trouble in paradise, and why did the IMF not raise an alarm ?

The core problem appears to be the fact that the Republic of Panama has no central bank to oversee the country's financial institutions, and some are in need of funding. One bank that is linked to the country's president, Ricardo Martinelli, is said to be sorely in need of recapitalisation. Without an effective governmental regulator, there is no gatekeeper in Panama.

Whilst Country Risk for Panama has remained low this year, this column will be closely monitoring the health of the Panamanian financial industry, and shall report any relevant facts to our readers. Panama is booming, but there may just be a few problem banks in Panama City, hoping that nobody notices their deficiencies.

Monday, November 26, 2012


Statements made by representatives of the European Union this week indicate that only if the investigation into the terrorist bombing at the Bulgarian airport will be considered in the EUs latest consideration of whether to designate Hezbollah as a terrorist organisation. All other previous attacks are to be ignored, including the Beirut bombings that killed scores of US and French soldiers, and destroyed embassies. How can one base a rational decision upon the result of an enquiry into one event ?

Is Paris burning ?

So long as the EU practises such short-sighted policies, we will continue to see terrorist-inspired hatred on European streets, such as the anti-Semitic demonstration recently in Vienna. If Hezbollah is not banned in Europe, it will continue to extort money, enlist members, and eventually, bomb its European hosts to oblivion. Does it take a Hezbollah ballistic missile, conveniently furnished by the regime in Iran, to hit a European city, before the EU leadership wakes up ? I certainly hope not.


The long arm of the Department of Justice, which has been a persistent thorn in the side of Swiss banks seeking to conceal accounts of American depositors from disclosure, has now reportedly reached out to eleven more targeted banks. Bank Frey and Pictet & Cie. have been publicly named as two of the targets of the wide-reaching investigation of US tax cheats.
There have been persistent, but unconfirmed, reports that the major Swiss banks previously targeted by the United States arranged for their American clients to move their accounts to local and cantonal banks, and to the two just named. Many Swiss bankers continue to play a cat-and-mouse game with US law enforcement agencies, quietly migrating their high net-worth clients' accounts to other institutions, rather than disclose their existence. These tactics will only serve to stimulate a broadening of the American investigation.

The matter is made worse when Swiss bankers decry the US actions as an "invasion of Swiss sovereignty." The lack of genuine cooperation will only result in the targeting of every Swiss bank and non-bank financial institution by US regulators seeking US "flight capital." That will raise Country Risk; do the Swiss really want to see this happen ? 

Sunday, November 25, 2012


The release of information regarding the reported loading of missiles onto a freighter at the Iranian port of Bandar Abbas, with the probable destination Sudan, a staunch Iranian ally, for covert delivery in Gaza, puts Sudan squarely in the cross-hairs again for a bombing attack. The problem is, this time the Government of Israel is not denying any involvement; it is saying that it will destroy the shipment, to keep it out of the hands of Hamas. That means that another attack upon Sudan is more than likely, and with the current situation in the region stable, but tense, amidst the cease-fire, anything could happen. Sudan could be seriously damaged in ways that its leadership clearly  does not see coming.

The information available states that Iranian warships will most likely escort the freighter once it leaves Iranian territorial waters. However, once it arrives at Port Sudan, air attacks become possible at any time.  Whilst we doubt that Israel will intentionally sink an Iranian-flag vessel, the stakes are high enough for it to happen. The freighter reportedly is carrying both medium-range and ballistic missiles, and that cargo represents a clear and present danger to Israel.
Iranian warship in Port Sudan
There are also political considerations that favour an attack in the Sudan. An election looms in Israel, and the present government will certainly want to appear to be strong on defence, especially since many Israelis have expressed an opinion that the recent hostilities did not reduce Hamas' missile inventory sufficiently to guarantee an extended period of peace.

Also, Israel has stated that it will prevent Hamas from replacing the missiles it fired at Israel. The Sudan is the best place, en route, to interdict missile shipments. A major Israeli attack upon Sudan will have a ripple effect;  it will discourage foreign investment, could disrupt normal commerce, increase defaults upon loans, and cause professionals who are expats to leave the country for their safety. Sudan in Israeli gun sights means that one must raise Country Risk on that nation, whose leadership has chosen to throw in its lot with Iran, with dire consequences.

Compliance officers who see the handwriting on the wall would do well to minimise their bank's exposure in Sudan, and to advise their customers accordingly about the dangers.



I have noticed that readers have been visiting the three previously posed articles about Marco Antonio Delgado, the prominent El Paso attorney charged with money laundering. For the benefit of those who have not seen them, all three articles* may be accessed on this site. The titles are:

(1) El Paso Lawyer who laundered Cartel Profits Arrested, 6 November, 2012.
(2) Accused Lawyer-Laundryman denied bail in Texas, 14 November, 2012.
(3) Lawyer arrested in $600m Money Laundering case was a US Government Informant, 16 November, 2012. 
Federal Court Districts in Texas
Why was he not permitted to post bond, as he is a licensed attorney in the State of Texas ? Read on. The United States Magistrate Judge who heard counsel on bond, in the Findings of Fact section of his order, ruled that "there is a serious risk that the defendant will not appear."

I will quote the Court's Written Statement of Reasons for Detention, in its entirety:

"I find that the credible testimony and information submitted at the hearing establishes by a preponderance of the evidence that the Defendant is charged with conspiracy to commit
money laundering.

 Although a naturalized United States citizen,Defendant has access to large amounts of funds, and has extensive international contracts whom the Court believes may be available to assist the Defendant in leaving the country should he desire. Also, considering the strength of the Government's case and the severity of the sentence faced, the Court finds that the Defendant poses a serious risk of flight and there are no conditions or a combination of conditions of release that will reasonably assure the Defendant's presence as required."

Delgado's counsel told the media that he intends to appeal this ruling, but a search of the court docket, and Eleventh Circuit Court of Appeals failed to find any such entry. We shall check again after the time  for filing expires, and report back to our readers in a subsequent article.
* Type a few keywords into the white search box in the upper left hand corner
of this page to access these articles, or any other content that interests you.

Friday, November 23, 2012


What you see above is a page from the latest version of the passport of the People's Republic of China. Note that territory not currently part of the PRC appears as Chinese in the map.Whilst I can understand the inclusion of Taiwan (Republic of China), there are other areas claimed by China included in the map. Are we seeing the shape of things to come, and will China's expansionist posture embroil its neighbors in further incidents ?

The other areas on that map, apparently claimed by China, include:

(1) All of the islands of the South China Sea, including the Spratley and Paracel Islands. The controversial nine-dashes, through which China lays claim to the entire region, are on the map.

(2) Territory that belongs to India. China has coveted territory on the Indian frontier since the PRC occupied Tibet in 1950.

There have already been a number of diplomatic protests to the passport map, lodged by countries in Southeast Asia. If China continues to zealously pursue its territorial ambitions , not only will Country Risk increase exponentially, but there is a real risk of military conflict. With the United States moving military assets into the region, to support its allies, the threat of war increases. 


A Federal Judge in the Eastern District of New York has granted a Motion for Summary Judgment in favour of Arab Bank, in a case* where an American citizen who was shot by Hamas in 2008, whilst at the frontier between Israel and Gaza, sued the bank for damages. The Court basically ruled on evidentiary grounds, finding that the plaintiff's evidence was insufficient to prevail, whilst citing to recent case law affirming liability, when there is a factual basis to support such a claim.

In a well-reasoned Memorandum, Order and Judgment granting Summary Judgment, the Court, speaking through District Judge jack Weinstein, stated:

  "While the money funneled through the bank 'need not be shown to have been used to purchase the bullet that struck the plaintiff,' the bank's provision of financial services must be shown to have been 'major, 'recent' and 'with malign state of mind.... No single or total transfer highlighted by the plaintiff establishes the requisite magnitude and temporal connection to the attack required to find that the bank's actions proximately caused plaintiff's injuries." Memorandum at 47.

The Court held that the bank's actions, or non-actions, were not the proximate cause of the gunshot that harmed the plaintiff. The lack of proximate cause barred recovery against the bank.

This decision can be distinguished from the other cases brought against Middle Eastern financial institutions for terrorist facilitation, because here the plaintiff was unable to show neither a heavy volume of wire transfers, nor that the bank knew that the small amount of transactions could result in hard to an American years later.

* Mati Gill v. Arab Bank PLC, Case No.: 11-cv-3706-JBW-VVP (ED NY).


Thursday, November 22, 2012



The US Department of the Treasury has designated senior Hezbollah leader, Abu Musa Daqduq, pursuant to Executive Order 13224. Musa was responsible for the kidnapping, torture and execution of five American soldiers, who were taken from the Karbala Joint Provincial Coordination Centre in 2007, by soldiers dressed in US uniforms and speaking English. He was formerly a special operations unit leader, and the head of the IRGC bodyguard for Hezbollah Secretary-General Hassan Nasrallah.

 Unfortunately, the US military turned over custody of this individual to the Iraqi Government last December, and Iraq conveniently dismissed terrorism charges against him, and freed him*. Musa is believed to have returned to Lebanon.
Any assets that he may have in the US is subject to seizure, and it is illegal for US nationals and corporations to engage in any transactions with this individual.

I am showing his primary aliases below, for the benefit of compliance officers in the Middle East. There are several other variations on the names that you see here. Various Dates of Birth between 1969 and 1972. Places of Birth shown are Beirut and Baghdad.

(1) Ali Musa Daqduq
(2) Hamid Muhaammad Jabur al-Lami
(3) Hamid Muhammed Jabur Al-Musawi
(4) Hamid Majid Abd  Al-Yunis
*Iraq releases Hezbollah Leader wanted for Executions of US Soldiers


The next of kin of victims of a Hamas attack upon seminary students in Jerusalem in 2008 have filed suit in New York against the Bank of China, who they allege was Hamas' banker, laundering millions of dollars, and funding terrorism in the Middle East. Eight people died, and eleven were wounded in the attack.

The Verified Complaint accuses the Bank of China for providing material support to two designated terrorist groups, Hamas, and Palestinian Islamic Jihad. It tracks Hamas funding, as it took a circuitous path around the world, ending up in the hands of Hamas operatives.

The money pipeline:

(1) Hamas funding sources in Iran and Syria.
(2) Bank of China accounts in Guanzhou, controlled by Said Al-Shurafa, a senor Hamas & PIJ leader.
(3) Bank of China, New York Branch, accounts, also controlled by Al-Shurafa.
(4) Hamas operatives in Israel, the West Bank, and Gaza.

The case is a wrongful death action, which charges the Bank of China with negligence, negligence per se*,  and breach of Statutory Duty (Israeli law regarding funding terrorism, and reporting requirements).

The style of the case is Jacob Rot et al vs. Bank of China et al,* New York State Supreme Court, Index No.: 157476/2012.
* An act that is considered negligent because it violates a statute or regulation.
**Read the complete text of the Verified Complaint here.



If you have been following the developments in the Middle East, you may know that Israeli jets destroyed the headquarters, in Gaza, of Islamic National Bank, in a bombing run, on 20 November. Not to be confused with National Islamic Bank, of Iraq, the Gaza bank was reportedly used by Hamas to pay its people, after foreign banks exited Hamas transactions, due to international sanctions, and the well-placed fear that major fines & penalties could be imposed by US regulators.

Islamic National Bank operates outside the law; according to the Palestinian Monetary Authority*, which regulates all financial institutions in the Palestinian Territories, INB does NOT hold a license from the PMA. It is not listed on the Authority's website as an accredited bank. After the air raid, Suleiman Tawil, who claimed to be the bank's owner, denied that the bank had a political agenda. The question remains, however: how did he get governmental permission to open an "outlaw" bank, unless he had Hamas' blessing ?

Furthermore, INB is not connected to the international banking system; a thorough search through the SWIFT website fails to reveal any SWIFT number for the bank. Obviously, the "bank" disburses cash, in US Dollars and/or New Israeli Shekels, to Hamas agents in Gaza. Where does its cash comes from ?

Notwithstanding that its headquarters is no longer operational, the bank's primary client, Hamas, needs to continue to pay its agents and soldiers. You can expect that bank officers will be making new requests for large amounts bulk cash somewhere in the Middle East quite soon, if they are not already in Beirut, Dubai, and Cyprus, with large suitcases; Watch for them. You also want to be extremely wary of any correspondence received from anyone claiming to be as representative of Islamic National Bank.
 Issued during British Mandate for Palestine. Note that the printer was Thomas De La Rue, London.