Thursday, February 14, 2013


Whatever business you are in, if you do business with a Ponzi schemer, the court-appointed professionals who are later charged with accumulating assets for the victims will be coming after you. The jewelers who sold Scott Rothstein more than $10m in jewelry, watches and other luxury items have settled with the bankruptcy trustee for Rothstein's law firm for $650,000 .

The original claim was for more than ten million dollars. This case is a perfect illustration of the fact that all businesses must have an effective compliance department, capable of detecting possible financial crime, and identifying high-risk clients, whom it may choose to exit, based upon compliance recommendations. Compliance is a valuable tool in minimising business risk; it is no longer smart to seek to cut costs by declining to create a compliance function, at those businesses where the law does not mandate such a programme.

Had an experienced compliance officer, working for the jewelry firm, checked out the Rothstein law firm's volume of litigation, using publicly-available online court resources, they might have noticed something, whether it was the Ponzi schemer's lack of court appearances,(which were noticed by other lawyers), or some other red flag. Such suspicious activities, which require follow-up, could have alerted the jeweler to the danger.

Simply put, you avoid compliance at your peril.

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