Tuesday, April 30, 2013


Oscar L Sanchez, whom readers may recall* was the money launderer who moved tens of millions of dollars in Medicare Fraud profits to government-controlled banks in Cuba, through his small Naples, Florida cheque-cashing store, has been sentenced in Federal Court in Miami. He cooperated with US authorities, and provided Substantial Assistance regarding indictments of three individuals involved in the massive fraud. His sentence has been the subject of much speculation, due to the amount of funds he laundered, through Canada and Trinidad, and on into Cuba.

Sanchez sentence;

(1) Four and one-half years in Federal Prison (55 months), plus 3 years of Supervised Release, which is similar to Probation or Parole.
(2) One year of House Arrest (Home Confinement).
(3) Surrender of substantial assets.
(4) Perform 1600 hours of Community Service.

The most noteworthy item in the case was the defendant's use of twenty boxes full of money orders, each worth less than $10,000, that he employed to physically transfer the funds.

Is the sentence too lenient ? I will let the reader decide whether the punishment fits the crime.

Miami Money Launderer moved $63m to Cuba


The refusal of Sweden to extradite an American citizen wanted for Espionage, on the reputed grounds that it is a "political" crime, and not permitted under Swedish law*, has uncovered a glaring flaw in that country's criminal code; terrorist financing is not a crime in Sweden.

A decade after 9-11, you would think that all the countries in Europe would have effective CFT legislation in place. It is hoped that this defect will soon be remedied, for the lack of a terrorist financing statute adversely affect the calculation of Country Risk, from my viewpoint.
* it also appears, from my review of the Swedish criminal code, that Espionage is only a crime in Sweden if it is committed on behalf of a country with which Sweden is at war. Therefore, unless the United States was at war with Cuba (on behalf of which country the espionage was committed), it is not an extraditable offence. No wonder the individual has been living in Stockholm; her name is Marta Rita Velasquez, a former US State Department and USAID official, wanted in connection with her role in the Ana Belén Montes case. 

Monday, April 29, 2013


One of Rothstein's Ferraris, up for government auction.
Readers often ask me why any non-financial company needs a compliance department, to protect itself from financial crime. The answer is that a good compliance officer can often spot a financial crime in progress. Let's take today's case, another in a long list of companies sued by the receiver in the Scott Rothstein Ponzi scheme, in the bankruptcy of his law firm. Most of you are familiar with that case.

Mr. Rothstein's luxury automobile dealer was sued, by the receiver, for $560,280, for the two Ferraris and two Maseratis* that he bought there, in what we call a clawback suit, seeking to recover the criminal profits that purchased the automobiles. The dealer was forced to settle for around half of the amount claimed. He did obtain an agreement that allowed him to recover one-half of the proceeds of the sale of one of the Ferraris, and was allowed to make an unsecured claim for $56,250. Obviously, he lost a substantial amount of money, making him yet another victim of the Ponzi scheme.

Could an in-house compliance officer have prevented the sales, and the ultimate loss ? Many compliance officers today are also attorneys, and any good lawyer would probably have checked the civil dockets, both state and Federal, to ascertain exactly how a lawyer not at a major law firm could afford to pay cash for four high-end cars. He would have found precious little litigation, and could then have raised the alarm of a possible financial crime in progress, delaying or even killing the sale.

Therefore, the next time that someone outside the financial world complains about having to create a compliance department in his shoppe, relate this story to him, please.
* Rothstein is reported to have stated, in a deposition taken subsequent to his conviction, that the Ferraris were his personal automobiles, but "the Maseratis were bought as gifts for his co-conspirators"
[direct quote]. Even whilst serving a term of imprisonment of 50 years, I note that he has retained his arrogance.


The FDIC, together with Florida's regulator, the Office of Financial Regulation (OFR), has modified the 2010 Consent Order pending against Transcapital Bank, of Sunrise, Florida, for AML/BSA Deficiencies. You can access the complete text of the order here*.
Modification of Consent Order  (FDIC 10-586b; OFR 0773-FI-08/10).


Several years have passed, and the Government of Antigua has continued to refuse to extradite its principal banking regulator, Leroy King, to the United States, to face criminal charges in the Stanford Bank Ponzi scheme scandal. King has exhausted all possible legal remedies available to him, and the courts of Antigua have ordered his extradition, so why is he not in the dock in Texas, answering for the pending criminal charges against him ?

The reason: the corruption spawned by Stanford in Antigua, reached into the highest levels of Antiguan government, even to the office of the Prime Minister, and King would be required to answer tough questions about the government's sordid relationship with its former "knight." Individuals deemed untouchable in Antigua could then be exposed to criminal charges, and the existing government seeks to sweep all this under the carpet.

Leroy King had a close relationship with Stanford, initiated, according for former Stanford International Bank CEO James Davis, through a barbaric 2003 "blood oath," involving the cutting of their wrists, and intermingling of blood, conducted in the dark of night at an abandoned airfield in Antigua. If this sounds like something you would dismiss as fantasy, Davis actually filed a sworn statement about this matter in the Stanford Federal criminal case.

Antigua's economy has taken a severe hit since Stanford's Ponzi scheme unraveled, but until it extradites Leroy King to the United States, to face justice, any American relief probably will not be coming. Does that mean one should raise Country Risk for Antigua at this time ? Review the data, and make your own informed assessment, but it is a country with debt issues, a reduced offshore financial centre structure, and unanswered questions about who in government received bribes from the generous Mr. Stanford.

Sunday, April 28, 2013


Mustafa Setmariam Nasar* is your worst terrorist nightmare. A Syrian who linked up with Osama Bin Laden and Al-Qaeda early on in Afghanistan, he is the author of what many believe are the seminal A-Q writings. He is currently at large, due to the fact that the United States, which was secretly holding him in custody, reportedly in Diego Garcia, released him to a Syria prison, and the civil war in Syria caused its government to release him, probably to spite the US for its support of the Opposition.

It makes an interesting story, which we have detailed here before in this blog, but one which makes one wonder whether the US Global War on Terrorism has ignored criminal prosecution of this terrorist, in European courts, for the bombings in Spain and the United Kingdom, so that it could hold on to him for an extended debriefing, only to transfer him to a place where he could easily be released.

Frankly, I still do not know why the capture of one of the world's ten most wanted terrorists was never made public. It may have something to do with the fact that he lived in Latin America for an extended period, during which time Nasar, who was the intellectual author of the Madrid Train Bombing, had time to reportedly assist in the planning and execution of the London Bombings, and to develop the concept of the IED, for use in Iraq against Western forces, and he was not captured or killed. His belated capture in Pakistan was too little and too late. Whether this was a major intelligence failure I will leave to the historians, after the information is declassified, decades later. Unfortunately, the people who made the decision not to capture him will all be retired or deceased by then, with absolutely no accountability.

What I do have a problem with is the fact that neither Spain nor the UK had the opportunity to try this terrorist in public, in open court, and apparently the US even gave Spain disinformation about his whereabouts. The victims, and their next of kin, are owed at least that much.

Now this individual, whose writing is revered in terrorist circles, is out there, somewhere in the Middle East. One wonders where he has gone, and what terrorist  projects he is currently involved in.
* Also known as Abu Musab Al-Suri.

Saturday, April 27, 2013


With an increasing number of wealthy Syrians exiting the country, due to the expanding nature of the civil war, compliance officers at international banks that serve a Middle Eastern clientele might want to look a bit more closely at any new high net-worth Arab clients, because they may not be exactly whom they profess to be. As Gilbert & Sullivan so aptly put it, "skin milk masquerades as cream."

 In short, rather than be rejected by your bank, a sharp Syrian PEP will obtain proof of nationality from some country other than Syria, such as Lebanon, or take out a EU passport he may have acquired earlier, to avoid any questions about whether he is unsuitable due to Syrian sanctions. Ask your Arabic-speaking staff to interview him, and ask them to give you the answers to these questions:

(1) What about his language, does he use the vernacular, slang and accents from the country that he claims to be from ? Could he be a Syrian concealing his nationality, or claim to be an expat when he is not ?

(2) What was his former occupation/profession ? Could he be a military man, or the former president of a government-controlled (and sanctioned) company in Syria ? Bodyguards, perhaps ?

(3) Source of Funds and banking references ?

Please ensure that your new affluent client is not a sanctions risk.

Friday, April 26, 2013


If you know your American history, you know that the Monroe Doctrine, promulgated almost two centuries ago by President James Monroe, states that the United States will not permit any foreign power to extend its influence into the Western Hemisphere, and reserves the right to take unilateral action as part of its inherent right of self-defence.

The resolve of the United States is about to be tested, as reliable sources have stated that Iran now intends to send a contingent of its Revolutionary Guard Corps to assist the regime in Venezuela, and for other unspecified purposes. Whether the individuals posted to Venezuela are members of the IRGC elite force, the Al-Quds Force, which operates outside Iran, is not known, but the odds are that this
special forces-type subgroup will compose at least part of the complement.

How does one transport soldiers, without  alerting the global press, you ask ? Expect the IRGC contingent, whose proposed size is not known, but is believed to be substantial, according to the sources, to arrive in stages, disguised as civilian workers, including technicians for the Iranian factories located in Venezuela, oil industry laborers, and a number of other innocent occupations.

The high security measures in place, within the military area of the Caracas airport, allow unmonitored entry via air transport from the Middle East. Note well that, in the past, Venezuelan nationals who have attempted to photograph coming-and-goings in that restricted area, have been fired upon by the authorities, and some have been killed, without any government accountability.

The question remains: will the United States, which has pointedly ignored the presence of Hezbollah inside Venezuela, respond to Iran Revolutionary Guard Corps troops and agents there ?

From a financial viewpoint, Country Risk levels in the region may increase, especially if the very presence of the IRGC is deemed to be an issue , both within and without Venezuela. The civilian population, especially the Opposition, may believe that there is a clear and present danger that the country will degenerate into a police state. Will Venezuelans see a parallel to the previous Syrian military presence in Lebanon, and seek to expel them ? Stay tuned for updates.     

Thursday, April 25, 2013


Okke Ornstein, the Dutch fraudster/fugitive who was recently sentenced to serve 20 months in a Panamanian prison for Fraud and Libel, has been sentenced to an additional 18 months, in a new case, for Criminal Fraud, and Libel with Intent to Blackmail. Formerly the general manager for convicted fraudster Marc Harris, he has been linked to numerous frauds in the Republic of Panama.

Apparently his websites have been hit with multi-million dollar fines as well. As soon as the order is released to the public, we shall cover it here in detail. His appeal of a previous criminal conviction has also been dismissed for failure make required court filings. Another half dozen criminal cases remain pending against him .


The Government of Israel announced today that it shot down an unmanned aerial vehicle, more commonly known as a drone, that entered Israeli airspace from Lebanon. the drone, which was flying at an altitude of 1800m, was eight miles west of Israel, near Haifa. IAF F-16s were involved in the action.

Reportedly of Iranian manufacture, it was believed to have been operated by Hezbollah. Middle East watchers will recall that a similar intelligence-gathering drone was shot down over Israel several months ago.

Wednesday, April 24, 2013


Readers who saw my article on the missing shipment of the next-generation US one hundred dollar notes* will be interested in learning that the new note will finally be released on 8 October. The new hundred dollar note has additional security features:

(1) A blue three-dimensional security ribbon.
(2) An image of a disappearing Liberty Bell in the inkwell

To see the new note, access the earlier article, which is listed below.
*Alert for Unreleased US Hundred Dollar Note


The Office of Foreign Assets Control has announced that it will now accept applications for OFAC licenses online. These include:

(1) Applications for agricultural, medical, and medical licenses for Iran and other jurisdictions.

(2) Travel to Cuba (some categories).

(3) Applications for the release of funds blocked at US financial institutions.

(4) certain other types of licenses.

For details, go on their website:

Tuesday, April 23, 2013


This month's OFAC Enforcement Information press release shows that the Office of Foreign Assets Control has a long memory when it comes to sanctions violations. A Southern California corporation was fined $22,500 for shipping nutritional supplements to Kuwait, when it had knowledge that the goods were destined for an Iranian end user.

 The date of violation was 30 September, 2007, six years ago. That's a long time ago, in the business of international trade. It is not known whether the delay in imposing the fine is due to the work backlog at OFAC, or in the investigation.

OFAC stated that the company "acted with reckless disregard for US sanctions requirements." It also did not fully cooperate with the OFAC investigation. Ironically, the shipment would probably have qualified for an OFAC license, according to the filing.

Monday, April 22, 2013


The Government of Bulgaria apparently, in the aftermath of the Hezbollah bus bombing, arrested an Iranian agent believed to be working with Hezbollah. The agent, who was apprehended in the act of conducting surveillance upon potential Jewish targets, was a dual-national, and was carrying a valid Canadian passport.

Perhaps it now up to Bulgaria to push the imposition of EU sanctions against Hezbollah, since its territory was exploited by that terrorist group to plan and execute its attack. Such a designation will finally stop Hezbollah fundraising in Europe, and it may seriously disrupt its terrorist financing schemes. it is way past time for the EU to stop being politically correct, and recognise Hezbollah for what it truly is, an anti-West, radical global terrorist organisation.


A report came in today that the National Assembly of Panama, that country's legislative body, quietly passed, over the weekend, a law which bans the country from extraditing Panamanian nationals, for any purpose. If this is confirmed, then any foreign criminal actions Panamanians, both in the United States, the United Kingdom, and elsewhere, will be unable to obtain custody of their Panamanian targets, unless they travel outside the Republic.

Foreign indictments can operate as a check on rampant corruption; if no Panamanian PEPs fear foreign court action,  they will feel free to accept bribes & kickbacks at will. We are seeking a copy of the new legislation, and will follow up as soon as we have it in hand.

Sunday, April 21, 2013


Two IT professionals, who worked the recent presidential election in Venezuela, have alleged that, although Capriles, the Opposition candidate, won the popular vote, they deliberately changed the official results, to show that Nicolás Maduro, the Chavista candidate, won. They say this was done on the express orders of senior officials of the Government of Cuba. This corroborates the Opposition claims that the election was rigged to favour Maduro, whose candidacy was openly supported by the Castro regime.

Over 30,000 Cubans are in Venezuela; they supervise many of the country's government offices and agencies, as well as its law enforcement, intelligence and military forces. Should a democratic government ever return to Venezuela, not only would these cadre be banished, the extremely preferential oil shipment arrangement with Cuba would probably also  be terminated. Cuba is due to start payment upon that debt later this year.

This new evidence merely reinforces my previous recommendation, that Country Risk levels for Venezuela have reached, or even exceeded the level at which international trade, or financial exposure, should not be engaged in. This risk of default or non-payment is simply too high.   


Disturbing reports from Afghanistan, where foreign company managers resident in Kabul are being brought up on criminal charges when they have a civil business dispute with an Afghan company, make me wonder whether we should raise Country Risk levels so high as to red-line the country as an unacceptable business risk for all purposes. The obscene levels of corruption, the deliberate distancing of the regime from its American ally, for purely political and tribal purposes, the massive exit of dirty greenbacks to the UAE, and the growing strength of the Taliban, all point to a no-win situation for Western business, especially the extension of credit.

Whilst I hesitate to compare Afghanistan to the now-deceased "Republic" of Vietnam in 1972, the parallels are there; a soon-to-be-gone Western sponsor, a dedicated and even rabid opposing military force, and a culture of corruption that poisons the country; they are all there.

Raise Country Risk for Afghanistan to the highest level, prior to unacceptable risk; you may want to go further; I have.


Back when I worked in a Compliance Department, a decade ago, we had a rule: All owners of 10% or more of a corporation that wanted to purchase investments had to undergo a due diligence review, to ascertain their suitability, and by derivation, the suitability of the company, as a client. Soon thereafter, I noticed that a number of corporations came in with several shareholders owning exactly nine percent; I assume that some of the Accounts Representatives had disclosed the share ownership ceiling compliance policy to prospective clients.

I then reduced the ceiling on ownership percentage, where we would not check out shareholders only if their shares represented less than five per cent, correctly reasoning that it would be too difficult for clients to find 25 people in their group, to avoid and evade due diligence; It worked.

This week's news is an official announcement*, by the US Marshals Service, that it will be auctioning off 150,000 shares of common stock of Broward Financial Holdings, Inc.,  the bank holding company parent of Broward Bank of Commerce. The shares being offered, owned by convicted Ponzi schemer, former Fort Lauderdale attorney Scott Rothstein, immediately reminded me of the above situation.

 Why ? Because Mr. Rothstein elected to purchase shares that constituted exactly nine percent of the bank. A purchase of a larger portion of the bank's stock requires regulatory approval. Certainly he had sufficient funds to purchase a larger share.Was he concerned that regulators would stumble into his artfully concealed Ponzi scheme ? I would like to think that the answer is yes, but we probably will never know.

A final note: the minimum opening bid is $1m, and the bidder, in addition to the usual warranties and promises, must affirm that he or she is not acting on behalf of Scott Rothstein, in the event that people covertly working for him attempt to buy his own stock back, for the master Ponzi schemer himself.

Thursday, April 18, 2013


I am pleased to report that a noted Chinese scholar shall be translating my autobiography, The Laundry Man, into Chinese, and that it shall thereafter be published in China. Thank you for your continued interest in The Laundry Man, which is also available in Spanish, in Hungarian, and in Polish. See your favourite online booksellers for details. The Kindle Version is also available in English.


If you are wondering why there is all this interest in my recent article, Embezzler who Sued Employer flees the United States*, both in Colombia, and in the United States, it is the back story. It is one thing when law enforcement casts a blind eye to criminal activity of one of its valued Confidential Informants, but another thing when a sworn law enforcement agent engages in his own version of WikiLeaks, for the benefit of a friend, who is definitely not entitled to law enforcement sensitive information.

 Of course, we all all interested in the primary focus of the article, the story of two career criminals from Colombia, who  reportedly possess the valued "S" Visa, which allows them multiple entry into the United States, in exchange for information on the criminal activities of others, all under the supposedly firm supervision of a US law enforcement agent. Unfortunately, the supervision has failed to clamp down on a very public bogus legal claim, brought by a victim of their white-collar crimes.

The real issue is the reputed fact that a certain law enforcement agent, who shall remain unidentified here, has been sharing restricted information with one of the lawyers representing the two career criminals, allowing them to further victimise the former employer of one of the Colombians, and subject it to a totally bogus criminal investigation. This information allowed counsel to smear the victim's reputation with allegations of criminality, and put it on the defensive. After four years, clearly justice has not been done.

Will the disclosure of the agent's identity result in the end of his career, and what about the lawyer, who knowingly accepting classified intelligence that he or she knows, or should have known, is restricted to sworn law enforcement personnel ? When law enforcement, and officers of the court, break the law, what is the remedy ? Watch this blog for the answer.

* Published on 1 April, 2013, on this blog.


Agents of US Customs & Immigration Enforcement (ICE) have arrested 20 illegal immigrants who obtained bogus citizenship documents enabling them to pose as Cuban refugees, as well as members* of a criminal organisation that procured bogus Cuban birth certificates for them, one of whom has a prior conviction for this crime. Reportedly, most of those arrested were Venezuelan nationals.

Pursuant to US law, Cuban refugees enjoy preferential treatment, and are allowed to remain, and to apply for permanent residency after 366 days. The Cuban birth certificates the illegals employed were either genuine, had information altered upon them by the immigration fraudsters facilitating their illegal applications, or were completely counterfeit. in an earlier case, the defendant admitted paying $15,000 for a bogus Cuban birth certificate.

The charges:

(1) Conspiracy to Encourage and Induce Aliens to Unlawfully Enter and reside Illegally in the United States.

(2) Encouraging and Inducing Aliens to Unlawfully Enter and reside Illegally in the United States.

Are you banking any clients, recently arrived, with large bank balances, whose Spanish does not have a Cuban accent, slang or region-specific phrases ? You Cuban-American staff can certainly tell you if their Spanish is not of Cuban origin; Check it out , please.

*13-cr-6066-WJZ (SD FL).

Wednesday, April 17, 2013


A South Florida media source recently obtained a number of documents about a Saudi family who vacated their Sarasota, Florida home in a hurry just prior to 11 September, leaving behind their three automobiles, furniture and furnishings. One of the residents* was linked, in Venice, Florida, to two of the hijacker/pilots who flew one passenger jet into the World Trade Centre, and another into the ground in Pennsylvania.

What is bothering me about this matter is this :

(1) Apparently the FBI stated, back in 2002, that there was no connection with the 9/11 disasters. This was obviously an attempt to conceal details of an ongoing investigation.

(2) In releasing the documents to the media, a decade later, all names have been redacted (deleted). Only through other references, and the background knowledge of the journalist, were the identities of the hijackers, and the resident of the home, apparent.

(3) the names, addresses, and dates of birth, in the documents, are classified until 14 March, 2038, twenty five years from now. How can one justify this ? We are in the dark about a major suspect.

Bankers in Florida may have handled terrorist financing transactions for Al-Hijji, since 9/11, without knowing that he was a close associate of the hijackers. Inasmuch as the financial community is, for better or worse, part of the law enforcement effort, due to the USA PATRIOT ACT, we need to know who to watch out for; That is no too much to ask. Perhaps those career bureaucrats who classify such information should take into account the real-life problems faced by the banks that these suspects utilise.

*Abdulaziz al-Hijji.


A Swiss national who is reported to be the head of private banking at Bank Frey, Stefan Buck, and a partner at a Swiss law firm, Edgar Paltzer, have been indicted, in US District Court* in New York, for assisting US citizens to hide their assets from US taxes. One count of conspiracy has been filed against both defendants, who are reportedly in Switzerland, and not in US custody at this time.

Bank Frey was reportedly the recipient of over $938 million of new deposits, in "flight capital," money from US nationals that was moved out of Switzerland's largest banks, when those banks were targeted by the US Department of Justice. Obviously, the US is investigating Swiss regional and cantonal banks, many of whom opened new accounts for US citizens, and accepted their money.

Will this indictment serve to deter the smaller Swiss bank from hiding US wealth ? We cannot say, but I am sure a number of guilty Swiss bankers are wondering whether they are next. I also wonder what the directors are thinking at the bank today.

* Case No.: 13-crim-0282 (SDNY). [file not yet unsealed but available through DOJ].

Tuesday, April 16, 2013


The combination of widespread civil unrest, generated by a presidential election where many experts have confirmed that the results were manipulated by the ruling party, an abysmal economy, a politically influenced judiciary, and massive corruption,  all point to one conclusion: risk levels for investing in, or extending credit to, Venezuelan companies or ventures, is far to high at this time. Raise Country risk on Venezuela to Extremely High.

Monday, April 15, 2013


Just when you think you have heard it all, some white-collar criminal comes up with something even more amoral. In this case, a slippery operator who has made his illicit profits exploiting desperate businessmen, through requiring advance payment of "underwriting" fees,  that never result in funding, has taken the advance fee fraud to another level. Allow me to explain:

(1) The fraudster demands, and gets, an advance fee of, say $85,000, from the needy businessman. The victim believes that it is a fee for finding operating capital for his business.

(2)  The fraudster's company then creates and issues bonds, instruments of indebtedness, or other securities (which are worthless, as the company is a shell) which are shipped to another bogus company.

(3)  Note that neither of these two "financial firms" has any sort of broker-dealer, or investment adviser license, nor are the securities registered nor exempt from registration.

(4) Finally, the second firm "places" the bonds or securities overseas, touting them as indebtedness of a reputable company. In truth and in fact, the securities are worthless, as the shell company has neither tangible assets, nor cash flow. When the first company defaults on the payments on the bonds or debts, what happens, and to who ?

(5) The original victim was funded, but wait a minute. is he not a potential co-conspirator in common law or securities fraud, when the overseas investor learns that he has purchased worthless paper. And what additional securities violations have occurred ?

Imagine a businessman receiving funds through such a fraud, using the money to start up his new venture, only to lose it all later in subsequent civil and criminal proceedings. Worse, what if the overseas buyer is a money launderer for a narcotics kingpin, who is later convicted, and the money, which was criminal proceeds, is forfeited to the United States Government ?

Bottom line; whenever a funding source even hints that the proceeds are coming from outside your country, you need to immediately ascertain:

(1) Are there securities issues, and were they resolved to your lawyer's satisfaction ?

(2) Will due diligence be performed on the overseas funding source, and will you have access to those materials ?

(3) Are the bonds/indebtedness/securities legitimate, do they have marketable value, and will this entire venture come back later to haunt you ?

Any permutation or combination of the advance fee scheme is usually deadly; make sure you never involve yourself in one, or you will certainly regret it.

Sunday, April 14, 2013


The Foreign Minister of Austria, Maria Fekter, in a public statement made last Friday, declared that her country will not abandon bank secrecy, notwithstanding EU pressure for bank account information sharing. Notwithstanding that Luxembourg has agreed to comply, Ms. Fekter adamantly stated that Austria would continue to observe bank secrecy.

The Foreign Minister took the opportunity to criticise United Kingdom Overseas Territories for their offshore financial centre activitiesm which she referred to as money launderbng. The question arises: Is Austria refusing to cooperate with the EU because of all the Iranian skeletons in her closet ?

We have previously reported* that Austrian banks and corporate entities are flounting EU, US and UN sanctions on Iran's illegal Weapons of Mass Destruction (WMD) and ballistic missile programmes, and that Iranian nationals are operating openly in Vienna. Remember also, Country Risk**, when dealing with Austrian companies.

*Austria, a Hub for Iranian Money Laundering
**Raise Country Risk on Austria due to Iran Sanctions Evasion Issues


With all the publicity, in the financial press in the United States, about how a small number of high net-worth Americans are taking advantage of Puerto Rico's favourable status, as a tax haven, one wonders how long it will be before money launderers, acting on behalf of narcotics trafficking kingpins, find a way to serve their clientele through that US territory. Legally known as a Commonwealth, Puerto Rico is self-governing, and has its own tax code, which provides some extremely interesting advantages not available in the fifty states.

With little or no taxation of capital gains, or interest income, Puerto Rico has recently attracted the attention of some well-known wealthy Americans. Whilst one must reside there for half of the tax year, the appearance of new multi-million dollars residences there indicates that this is not a barrier for at least some affluent individuals from the Continental United States.

 Also, though the 90% tax holiday for corporations employing local residents no longer exists, some inventive offshore tax professionals have managed to work their magic there, since the tax holiday went away in 2006.

Bottom line, whenever legitimate wealth moves into new tax havens, money launderers are sure to follow, and since they stay up night and weekends, brainstorming over a problem, trust that they will find a number of ways to take full advantage of Puerto Rico's well-intentioned laws. Therefore, you may want to take a close look at any existing high volume bank clients to develop sudden funds transfers from, relocation to, or new business in, the Commonwealth of Puerto Rico; Watch this one.


US District Court (SDNY)
In its response to the American Magnitsky List,  the naming of those Russian officials deemed responsible for the persecution and death of whistleblower/attorney Sergei Magnitsky, The Government of Russia has banned eighteen Americans from travel to Russia. Whilst most of their names have not appeared in the media, other than the most senior officials, the Russian press has published their names and occupations, thus needlessly exposing their identities to criminal elements; I will not further endanger them by naming them.

These individuals were responsible for the arrest, extradition and conviction of arms trafficker Viktor Bout and convicted drug trafficker Konstantin Yaroshenko, both of whose prosecutions Russian claims were politically motivated.

Included in that list are:

(1) Six Assistant United States Attorneys, who were involved in obtaining the criminal convictions of Bout and Yaroshenko. The US Attorney for the Southern District of Florida was also named, as was a siting US District Court Judge.

(2) Four Special Agents of the Drug Enforcement Administration (DEA), including the supervising agent responsible for the Bout case.

(3) One Special Agent of the Federal Bureau of Investigation (FBI).

What's next, the filing of bogus criminal charges with INTERPOL ? All this Russian action will do is increase tensions between the two countries, and verify that the rule of law, as we know it in the West, does not exist in Russia. Whether Russian actions result in an increase in Country Risk for Russia is premature, but any additional punitive action taken against individuals in the American law enforcement community could trigger a major jump in Country Risk.

Friday, April 12, 2013


Mr. & Mrs. Rothstein
As the saying goes, there is no honour amongst thieves; individuals who are arrested for criminal activity, and who agree to perform substantial assistance to shorten their sentence, are often distressed to learn that their cooperation with law enforcement, against their co-conspirators, is a matter of public record. The public has a right to know.

The attorney for Kimberly Rothstein, the trophy wife of convicted and imprisoned Ponzi schemer Scott Rothstein, has filed an unopposed motion to continue her upcoming sentencing. Mrs. Rothstein is facing five years for conspiracy to obstruct justice, money laundering conspiracy and witness tampering, but her court filing indicates she intends to testify against two of the individuals who conspired with her to conceal her jewelry, including the 12k diamond, from the bankruptcy trustee, who was accumulating assets to pay the victims of the Ponzi scheme.

The US District Judge has delayed her sentencing until she can testify in the upcoming trial* against Patrick Daoud and Eddy Marin. As you can see, things get ugly for participants in a Ponzi scheme.

* Case No.: 12-cr-60205-KAM (SD FL) .


The United States is due to release the so-called Magnitsky List today. The list names Russian officials, judges, prosecutors and other individuals who were responsible for the persecution, and ultimate death in custody, of Sergei Magnitsky, the Russian whistle-blowing attorney who exposed systemic official corruption and theft, at the highest level, in connection with a Western-owned financial firm.

The American law, known popularly as the Magnitsky Act, prohibits anyone on that list from getting a visa to visit the US; they are also barred from investing there. Should you be a compliance officer at an EU bank, and you find your institution is banking anyone on the list, you will want to strongly consider exiting that relationship, for you do not need the increased level of risk.


 Professionals who provide their services to Ponzi schemers always risk being sued later for all or part of their fees, even when their fees are earned. Documents filed recently in the Scott Rothstein Ponzi scheme principal case, the Rothstein Rosenfeldt Adler law firm bankruptcy, reveal that a well-known political consultant who, with his firm, earned over $400,000 for services rendered, has settled with the trustee for approximately 4% of the fees received. Whilst this is a small percentage, who wants the publicity ?

Professionals prior to being engaged by clients, owe it to themselves to have a due diligence investigation conducted on all high-profile/high net worth/high-risk clients, to weed out all civil liability, for America's conspiracy laws have an extremely broad reach, and innocents are often caught in the net with the guilty, with disastrous results. Obtaining a verdict of innocent may not be in the cards for you, even if you were unaware of your client's criminal activities.

Therefore, professionals, check out your clients before they become clients, lest you later be sued for all the fees that you earned, to fatten the pot for your client's victims.

Thursday, April 11, 2013


President Francois Hollande of France, in a public announcement of the appointment of a special prosecutor to bring tax fraud and corruption changes, stated that it was his intention to shut down the tax havens of the world, as a matter of state policy. This is the strongest statement ever made by a European head of state, and it comes on the heels of a major French scandal involving secret foreign accounts of the country minister of the Budget, Jérome Cahuzac. France has, candidly, never been known for zealous AML compliance activity at its financial institutions, in start contrast to the programmes run at major UK banks, and it is hoped that this will now, under governmental pressure, lead to improvements.

We applaud president Hollande's statement, and further trust that he will direct French law enforcement and regulatory agencies to also enquire into money laundering and terrorist financing amongst French financial institutions, including their foreign branches. I have, from time to time, been provided with the  details of rampant money laundering activities at US branches of French banks, and I am advised that the AML/CFT policies that produce these compliance failures come directly from the home offices in France. Mr. President, when you clean house in Paris, please take a hard look at the overseas branches, too, and if you need any help, just give us a shout.


Did you ever see the classic film, The Producers, starring Zero Mostel and Gene Wilder. It involved  a theatrical manager, and his attorney, who sell the same shares of an investment in a supposedly bad play to multiple victims. The idea was, the play would fail, and the fraud would never be revealed. Unfortunately, the play was a success, and the fraudsters went to prison.

A client came to me once to perform an enhanced due diligence investigation of a West African gold mine that he wanted to make a substantial investment in. I never even got to the merits of the project, because I found that a large number of investors each owned 30-40% of the company, which is a mathematical impossibility.

I am seeing a huge increase in what can best be described as an exploration Ponzi scheme. The fraudsters sell major interests in projects that explore for precious metals, oil & gas, or some other commodity that sells well in the industrial world. The problem is, they vastly oversell the percentage of ownership, sometimes paying off the older investors a small sum, but generally defrauding everybody gullible to buy into their scam. The fact that the exploration is taking place in faraway parts of the world, such as  interior regions of Africa, the jungles of Latin America, and remote Asian locations,  makes it nearly impossible to verify. The fraudsters are relying upon greed and ignorance on the part of the investors, and their reluctance to spend money for enquiries in the field.

Therefore, any bank client who asks you for advice about a gold mine in Africa, an oil field offshore in Asia, or an emerald mine in Latin America, give them this article to review, and ask them why and how they were approached to make the investment. You may be able to deter them from losing a lot of money in a credible Ponzi scheme that, unfortunately, has no pot of gold at the end of the rainbow.