Sunday, September 29, 2013


American Embassy, Tel Aviv
Please do not let your guard down regarding efforts by bank clients to make a huge profit, by an end run around existing sanctions against Iran. Notwithstanding the media blitz on the "transparency" exhibited by the new Iranian President, there is no slackening in sanctions evasions enforcement.

The facts on the ground show what is really happening.The Iranian regime still poses a clear and present danger to the United States, and some of their actions are publicly disclosed.

One case in point: The IRGC Quds Force, its overseas arm, is reportedly behind major espionage efforts. A Belgian national, of Iranian extraction, was arrested in Israel, in the possession of several photographs of the American Embassy there. He had taken several prior trips to Israel, and is believed to have attempted to organize a spy ring.

If there is a new, transparent Iran, why does it send spies to take pictures of the American Embassy ? As I said, remain vigilant regarding any possible sanctions evasion activity of your bank clients. 


If you were able to line up all the money launderers practicing their dark art in the Republic of Panama, you would find that a large portion of them are Venezuelan nationals. While for the undersigned to name them would only invite libel actions, it is important to understand who they are, and why they find Panama City to be such a user-friendly place for laundrymen.

Which Venezuelans are engaged in money laundering ? Running down the list, I see:

(1) A number of them are Caracas attorneys, serving their clients' needs, albeit illegally.
(2) Venezuelan PEPs, individuals closely linked to corrupt members of the Maduro regime, who are moving government funds stolen or illegally diverted, as well as bribes and kickbacks, for their associates in government, who cannot be seen depositing dirty money.
(3) Laundrymen working for narcotics traffickers, whether they be Venezuelan or Colombian.
(4) Bankers, some of whom have close correspondent relationships with Panamanian banks, or even branches, affiliates, subsidiaries, or related companies in the country.
(5) Terrorist financiers for local Hezbollah and Hamas agents, and those working for assorted other sanctioned terrorist groups, including the FARC and ELN.
(6) Money launderers whose task is to clean Iranian capital, and pay for shipments of goods that will be evading global sanctions on Iran, through deliveries to third countries, and subsequent transfer to Iran.

So, why Panama for Venezuelans ? Little or no identification of Beneficial Ownership, or requirement that Source of Funds be disclosed, a friendly Spanish-speaking legal and financial community, a large number of foreign embassies and consulates in the capital, the presence of international banks there, and  a total lack of government enforcement of the laws governing transport of cash or financial instruments into Panama.

Venezuelan money launderers will continue to clean the criminal proceeds of their clients in Panama, until and unless some law enforcement agency comes in and makes it so difficult for them to operate, that the laundrymen take their business elsewhere.

Saturday, September 28, 2013


The Financial Action Task Force (FATF) no longer "names & shames" the jurisdictions where money laundering and terrorist financing run rampant, but I believe that it is time to return to that highly effective practice, and my first candidate is the Republic of Panama, where, in my humble opinion, financial crime, and especially money laundering and terrorist financing, are out of control.

Why Panama first and foremost ? Here are but a few of the red flags that I am aware of:

(1) Money laundering of criminal profits, especially those originating from Venezuela and Colombia, into and through major Panamanian banks, is widespread.

(2) Enforcement of the existing anti-money laundering laws is virtually non-existent.

(3) A number of prominent, and sanctioned, Latin American and Middle Eastern and terrorist groups are moving money through Panamanian banks; some even have permanent account relationships there. Funds from some groups are then transferred to Beirut, and others to offshore tax haven countries; some money even enters the United States, where it could forseeably fund terrorist actions.

(4) The Venezuelan air bridge, business jets transporting illicit bulk cash, and arriving regularly at Panamanian general aviation airports, operates without any serious interference from local law enforcement.

(5) Foreign nationals who are the victims of financial crime in Panama rarely obtain justice, through the corrupt criminal court system. The perpetrator's laundering of his illegally-acquired wealth, is never prosecuted in Panama.

(6) The involvement,  of Panamanian PEPs, including several at the ministerial level, in corrupt conduct, taints any serious efforts to reign in financial crime.

(7) The powerful Syrian Organized Crime cartel, which owns several banks, and has placed key people in most important government agencies, operates free of any government interference.

There are many more, I think it is high time to Bring back the NCCT List, and place Panama on it, so that US and EU banks can govern themselves accordingly.


After much delay, the latest version of the $100 bill, with enhanced security features, is scheduled for national release on October 8. Those readers who remember my article on the theft, last October, of the Federal shipment of the new $100 notes, while en route from the airport in Philadelphia, to a storage center in New Jersey, are probably wondering of the thieves have been impatiently hoarding their booty for the past year, waiting for this day, or whether they have already fenced them.

In any event, if you are not familiar with the new bill, check out the illustration above.


When I served in the Vietnam War, we called it "Winning Hearts and Minds," actions that result in gaining the trust and support from the people, and extinguishing their sympathies, and ties, with your adversary. The technique involves rendering assistance to the civilian population in your conflict, especially when they are in great need.

The specially-designated global terrorist organization, Hezbollah, has, with its many civil assistance programs, won over much of the Lebanese people, and this week we see that Mexico's Gulf Cartel has adopted similar tactics, in the aftermath of widespread destruction and loss of life, due to a natural disaster in that country, Hurricane Ingrid.

A delivery, by a caravan carrying several tons of food, was allegedly sponsored and conducted by the Gulf Cartel, and delivered by it to the stricken area, north of the Mexican town of Tampico. The Mexican Government reportedly has not rendered any assistance.

In this era of instant media, a video purporting to show the delivery of supplied has been widely circulating on the Internet, complete with musical score, and a forceful political message that verges on propaganda. It could play well with the Mexican public.

When narcotrafficantes engage in conduct that wins over the civilian population, they can expand their reach, frustrate law enforcement efforts, and create areas of influence; this is disturbing, to say the least.

Friday, September 27, 2013


When a Ponzi scheme implodes, many of the professionals involved in maintaining the fiction of a legitimate enterprise, or otherwise using their expertise to aid and abet the fraud, find themselves charged with their fraudster clients. Peter Konigsberg, a New York accountant, was arrested this week; he allegedly conspired to falsify records and statements, and was closely associated with Bernard Madoff's $17bn fraud. As an outside accountant, he also represented a number of Madoff investors. Another accountamt,  Madoff's auditor, has already pled guilty in his case.

He was reportedly the only no-Madoff family member to own any portion of the criminal enterprise's London office. Released on $2m bond, Konigsberg'a indictment is part of a larger case, involving several other Madoff conspirators.
* Case No.: 10-cr-00228-LTS (SDNY)

Wednesday, September 25, 2013


This week's natural disaster in Pakistan, already with 400 estimated dead, will spawn extensive international charitable relief action. While most of it will be bona fide, there may be a few bogus "charities" sending funds. or goods, whose end users will not be earthquake victims, but terrorist organizations.

Watch carefully any unknown charity, or charitable organization with a name deceptively similar to one of the reputable ones, or even newly-formed entities, for disguised payments to designated terrorist organizations, payable through fronts. In the chaos post-disaster, the last thing anyone is thinking about is terrorist financing. Do not make that mistake.

Vet any charitable organization not known to you or your associates, lest you end up under investigation for sending funds to a radical Islamic organization on the sanctions list. Is the recipient well-known as a facilitator of charitable relief ? Could it be a thinly-constructed front for terrorists ? Enhanced Due Diligence is the order of the day, and ignore the sender's pleas for immediate clearance, for the sake of the victims, lest you become a victim of a different sort.

Tuesday, September 24, 2013


Two final thoughts that still bother me about the Scott Rothstein Ponzi scheme and his principal banker:

(1) How could the entire TD Bank compliance department ignore all those hits from the bank's AML software ? Obviously, someone in senior management trumped compliance. Why is he not being held accountable ?

(2) The $52m fine, according to one of the lawyers for the Ponzi victims, is insufficient, as it represents only a drop in the bucket, when compared to the bank's annual profit; he's right.  Next time, how about a real punishment.


Are foreign banks exiting the Republic of Panama because of FATCA, or for some other reason ? In recent months, we have seen the sale of certain foreign banks, and the announced closure of others. I have difficulty believing that the motivating factor is the onset of FATCA, as they could simply close all their accounts of American citizens or residents; There's something more to this.

Are foreign banks leaving because they fear that Panama's future will not be as bright as its government has predicted ? Or because they are concerned about the retreat from democracy and neglect of the rule of law that seems to be the order of the day in Panama City ? Whatever it is, possible political turmoil in the future, new and probably unwanted attention, directed by international law enforcement at the financial community, or some reason to rise risk levels to a point where further bank operation is deemed dangerous, we need to watch Panama closely for signs of trouble. 

Monday, September 23, 2013


Just when you thought the worst was over for beleaguered TD Bank, the proverbial roof falls in. The Office of the Comptroller of the Currency, and the Securities & Exchange Commission, have levied a $52.5 civil penalty upon the bank, through a stipulated Consent Order.

The funds are to be paid as follows:
(1) $37.5m to the SEC.
(2) $15m to the OCC.

The Consent order is short on information, but the two principal violations are stated;
(A) Failure to file Suspicious Activity Reports (SARS).
(B)  Deceiving the investors into believing that the funds were safe.

Readers who want to review the complete text of the Order can find it here*.
*Consent Order for a Civil Money Penalty; Case Numbe AA-EC-2013-67


The seizure of 1.4 metric tons of cocaine, which arrived in Paris, from Caracas, on an Air France airliner, should put to rest all questions concerning the extent of government-supported drug trafficking in the Bolivarian Republic of Venezuela. Arrested were a Venezuelan National Guard officer, and two non-commissioned officers, two UK, and two Italian nationals; a reliable source reported that some of the participants were from the Middle East.

The drugs were placed within 30 suitcases, marked with the names of individuals who were not on the flight manifest. Some of the drugs were allowed to leave the airport, and were interdicted en route to Luxembourg. The fact such a huge cache of narcotics was allowed to enter the airport, and be loaded, with bogus name tags, on an international flight, should remove any illusions you may have about the Government of Venezuela. Any counter-drug programs that it has are only window dressing, and are totally ineffective, on purpose.

 Facilitating narcotics shipments represents significant income for the Maduro Regime, and its military, and law enforcement, is actively involved in the international transport of drugs, into and through, Venezuela, on its way to North America and Europe. The Venezuelan National  Guard is said by most observers to be heavily involved in the transshipments.

As I have said before, you do not want to be doing business with Venezuela; the risk is far too high, and corruption is out of control.


This is John Flavio Dominguez, who is currently a Relationship Manager at a major Panamanian credit card processing facility. If your bank is using his services, be advised:

(1) He has criminal charges pending against him in the Republic of Panama.
(2) He was dismissed from several banks in Panama, for embezzlement.
(3) He is under criminal investigation for  embezzling over $2m in Panama.
(4) He is reportedly under investigation in the United States for theft of bank funds.
(5) He allegedly destroyed evidence, and sabotaged a financial entity in Panama.

Inasmuch as criminal cases in Panama generally proceed very slowly, and are subject to political influence, the payment of bribes to government officials, and the delays typical to cases in the developing world, it may take years before justice is done, so it would be prudent to avoid this individual.

Sunday, September 22, 2013


The quasi-public nature of the corruption proceedings in the case of Bo Xilai provides us with helpful hints regarding exactly how foreigners should conduct their business relationships in China. The case should also serve as a warning about what not to do, if you value your company's investment there, and your own freedom, should you choose to work there.

(1) Bo Xilai was sentenced to life in prison, and forfeiture of all his assets. I wonder, does that include his three million Euro villa in France ? Violating the FCPA, the Bribery Act, or any other nation's corruption laws, get you arrested at home, or in China, and their prisons are not for the weak of heart.

(2) Who gave the defendant all those greenbacks, the tens of thousands of dollars in US currency that his wife used to draw upon from the family safe, when she wanted to go on a shopping spree ? Someone here just made it easier to build an FCPA violations case on the donors. Who was guilty of such stupidity ? Or was it simply arrogance ?

(3) The reported four million dollars held by Bo Xilai; some came from government funds. If you are holding hands with a corrupt PEP, or your local partner is, you run the risk of being tarred with his crimes in China.

(4) Bo Xilai stated that an official Chinese government agency at first sought to cover up his wife's crime by filing bogus reports. In China, the truth is what the Chinese Communist Party says it is. Don't get on the wrong side of the official version.

(5) The extremely public attention paid to the trial means that the government is serious about stopping blatant corruption, or is it just those who are politically incorrect ? Can you really say you understand the permutations of Chinese domestic party politics ?

(6) Will all foreign consultants now be under the microscope ? Assume this to be the case.

This is all about political astuteness, in an inscrutable country. choose your Chinese partners, and Godfathers, wisely.   


We have previously warned compliance officers to be wary of any significant transactions with Iraq, due to the river of dollars flowing to Iran, from both Baghdad and the Kurdish Region, but several disturbing actions taken by the Iraqi Government this year, in my humble opinion, disqualify Iraq for client investment, or for any other financial intercourse. The risk of loss, or of default, or of major domestic problems, is just too high at this time; it is like a ticking time bomb, waiting to go off.

These issues include:

(1) The Government of Iraq has, more or less, violated all nineteen points of the Erbil Agreement, which served to level the playing field for Sunni and Kurdish groups.

(2) The de facto  alliance with Iran.

(3) Iraq's failure to condemn the war crimes of the Assad regime in Syria.

(4) Allowing Iranian aircraft to overfly Iraqi airspace, carrying troops and arms to Syria, and lying to the United States about it.

(5) Tacitly ignoring the attack on the MEK camp. I am no friend of the MEK, but that was just plain assassination.

(6) Stating publicly that it will assist Iran to develop its nuclear program.

(7) Storing Syrian chemical weapons, to keep them out of the reach of UN inspectors.

If your bank is continuing to have exposure, due to dealing with Iran, its banks, or its businesses, you are taking a tremendous risk that things will ultimately result in a substantial loss.

Saturday, September 21, 2013


A terrorist attack on a major shopping mall in Nairobi has left an estimated 30 dead and 100 injured. Al-Shabaab, the Islamist group seeking to seize power in neighboring Somalia, has claimed responsibility; the radical group had previously threatened Kenya for deploying its military in Somalia, in support of the provisional government, and defeating Al-Shabaab on the battlefield. The attack, which is still ongoing, commenced with two explosions in the mall.

Al-Shabaab's action, in Kenya, has demonstrated that the designated terrorist group has targeted the country for retribution. Review the facts, and make your own assessment as to whether to raise Country Risk for Kenya at this time.


Those who thought that Richard Chichakli would swiftly agree to a plea agreement in his case* now have their answer. The defendant has come out swinging, and filed a handful of defensive motions. Unfortunately, they are not available on PACER, which posts the electronic filings in the case, and it is doubtful that, while in custody, he has the ability to file Pro Se electronically, even with the assistance of his Stand-By Counsel.

 Did he type the motions in the MCC law library, or were they holographic documents ? We cannot say, but we were able to deduce the content of the motions from the details in the Government Memorandum in Opposition to Defendant's Pending Motions.

He filed these motions:

(1) A Motion to Dismiss, stating that the Indictment was defective, because it contained false or misleading factual assertions. The Government replied that the Indictment was not defective, and asserted that there were only minor inadvertent errors. Remember that, on a Motion to Dismiss, all well-pleaded allegations of the Indictment are taken as true.

(2) A Motion to Strike, seeking to eliminate  all references to sanctions, and to Viktor Bout, as prejudicial and inflammatory. The Government responded that the motion was not supported by the law, and that Chichakli had not cited to any legal authority, in support of his position. Bout is a defendant, but cannot be tried, due to the limitations of the law on Extradition.

(3) A Motion to Suppress, asking that all evidence from the search of the defendant's residence be excluded, because the search warrant affidavit contained false statements. The Government countered that the affidavit was supported by reliable information, and that there was sufficient evidence to support Probable Cause to search his residence.

In addition, the defendant is seeking a prompt hearing on these motions, and that an investigation be conducted, in tampering with the laptop computer issued to him to review the discovery. He alleges that the Bureau of Prisons IT Department improperly accessed his computer logs, removed 165 Gigabytes of information, and denied him access to Microsoft Outlook, by inserting password protection. Apparently, it was the US Attorney's office that was to provide IT service, and Chichakli is call for a report to be filed when these pending motions are heard at oral argument.

Chichakli is asking for a date at the end of September to hear argument on the motions.
* Case No.: 09-cr-01002-WHP (SDNY).

Friday, September 20, 2013


Readers of my continuing series, When White-Collar Crime becomes Money Laundering, (in six parts so far) who wanted to know the status, it appears that the Colombian national, Lourdes Cajale, whom her employer alleges embezzled money from the firm's account, and laundered it in Panama, will not be charged with money laundering, either in the US or the Republic of Panama.

It appears that her ploy, suing her former employer, a corporation, for reportedly violating a ficticious  employment agreement, created so many issues of fact, that no prosecutor has brought criminal charges against her, in either state or Federal, Court, or in the Republic of Panama. The bogus civil suit, which has been pending since 2009 in Miami, and has never been set for trial, seems to be in limbo. My sources in Panama have failed to find any criminal charges filed against Cajale there, in this case. She quietly left the United States some time ago, and has not returned, though she is known to be a naturalized American citizen.

Her former employer has paid its attorneys to defend the civil suit; other lawyers were engaged to seek criminal charges against her, and more attorneys to attempt to restore the company's president's US visa, which was revoked, due to unsubstantiated allegations of criminal activity that Cajale reportedly made to American authorities. She artfully gamed the system, as you can see; Justice has not been served.

Bottom line: no criminal charges were filed against her, no civil judgment yet either, and no restoration of visa for her employer. Has she gotten away with murder ? You be the judge, but I wonder how many criminal defense attorneys have taken note of this technique, and have seriously thought about filing a civil action, though there may be no factual basis for any litigation. Let us hope that their ethics prevent them from acting.


Will Panama replace the United Arab Emirates as the place to go if you are an Iranian government-controlled company seeking to conduct trade that effectively evades international sanctions over weapons of mass destruction ? It may soon become a reality. Look at these developments:

(1) A prominent builder, who has been seen in Panama, intends to construct a large number of single-family residences for the Iranians that are expected to emigrate there.

(2) Panama's new immigrant investor laws are being carefully examined by professionals advising Iranian clients; these advisers are Iranian expats. already living in the West, and they are looking for a meaningful alternative to Canada.

(3) The use of Panama, and Venezuela, as third party countries, to which goods are shipped, and then transshipped to Iran via maritime commerce, is growing. Rumors continue to circulate that Panamanian officials, including the country's president, have invested in companies engaged in this commerce.

(4) The "don't ask-don't tell" international banking system in Panama, which so far has been ignored by US and EU law enforcement agencies enforcing Iran sanctions, is available to assist in any complex sanctions evasion payments scheme.

(5) Don't forget the presence of its primary surrogate, Hezbollah, whose affiliate, Hezbollah Latin America, has a robust presence in the region, and whose agents can conduct financial transactions under the cover of their many front companies, staffed by cadre with local passports and identities.

As it becomes more and more difficult for Iran to operate in the UAE, expect it to deploy to alternative jurisdictions, and Panama is a very attractive prospect, with many useful features. Unless the United States finally decides to get its hands dirty in Panama, and assertively goes after the banks involved in facilitating Iranian sanctions evasion, Iran will increase its footprint in Panama.

Thursday, September 19, 2013


Reports indicate that the fallen Chinese leader, Bo Xilai, will be sentenced on Sunday, for engaging in multiple crimes of corruption, and becoming a multi-millionaire through bribes and kickbacks. This  case should serve to remind us that corruption, on the part of senior officials in China is rampant and out of control, no matter how much propaganda the country's government serves up to spin the truth. It is far too widespread to suppress.

Risk levels, for foreign companies and professionals, drawn like a moth to a Chinese flame, are high, and bogus arrests, and incarceration, can be a real possibility, especially if the government wants to level the playing field a bit, so try not to dominate local Chinese companies, please; You may regret it.

Worst of all, the new policies and laws that effectively end the ability of foreign nationals and companies to engage in any meaningful due diligence, are for me the last straw. Who wants to go on the record to approve local Chinese partners for a client, when routine inquiries constitute crimes against the state ? Do your client really want to jump in, feet first, and invest time & money, when one cannot ascertain risk levels of prospective joint venturers, and local partners ?

I have already advised readers to raise Country Risk levels for China; to those brave souls who still want to find a way to profit from China, I say: have a contingent escape plan in place, both for financial, as well as personal, risk. Can you say FCPA ?


The twin natural disasters in Mexico this week will certainly spawn relief efforts originating in the United States. America-based  charitable organizations, and other nonprofits, will be sending food and supplies to those affected by the storms and flooding. The problem is, it provides a rare opportunity for money launderers employing bulk cash smuggling to ship narcotics profits south, in the chaos that typically follows such disasters, where relief is desperately needed for the victims, and the need is urgent.

Bulk cash, which can easily be concealed in relief supplies, could be sent south under the auspices of a bogus charity controlled by the money launderers. Once en route, and safely in Mexico, it may be diverted, the cash extracted, and the supplies allowed to proceed to their stated destination.

The most effective concept is to create a nonprofit.with a name deceptively similar to that of a well-established charitable entity, which will facilitate its ready acceptance. Outbound shipments from the Continental United States are rarely examined, unless they are of a suspicious nature, or traveling to a high-risk drug producing country. I expect that one or more money launderers, working for cartel masters, will attempt to move bulk cash, using this technique, into and through Mexico, to a final destination where the US Dollar is the accepted currency, like Panama or Ecuador.

Let us hope that US law enforcement examines these charitable donations flowing into Mexico.

Wednesday, September 18, 2013


Several experienced residential observers of the political scene in the Republic of Panama have expressed real concerns about the probability that the results of the 2014 Presidential Election will be manipulated to place power in the hands of the ruling party's chosen successor. In essence, the fear is that President Martinelli, whose autocratic style of management of the country, will find a way to place his chosen one into office, and rule from the shadows.

The example has been cited of decades of questionable election returns in Venezuela, resulting in a virtual dictatorship, and Panamanians who wish to maintain democracy in their country are worried. I don't blame them. Many of them do not want a strongman-type rule in Panama again.

Compliance officers at banks whose clients are exposed in Panama should keep an eye on the forthcoming election, the results, and any civil disturbance that may arise in the aftermath, due to verified evidence of election fraud. Panamanians are not afraid to take to the street if they have grievances, as we have seen in recent years, and President Martinelli does not refrain from having his security forces respond with a heavy hand. The net worth could be chaos in Panama City in 2014, disrupting business and increasing risk levels.


Claudio Osorio, the high-profile Venezuelan businessman who took in $40m from investors, and qualified to receive an additional $10m from the United States, was sentenced today, in US District Court in Miami, to  twelve and one-half  years in Federal Prison. He promised investors that his company would build 500 homes in Haiti, and proposed to construct additional low-cost homes in other developing countries, but failed to produce, and made repeated misrepresentations of material facts, including false bank statements, in what was in essence a Ponzi scheme gone sour.

The case received a large amount of media attention, due to Osorio's fundraising activities on behalf of candidates for President of the United States.. His company reportedly never even broke ground in Haiti, and the defendant allegedly moved all the investors' money to the Cayman Islands. The court-appointed trustee has stated that he is unable to recover any funds from accounts there; the money is believed to have been spent.

Several years ago, a former Venezuelan government official, of cabinet rank,  living in Miami, warned that Osorio's business model was a fraud, but unfortunately, nobody was listening, least of all the investors, whose $40m will probably never be recovered. The word for the day : Due Diligence. 


Iranian businessmen, acting on behalf of their government, are quietly purchasing interests in financial institutions in Asia, and other regions, for the sole purpose of acquiring the ability to engage in international finance, doing an end run around existing sanctions pending against Iran. We have previously discussed the fact that there are five Iranian-controlled financial institutions in Malaysia, but that is only one faced of Iranian banking ambitions.

Iran is either already in, or has arrangements pending, to either purchase outright, or invest in, banks located in:

(1) Azerbaijan
(2) Armenia
(3) Singapore
(4) Venezuela

The usefulness to Iran, of the control of a financial institution in a third country cannot be overestimated. Goods can be ordered and shipped to that country, but the destination changed to Iran, while the cargo is en route on the high seas. Dual-purpose goods,  those that have parallel applications in Iran's illegal WMD and ballistic missile programs, can be safely ordered, as the seller believes that they are destined for a non-sanctioned end user. Payments for sanctioned Iranian oil can be quietly routed through other jurisdictions. The sanctions evasion potential is unlimited.

While it is premature to consider raising the Country Risk levels in Azerbaijan and Armenia, compliance officers would be well advised to confirm ownership of any bank in those countries that has recently changed hands, before engaging in any transfers of large amounts of funds. I have already recommended that you raise Country Risk for Malaysia.


A reader who reviewed yesterday's article asked how extensive the Hezbollah financial pipeline is in the Western Hemisphere, and questioned how a specially designated global terrorist organization had access to major financial institutions. The answer lies in the organization's extensive use of front men, whose ties to terrorist financing are not readily apparent. Unfortunately, the principle of "Know your Customer's Customer" is not widely practiced, and links of a bank customer to terrorist associates, or even known terrorist agents, is not uncovered during routine due diligence.

Where are these Hezbollah-controlled accounts ?

(1) The Republic of Panama, especially in the Panamanian branches or subsidiaries of Venezuelan banks, and in those banks under the management or control of Panama's flourishing Syrian organized crime organization.

(2) Miami, Florida, where several banks unwittingly facilitate Hezbollah money movement.

(3)  Southern California.

(4) The Netherlands Antilles.

(5) St. Lucia

Hezbollah accounts in Beirut are the usual recipients of the narco-profits, as specific accounts it controls in Lebanese banks have been identified by investigators in Caracas.

How are these accounts operated ? Funds emanate from accounts in most of Caracas' major banks, as well as the bulk cash smuggling route discussed in yesterday's article. From there, they generally go to Panama. How they arrive in the United States can only be ascertained through a review of the active and closed accounts that are known.

 I also count thirty eight corporations controlled by Hezbollah, and more than two dozen properties that it appears to own through front men. While I have been concentrating on accounts owned by individuals, a search for accounts in the names of those front companies, at the banks already known as Hezbollah clients, would be necessary.

This is just the tip of the Hezbollah financial iceberg. I can understand why the Caracas accounts are totally untouchable, given the Venezuelan Government's known relationship with Hezbollah, but the unimpeded flow of cocaine profits through accounts in Panama, the United States, and other countries in the region, is simply unacceptable.

Tuesday, September 17, 2013


Kimberly Rothstein, the wife of convicted Ponzi schemer (and ex-attorney) Scott Rothstein, has asked the Federal Judge in her own case to again delay her sentencing, which is currently set for 7 October. Mrs. Rothstein, who pled guilty to three charges, including money laundering conspiracy and obstruction of justice, reportedly faces a maximum five-year sentence. Her husband is serving a 50-year sentence, and she intended to have him lie about the disposition of the missing jewelry, which is witness tampering.

In her attorney's motion, the defendant asks that her sentencing be delayed until she can testify against two of her co-conspirators. Readers of this blog will recall that she attempted to hide, and later sell off, the bulk of her extensive jewelry collection, to prevent it from falling into the hands of the court-appointed trustee, who was assembling assets to repay victims of her husband's massive $1.2bn Ponzi scheme. The defendant stated that she intends to testify against those who aided and abetted her in the fraud. She hopes that this Substantial Assistance will qualify her to receive a 5k1.1 motion, from the US Attorney, so that she will receive a shorter sentence than the Sentencing Guidelines recommend.

In an obvious attempt to mollify the judge, who had previously stated that she would not be granting any other delays in sentencing, counsel's motion included the statement that Mrs. Rothstein was ready to begin serving her sentence right after the sentencing hearing, rather than have the customary period generally afforded defendants to get their personal matters in order, prior to surrendering.


Hezbollah Latin America, also known as Hezbollah Venezuela, whose primary source of income is narcotics trafficking, operates in concert with a specific, and very efficient, local criminal organization, which includes several senior Venezuelan government officials, going all the way up to the ministerial and gubernatorial levels. The involvement of these senior officials guarantees that not only will local law enforcement not interfere with their operations, but they will actively assist in protecting the transport of contraband outside the country.

Those Venezuelan officials, who have ethnic roots in the Middle East, assist in securing identity cards, known as Cédulas, and Venezuelan passports, for arriving Hezbollah cadre, who can then dispose of their Lebanese and Syrian passports. Some even assume Spanish surnames, and begin to blend into the multi-ethnic fabric of Latin America, making their travel into the United States a clear and present threat.

Since, in essence, US law enforcement agencies (and foreign investigative journalists) are barred from the country, little actionable intelligence exists on the overall operation, but some details are available. The proceeds of those drug sales are bulk cash shipped, usually on business jets based in Caracas, right into Panama's principal private aviation airport, turned over to their local representatives, who then deposit it in Panamanian banks controlled by the local Syrian organized crime group. Some money is smuggled in by cash couriers, known as testaferros (figureheads).The funds are subsequently transmitted to the Middle East, and to make purchases in international trade to assist Iran. Some observers have estimated that the cocaine profits represent a major portion of Hezbollah's annual budgetary needs.

While the leader of Hezbollah Latin America, the Lebanese national, Ghazi Atef Nasserdine*, has been an OFAC Specially Designated Global Terrorist [SDGT] since 2008, I find that none of the other roughly one hundred cadre known to me have been sanctioned. This means that they are free to travel internationally, open bank accounts in the US and the EU, and move money through them, with impunity. Some cadre  have been assigned "V,"  for Venezolano, Cédula [National Identity Card] numbers, which establishes them as Venezuelan nationals, and allows them to get Venezuelan passports.Whether any of them now reside in North America, or in Western Europe, is not known.

The Hezbollah agents in Venezuela have an additional asset: There are approximately thirty associates that they work with, who are legitimate Venezuelan nationals; consider them to be the functional equivalent of associates working with traditional Italian organized crime (Mafia) in the United States. Bankers in the United States dealing with these associates are at a distinct disadvantage, not known that they are serving front men for a terrorist organization.

What is most disturbing is that Hezbollah's money laundering network, moving in and through the Republic of Panama, is freely operating, notwithstanding that the organization has been designated as a terrorist organization by a number of countries. Are not at least some of the participants not known to law enforcement agencies in these countries ? It is past time for some law enforcement agency to terminate the ongoing Hezbollah financial pipeline, Caracas-Panama-Beirut, with side trips to Tehran, and to charge the guilty banks in Panama City with providing financial support to a terrorist organization. Panama certainly will not police its own house; I leave it up to others to do so.
*Ghazi Atef Nasserdine, Cédula No. E-82146374. The "E" prefix establishes him as an Estranjero, or foreign national, residing in Venezuela.  His wife, Samar Abdulhadi Nasserdin, Cédula No. E-81756782, has not been designated by OFAC. Most Venezuelan government agencies separate the digits with periods, which would render it thus:  81.756.782  . Ghazi Nasserdine also has a Venezuelan citizen Cédula, which is V-82.146.374 . Obviously, Hezbollah can  have its agents designated as citizens upon request.

Note: Venezuelan law requires that individuals over the age of 18, who are applying for their Cédula for the first time, must produce a valid birth certificate, and also attest to the reason why they waited so long to obtain one. A Venezuelan usually obtains their Cédula when they have attained the age of nine, or shortly thereafter. That may render all the Cédulas, and the subsequent passports, obtained through the production of a fraudulent birth certificate and Cédula, as void, on their face.

Monday, September 16, 2013


Readers who wish to review the complete text of the report filed by the United Nations Mission to Investigate allegations of the use of Chemical Weapons in the Syrian Arab Republic, can find it here*.
* Syria


Compliance officers and client relationship managers at international banks in North America and the European Union kindly take note that Panamanian authorities are warning that some of the more prominent Mexican narcotics cartels are expanding their operations in the Republic of Panama. This means that laundered drug profits, having been cleansed in Panamanian banks, and now owned by anonymous front companies, all formed by the same small group of busy Panamanian law firms, could be on their way to your jurisdiction, to be invested in an office building near you.

For your information, the cartels that are openly operating in Panama include:

(1) Los Zetas
(2) The Juárez Cartel
(3) The Gulf Cartel
(4) The Beltran Leyva Cartel

If Mexican "businessmen," seeking to invest their capital through your bank, and commence a new account relationship, are using Panama corporations as their vehicle, beware. Panama's bearer shares cannot be definitively tied to your new clients, as beneficial owners, and you may be doing business with the Devil, or at least his Mexican counterparts, any individuals on the OFAC list.

if still wish to take their business, choose a reputable investigative firm in Panama, not staffed with local (and therefore corruptable) talent, and have it check them out, in both Panama & in Mexico. If their "employment," or business they claim to own and operate is a fiction, exit them immediately. If the Source of their wealth cannot be ascertained, close their accounts. finally, watch for front men, all with good references, who are markedly unfamiliar with legalese, and the jargon of finance.

Sunday, September 15, 2013


Travel warnings usually warn a country's citizens to avoid travel to nations where they may become victims of crime, but recently the Government of Russia issued a unique twist on such a warning. It cautioned those of its nationals that are wanted in the United States on criminal charges against traveling into, or through, countries that have extradition treaties with America.

The press release obviously was issued after a number of Russian nationals were arrested, and ultimately extradited, from third countries with extradition agreements with the United States. Russia and America do not have an extradition treaty, which the readers of this blog are familiar with, in  connection with the extended stay in Moscow of the then-fugitive, Richard Ammar Chichakli, said to have been the CFO of Viktor Bout.

The impact of this announcement is to codify what many observers of Russia had suspected for some time, that the government there has no interest in bringing its white-collar criminals to justice, if they committed their crimes in the United States. Customer relationship officers at international banks located in the United States may want to bear that in mind, in assessing risk levels for Russian nationals.

Not only will Russia not assist in bringing Russian criminals to justice, but it is actively protecting them. Remember that the next time your bank contemplates the extension of credit to a Russian corporation. Of course, you risk financial loss in any transaction, but Russian participants in any financial crime committed against your bank will most likely never have to pay for their actions.


In 2011, a Federal Judge, in the Eastern District of New York, sentenced the $400m Ponzi schemer, Nicolas Cosmo, to twenty-five years, and required him to make restitution in the amount of $179m. he was later fined an additional $240m, for using investors' money to trade in commodity futures, without their knowledge, and banned from ever engaging in commodity-related trading again. The defendant's appeal to the Second Circuit failed to give him any relief from his conviction and sentence.

Cosmo defrauded a lot of investors; the media dubbed him the Mini-Madiff. So why can't we easily access any of the information about his case ? A check of the US Bureau of Prisons locator program shows that he is not incarcerated in a Federal institution; I understand that his critical testimony, against others in his Ponzi operation, means that he must be protected, but there's something else.

If you go on the PACER website, to look at his court file, your inquiries mysteriously fail to turn up any results. One cannot access the file by entering his name into the search engine. I find this most disturbing.

But is file has not been sealed by the Court; it has just been placed out of the reach of most researchers, victims' attorneys, and others interested learning about the $413m case. When one cannot access what is supposed to be public information, we all lose.

So how did I find the file ? When I wrote my original 2011 article, about Cosmo's sentencing*, I placed the case number as a footnote, to assist any readers who wished to explore the case. With that 2009 case number, I was able to access the court file, which was closed on 17 October, 2011. On PACER, one may also search by case number, and someone who was closing access to the file must have forgotten that little trick.

So why is Nicolas Cosmo such a mystery ? Longtime readers of this blog may recall my tale of the fraudster whose sealed New York federal criminal file allowed him to perpetrate subsequent fraud in Florida. We cannot practice due diligence if the truth is hidden from view.

Many years ago, when a fraudster from Africa convinced a gullible Swiss banker that he could turn lead into gold, and escaped to Miami with his ill-gotten gains,  a major suit against him by those whom he defrauded in the US was conveniently made unavailable, as it embarrassed local politicians. I refused to give up, and retrieved the file from the desk of the Dade County Circuit Court Bailiff who was entrusted with hiding it. When information is hidden from public view, for any reason, we all lose.

Saturday, September 14, 2013


The undue diplomatic delay in the Syrian chemical weapons negotiation has, unfortunately, resulted in some serious consequences for the United States. Multiple sources have stated that the Assad regime has already transferred control of some of its chemical weapons caches to Hezbollah, which intends to store it on both sides of the frontier with Lebanon, especially in the Bekaa Valley. Some of the transfers were reportedly made before the current crisis over Syria's use of those weapons on her own civilian population took on diplomatic, rather than military, dimensions.

Given the established pipeline, between the Middle East and Hezbollah's Venezuelan  regional operations center, aerial delivery of a portion of the acquired ton of VX nerve gas to Latin America this month becomes a distinct possibility. Since the United States is woefully unprepared for any chemical weapons attack, Hezbollah's possession of chemical weapons, and its ability to deliver them to its cadre in Latin America, makes it a clear and present danger to the United States.

This turn of events may finally shake up the United States Government, which has, for the most part, taken no action to counter the Hezbollah buildup in Venezuela and Panama. 


New laws that, in effect, criminalize due diligence investigations, are making it extremely difficult to obtain the amount of information necessary to minimize risk levels, for foreign companies and financial institutions, prior to initiating business transactions in China. Western researchers working in China have been arrested, and access to personal and corporate records severely restricted, if not totally denied, to them.

Whether these new restrictions are now in place to discourage foreign companies to compete, in China, with local firms, or for some other, darker purpose, the net result is that, with rare exceptions, obtaining thorough due diligence reports on Chinese companies, and nationals, will no longer be assured. Enhanced due diligence on Chinese targets will be completely unavailable, and proper protection of clients in high-risk matters cannot be assured.

The alternative, obtaining business intelligence through illicit channels, exposes the researcher, and his or her company, and could even bring down official wrath on the foreign firm seeking to do business in China. This is unacceptable for most risk managers.

Therefore, inasmuch as the reliable detection of prior history of fraud, and other financial crime, cannot be assured, with respect to prospective Chinese partners, suppliers, major customers, and even government-controlled companies, risk levels must be raised at this time.

Review the evidence, and make your own, educated decision, based upon the facts, but I recommend that you raise Country Risk on China, due to these new official impediments to due diligence.


Friday, September 13, 2013


Parra today
Libardo Parra Vargas, a senior member of the Colombian terrorist organization M-19, was denied asylum, and deported from Costa Rica, having served a sentence for money laundering. Parra, when arrested, had $1.4m in cash, 25 mobile telephones, and false identities, and the currency tested positive for narcotics. A diplomatic cable released in the recent Wikileaks scandal pointed to him as a suspect in human trafficking, and noted that he possessed several false identities.

He was deported to Panama, which will reportedly transfer him to his native Colombia, where he was convicted in absentia of kidnapping and extortion, and will be serving his 24-year sentence. He is notorious for his participation in the M-19 siege of the Palacio de Justicia, in 1985, in Bogotá, where half of the members of the Colombian Supreme Court were killed, and will undoubtedly be welcomed into the penal system by the authorities.

Parra at the time of his money laundering arrest

Thursday, September 12, 2013


Ponzi schemer/banker R. Allen Stanford's appeal of his criminal conviction is on hold; the Clerk of the Fifth Circuit Court of Appeals has paused the briefing schedule until the Court rules upon Stanford's pro se motion to discharge his appointed counsel, and allow him to defend himself. He has alleged ineffective assistance of counsel at the appellate level, even before his brief is filed; his attorney has complained to the Court that Stanford is seeking to deal with new issues that do not belong in an appeal.


Deputies in the interior ministries of the six countries that make up the Gulf Cooperation Council will reportedly meet this coming Sunday (15 September), in Saudi Arabia, to discuss details of sanctions to be imposed upon Hezbollah, which has provided military support to the Assad Regime in Syria. Sanctions were generally approved in June; this meeting is to work out details.

Specifics have not been published, but the topics mentioned include:

(1) The imposition of restrictions on Hezbollah agents, on their travel and residency, in or through the GCC countries.

(2) Restrictions on Hezbollah financial and trade transactions and all its business operations.

(3) Restrictions on Hezbollah financiers, or facilitating parties, reportedly including central banks.

If promulgated, and enforced, these restrictions could impact not only the flow of drug profits from Hezbollah Latin America, but it could also interfere with any Iranian Government funding that takes circuitous routes to Beirut. GCC sanctions against Hezbollah could really hurt it financially.

Wednesday, September 11, 2013


The new military-run government in Egypt has destroyed or collapsed most of the smuggling tunnels that Hamas has been using covertly import contraband, including currency, into the Palestinian territory of Gaza. Egypt is now considering the creation of an exclusion zone, or no man's land, on its frontier with Gaza, which will essentially be the end of the organized smuggling tunnels into Gaza.

The net result has been a major decline in both smuggled goods, as well as income that Hamas derives from the illicit commerce, in which all good are taxed. Bulk currency also cannot now discreetly enter Gaza.

Where will Hamas get the currency it needs to pay its huge number of governmental officials ? it already reportedly has had to reduce their monthly take-home pay. Where is this money to come from ?

We saw a possible answer today. Israeli news carried the story of a number of Palestinians in Jerusalem who were charged with operating a underground Hamas cell there. one of the defendants, who was also charged with money laundering for a terrorist organization, apparently funded the group's activities through merchants located in Jordan, who sent funds to Hamas agents in Jerusalem.

Logistically, Hamas could help finance its activities in Gaza through Jordan's legitimate international trade with the West Bank and Jerusalem. How the cash would be transmitted thereafter into Gaza I would not venture a guess, except that bulk cash smuggling is generally difficult to stop, when there is a determined organization involved. I wonder if any Jordanian banks have had new, and urgent, requests this week for large quantities of bulk cash, including US Dollars. As an ally of the United States, and a country with low-levels of Country Risk, I am sure that there are a number of American banks who will ship bulk currency without question.

NOT the type of currency Hamas wants


If you have ever wondered what ETA members do, when they engage in terrorist acts on Spanish soil, in support of Basque independence, and civilians die as the result, I will tell you. They relocate to Venezuela, where the government not only gives them safe haven, it actually supports them financially. Each month, ETA expats residing in Venezuela receive an official visit, where they are paid, in US Dollars last time I heard about it, a monthly subsistence for living expenses.

Six hundred dollars a week was the number given to me, and with the rapidly depreciating Bolivar, one can parlay those Greenbacks into a handsome sum each month. My point is, if ETA expats are living comfortably in Venezuela, and they face certain imprisonment upon return to Spain, what is their incentive to join in any political settlement with the Government of Spain ? More importantly, can there even be a meaningful, complete settlement, if some of the more militant members of ETA, with arrest warrants hanging over their heads, do not join in ?

Venezuelan billboard opposing extradition of ETA (Basques) to Spain
ETA may have renounced violence two years ago, but it is time for its fugitives to come home, face justice if necessary, receive amnesty on a case-by-case basis, an reintegrate themselves into society. So long as the Government of Venezuela accommodates them, and bankrolls their lifestyles, it may not happen.