Thursday, October 31, 2013


A recent article, by Pricewaterhouse Coopers*, entitled Avoiding the Drift: Optimizing and Maintaining AML Surveillance Programs, makes a convincing argument that American banks are displaying a gradual process of inadvertent noncompliance. It takes the position that AML systems need to be constantly monitored, updated, maintained and repaired.

A new term has apparently been coined: AML Drift, which occurs when inadequate attention and resources have been dedicated to maintaining and sustaining the core components of AML programs that may now have been in place for more than a decade, and cites the increasing number of regulatory fines and penalties over the last five years, as proof thereof.

I can follow the author's logic, but wonder if allowing compliance to deteriorate is really a cost-based conscious decision, rather than ordinary negligence, on the part of management of some financial institutions.

Avoiding the Drift: Optimizing and Maintaining AML Surveillance programs

Wednesday, October 30, 2013


Regular readers of my articles know that I feel that US regulatory agencies are soft on banks that are found to be facilitating major money laundering operations. Violators are usually assessed a fine that is but a small percentage of their annual earnings, and may sometimes be subject to a deferred-prosecution agreement, both of which avoid a criminal money laundering charge.

Is the real reason that the United States Attorneys do not charge banks with money laundering offenses because they are afraid of the possible charter consequences ? I ask that question, because in connection with the pending investigation of JP Morgan Chase, a government official stated that, should the bank be convicted of money laundering, that would trigger a mandatory OCC charter revocation hearing.

Frankly, I cannot remember a single case, during the last twenty years, where a national bank was convicted of, or pled guilty, of money laundering. Is these merely a classic coincidence, or do US regulatory agencies, and our law enforcement community, willfully avoid such charges, lest a bank that deserves to lose its charter, actually loses it ?

Who know the answer to this question, I wonder ?


Though it initially appeared that Richard Chichakli, the longtime associate of Viktor Bout, could be cooperating with the authorities, Chichakli's subsequent actions indicated that he intends to vigorously defend himself, Pro Se, and the US Attorney's Office in New York has filed a Motion in Limine, and a Rule 404(b) Notice.

Rule 404(b) of the Federal Rules of Evidence requires Federal prosecutors to give notice when they intend to introduce evidence of other, uncharged, crimes, wrongs or acts, committed by the defendant, or others associated with the conduct. The evidence introduced is intended to show the existence, nature and development of criminal relationships among the co-conspirators. Remember, Viktor Bout, though not on trial at this time, is a co-defendant.

Rile 404(b) evidence is also used to prove motive, opportunity, intent, preparation, plan, knowledge, identity, and the absence of mistake or accident. It serves to show a jury that a defendant was engaged in criminal conduct long before the events that are the subject of the indictment he is on trial for.

The evidence which will be introduced:

(1) Prior aircraft transactions regarding the purchase of Boeing 727 aircraft, and aircraft parts, some of which were completed, and some not.

(2) Prior business dealings with Viktor Bout, and his brother, in the airline industry.

(3) The use of false names and false documentation.

The Motion in Limine, which requests that the Court not allow that a specific topic be introduced at trial, for any purpose, goes to Chichakli's designation and sanction, by the Office of Foreign Assets Control, or OFACA. The defendant has long charged that he was improperly designated as a Specially Designated National, or SDN. The issue is the evidentiary basis underlying OFACs decision to list Richard Chichakli as an SDN, which he has indicated he will seek to challenge at trial, which the Government argues is irrelevant to the case.
 The motion requests that the defendant should be precluded from re-litigating his SDN designation.  We will follow up in a future article when the Court enters its ruling.

Tuesday, October 29, 2013


I call it the Riggs Bank/Wachovia Bank approach to dealing with massive AML/CFT violations; cause bank ownership to sell out and dismantle the offending financial institution, The problem is: it is not deterring other banks from blatantly disregarding their AML/CFT responsibilities; Here's why.

Whether it be a Riggs, or a Wachovia, or a Lebanese-Canadian Bank, the results are the same:

(1) Another financial institution takes over some or all of the bank's assets. The bank's Shareholders get paid. The bank simply ceases to exist; its charter is never revoked, no matter how serious the violations.

(2) the successor bank generally keeps most of the branches. The public does not perceive any interruption in operations, nor that a strong penalty was imposed.

(3) The fines & penalties, which rarely exceed five per cent of the bank's annual profits, are levied, and easily paid.

(4) Absolutely none of the senior bank officers, or the ranking compliance staff, are ever charged with a crime, and they often transition to yet another bank, without losing a step in their careers, or a dime from their income.

(5) The directors of the bank, at whose feet final responsibility sits, are never punished for failing to direct bank staff properly.

The results: other bankers, who see that, over and over again, no serious penalty is ever imposed upon even the worst offenders, are not deterred, and place profits above complying with our AML/CFT laws and regulations. They know that they can pay fines out of profits, that regulators are afraid to revoke the charter of any national bank, and that their officers and compliance staff will not be charged in criminal court.

Is there a solution ? It is obvious; change all of the above. make an example out of the worst of the worst; criminal charges, charter revocation, and dismantling of the bank, not the sale of its assets at a profit. That will make others sit up and take notice. The problem appears to be that it is deemed to be politically incorrect, and thus the problems continue.

Monday, October 28, 2013


The Cuban Convertible Peso (CUC)
The Government of Cuba has announced that it intends to integrate its two-tier monetary system. The Cuban Peso (CUP), which is the national currency, is currently worth four American cents ($ .04); the Convertible Peso (CUC) which is used by tourists and foreign nationals, and others with access to US currency, is valued at par with the US Dollar. It is the only currency accepted in stores that sell imported goods, and is used in the tourist industry; the CUC replaced the US Dollar in 1994.

There are a number of inequities that a unified Peso is intended to remedy, including the present inability of most Cuban nationals to afford to shop in the imported goods stores, unless they are receiving remittances from relatives abroad;The CUP has no value abroad; it is used to buy domesticv goods, and to pay salaries. Will a new Peso present opportunities for money launderers to wash drug profits earned in North America ? Read on, please.
The Cuban Peso (CUP)
Add to the currency consolidation news the fact that Cuba has announced that it will open a "Special Economic Zone" (free trade zone) at the port of Mariel, where foreign businesses can repatriate profits abroad for many years in the future, free of Cuban taxes, and you have a potential perfect storm for money launderers.

It does not take a vivid imagination to create a scenario : US-earned drug profits, that are easily bulk cash smuggled, by sea, into Cuba, could be washed through the Euro-businesses operating in the Mariel Special Economic Zone, and sent to the EU, as profits earned tax-free in Cuba. The dollars could be exchanged for the new strong Peso in the underground economy, or through confederates posing as tourists, or by street-level foreign exchange brokers. After being declared as profits, the money could be changed into Euros, and repatriated abroad.

Mariel Special Economic Zone
Given that Cuba's state-owned banks have been involved in knowingly laundering illicit Medicare profits that have been smuggled into Cuba, one doubts that the launderers will have any problems, once they move their clients' narco-profits to Havana. Foreign banks with branches inside Cuba could also be utilized to send what are declared to be business profits to Europe.

Target dates for the new Peso, and for the opening of the Special Economic Zone, have not been set, but we will be watching for indications that dirty money is being directed through this method, when the opportunity presents itself.

Sunday, October 27, 2013


Senate Bill 1465, the Incorporation Transparency and Law Enforcement Assistance Act, has been sitting in the Judiciary Committee since August 1, 2013. For those readers who did not see my earlier article on the subject*, this important legislation has been stalled in Congress for years.

The law:

(1) Requires positive identification of beneficial owners of new corporations or LLCs. Changes of ownership of existing companies must be reported in 60 days.

(2) Mandates the production of passports or US drivers' licenses as proof, and requires that they be verified.

(3) Demands full compliance with this law, as to existing corporations, within a definite deadline.

(4) Basically forbids bearer shares.

(5) provides criminal penalties of three years in prison, and/or a $10,000 fine for violations.

There's much more, but this represents these most important provisions. In my humble opinion, it is the most significant AML legislation since the USA PATRIOT Act of 201. Unless and until beneficial ownership of American corporations comes out of the dark, enforcement of the Money Laundering Control Act of 1987 will never be truly effective.
*Who is holding up the US Incorporation Transparency Act ?

Friday, October 25, 2013


An appeals court in Shandong has dismissed the appeal of convicted Chinese leader, Bo Xilai, and affirmed his conviction and life sentence. He reportedly has no more appeals as a matter of right, but may file further proceedings, through such actions rarely, if ever, succeed in overturning a criminal conviction in China.

The fact that his trial, and appeal, was, in a limited and controlled way, made public by Chinese officials, indicates that his conviction and punishment were intended to act as a deterrent to Chinese PEPs, many of whom are engaged in rampant corruption, and whose actions ha ve brought the Chinese Communist Party into disrepute.

What compliance officers need to take away from the Bo Xilai case is that official corruption within China remains out of control, and the risk that any Chinese PEP has accumulated illicit wealth, through bribes and kickbacks, is high. Your specific threats:

(1) That a wealthy Chinese businessman, seeking to open an account at your Western bank, is either a disguised PEP, or a front man, placing illicit funds into your financial institution.

(2) That your bank client, who is engaging in business in China, is directly, or indirectly, paying off a Chinese PEP,  through his accounts with you.

Corruption among Chinese PEPs continues to be a clear and present danger to Western banks.

Thursday, October 24, 2013


The US Army Training and Doctrine Command has declassified an excellent field manual, Logos & Insignia of Insurgents, Terrorists, Paramilitary and other Militant Groups Worldwide. If you are working in the counter-terrorism field, and are not aware of this outstanding resource, send me email, and I will send it to you: . It covers all regions of the world, including the United States.

Compliance officers please note: I do not believe it has any AML/CFT application, unless you are specifically looking to identify an obscure logo or insignia that might shed some light on an Enhanced Due Diligence investigation into a suspected terrorist, or militant, organization.


Much has been made this year, by a number of knowledgeable commentators, about Ecuador's increasing involvement in assisting Iran in evading the global sanctions in place against it, due to illegal WMD and ballistic missile programs. While this is correct, it is more important that Ecuador's role is not just a passing interest, but a matter of its national policy, which was initiated five years ago.

On November 6, 2008, a senior Ecuadorian compliance official, Paulina Arauz, pursuant to the request of the then-general manager of the Central Bank of Ecuador, Mauricio Martinez, prepared and delivered a confidential eleven-page Opinion Letter* to Martinez. The opinion dealt with the methods of implementation and facilitation of a financial relationship between Ecuador and Iran:

(1) The document discussed the potential ramifications of any transactions with Iran, spelling out in detail US laws and Executive Orders,  and the possible consequences for Ecuador.

(2) Using information that the author stated was obtained from the dominant commercial off-the-shelf high risk database, several financial institutions said to be known Iranian correspondents, either directly or indirectly, were surveyed, and details on who was, and who was not, sanctioned, as a result, were covered.

The conclusion arrived at; the use of certain obscure third-party correspondents, in financial dealings with Iran, and which do not currently show up on commercial AML databases, provide a solution for the Central Bank, with reduced risk.

This opinion formed the basis for Ecuador's establishment of a close financial relationship with Iran. it means that all substantial international trade transactions with Ecuadorian companies, financial institutions, and indeed the government itself, could very well be fronts for Iran. You should consider the implementation of enhanced Due Diligence, should you encounter any such transactions, lest you be unwittingly facilitating Iran sanctions evasion.

*Informe, Reservado y Confidencial, OC-176-2008 

Wednesday, October 23, 2013


Treasury's Office of Foreign Assets Control has levied a civil penalty of $1.5m, upon a UAE-based investment & trading company, Alma Investment LLC, for violation of Iranian Transactions and Sanctions regulations. The conduct that gave rise to the penalty:

"Alma originated at least six electronic funds transfers, totaling $103,283, processed through financial institutions located in the United States, for the benefit of persons in Iran. OFAC determined that Alma violated the prohibition against the exportation of services, directly or indirectly, from the United States, to Iran, or the Government of Iran, set forth in §560.204 of the regulations."*

Note well that the civil penalty is fifteen times the amount transferred; There were a number of aggravating factors cited by OFAC:

(A) Alma concealed and/or omitted material information in funds transfers originated by Alma, for processing through the United States. This conduct was willful and reckless.
(B) Alma appears to be associated with multiple Iranian entities, and facilitated Iran-related payments through the United States.
(C) Alma's management, including senior management, had actual knowledge of the illegal conduct.
(D) Alma has no compliance program.
(E) Alma did not cooperate with OFAC during the course of the investigation.
(F) Alma omitted references to OFAC-sanctioned countries or persons on the transactions, which were processed through the United States.

The Enforcement Information stated that the penalty will have a deterrence effect, and encourage greater due diligence.

* Enforcement Information for October 21, 2013.


There have been multiple complaints, by Western authors, to the effect that they have noticed that certain passages within their work, being printed for Chinese consumption, were deleted, if they contained any segments that were unflattering, or embarrassing, to the Government of China. China simply had their printers remove anything it found objectionable.

It is a common practice with all Chinese media. Remember this when you are conducting due diligence, or enhanced due diligence, on Chinese PEPs or companies, whether they be state-owned, or privately held. The negative information that you are looking to uncover about your target may have already been removed. Use external sources, from outside China, wherever possible, to get a cleaner, and clearer, picture of the individual or entity that you are looking at. Hong Kong resources are generally preferable to anything from Mainland China, unless they themselves rely upon Chinese source material.

This also means that, if you are looking at English-language translations of Chinese material, you will want to look critically at the source, if the original was first published inside China. Corruption details, and negative information on your target, probably were redacted by Chinese authorities.

This does not mean that you dismiss all China-source material; just understand that you are not getting the complete picture, warts and all, from it. 

Tuesday, October 22, 2013


A major Miami-area executive search firm was advertising recently for clerical staff, to prepare and file delinquent Suspicious Activity Reports for a bank, located here, that has a long and sordid history of AML compliance deficiencies. The employment offer was for an extremely small hourly wage, which means that anyone who was qualified, through training and experience, to analyze the available information, and properly compose SARs, would not be applying for the job. The bank officer who tried to cut corners by paying a pittance for this important compliance work should be terminated, in my humble opinion. 

Moreover, the bank was, according to the executive recruiter, more than ONE YEAR BEHIND in its SAR filings. Where are the Federal auditors and regulators here ? No bank, even one with a robust AML/CFT program, should be late filing its SARs the next year. The money launderers will be in, and out, of the bank, and long gone, well before the SARs are prepared and filed.

Apparently there are several other Miami banks with this same SAR delinquency. This is what happens when regulatory agencies only give offending banks repeated Cease & Desist Orders, when they catch them with violations. The banks simply do not fear the regulators. Only when one of the most egregious violator loses its charter will the other banks institute truly effective AML/CFT compliance. 


Several years ago, at a risk management presentation I was giving to officers and directors of a major bank in the Dominican Republic, I asked the bank's principal owner how he handled AML compliance for accounts of local money service businesses. He replied that he did not allow any of them to open accounts at the bank, due to their extremely high-risk nature, chronic AML deficiencies, and probability of influence or control of narcotics traffickers.

How can a small, suburban New Jersey bank process more than $1.5bn in transactions with four Casas de Cambio, located in such high-risk jurisdictions as Mexico and the Dominican Republic, for over two years, without being noticed by US regulators and law enforcement agencies ? That's what happened at the now-defunct tiny (and undercapitalized) Saddle River Valley Bank, of Montclair, New Jersey. What's wrong with this picture ?

The bank, whose holding company was recently handed an $8.2m civil penalty by OCC, FinCEN, and the US Attorney in the District of New Jersey, admitted that it failed to file 190 SARs. Surely all this traffic, particularly with Mexican Casas de Cambio, must have been noticed by Federal law enforcement agencies, who were already watching the MSBs for other reasons. And what about those Dominican Casas de Cambio; I know that they are regular investigative targets.

What this case demonstrates is the folly of long-term monitoring; allowing these MSBs to move billion of dollars through a US bank, while you patiently monitor the target, allows the money launderers to sue the bank, and then move on to another, as yet unknown to you, and do it again.

I am aware that the idea is to identify all the narcotics traffickers involved, but this method, which appears to be ingrained in law enforcement policy, results in major short-term successes for the money launderers. When you have cleaned over a billion dollars, as a money launderer, they have beaten the system; filing criminal indictments two to four years later is too little, too late, in my opinion.

Monday, October 21, 2013


Jacques de Groote, who was the former Executive Director of the International Monetary Fund, and later the Belgian Director at the World Bank, was sentenced to probation and a large fine this week, after he was convicted in a case where €500m was seized, and which charged aggravated money laundering, fraud, and securities fraud.

While the Czech managers, who were the major actors in the fraudulent purchase of a Czech firm being denationalized, received prison terms, de Groote's only punishment was to pay a fine of 230 Swiss Francs, daily, for 330 days, for a total of 759,000 CHF. When Swiss courts pronounce lenient sentences that do not include prison time for fraud on this scale, they fail to deter future financial crime. 


Raoul Weil, the former head of UBS Global Wealth Management division, was arrested this week in Bologna, Italy, after traveling there from his native Switzerland, where, as a Swiss national, he could not be extradited. Weil was declared a fugitive in 2009, by the US Department of Justice, when he declined to travel to Miami to face Federal charges that he aided and abetted high net-worth US citizens in evading taxes on their wealth, by hiding the funds in accounts whose owners could not be readily ascertained.

Weil, who was charged in 2008 with Conspiracy to Defraud the United States, allegedly ran a team of Swiss bankers, who entered America as tourists, and worked with United States taxpayers to hide their assets at UBS, using offshore accounts, and other vehicles designed to obscure beneficial ownership. The bankers employed techniques more common to individuals engaged in espionage than financial professionals, for they were not licensed in the US, including the lurid tale about their smuggling diamonds into the country inside toothpaste tubes, and using encrypted email accounts, all to assist tax evaders.

Weill allegedly supervised the tax evasion activities of approximately  17,000 US citizens; the figure of $20bn, hidden from the US taxman, has been alleged in the Indictment. He faces a maximum of five years in Federal Prison, and a $250,000 fine. Known to be a cocky, confident businessman, Weil may have finally run into a problem that he cannot solve.


The US District Judge in the Douglas Bates case, which is part of the billion dollar Scott Rothstein Ponzi scheme case in Fort Lauderdale, Florida, has ruled that the Magistrate was correct in restricting Bates from the practice of law, as a special condition of his bond. Bates is scheduled to go to trial in November, on multiple Wire Fraud charges. The charges accuse him of allowing Rothstein to further the fraud.

The Court, in its Order*, noted that Bates allegedly aid and abetted Scott Rothstein in his Ponzi scheme, and that attorney  Bates' actions directly led to the loss of sixth million dollars. The defendant's attorney had argued that in Bates' workers' compensation and personal injury law practice, he did not handle client funds, and therefore posed no risk to third parties.

There apparently was testimony at the bond hearing "that Mr. Bates (1) sent letters alleging to represent clients here knowingly did not represent (2) lied to individuals about business dealings that did not exist or that he had no involvement in; (3) arranged business meetings with individuals that were provided false information at his behest; and (4) sent opinion letters to individuals regarding business plans that he had no knowledge of." The District Judge found that these activities "squarely implicate the practice of law."

The Court denied Mr. Bates' attorney's motion, agreeing that there were multiple acts, that the condition imposed is not unprecedented, and that that the restriction is for the protection of the community.
*Entered October 19, 2013; Case No.: 13-60219-cr-Middlebrooks (SD FL).


Sunday, October 20, 2013


If you carefully read my recent article, Malaysia, a Center of Iran Sanctions Activity, you may have noticed that the Iranian businessman, who admitted being a highly successful sanctions evader regarding receiving payments for Iranian oil, utilized legitimate, as well as shell, companies in Turkey to achieve his goals. While the UAE and Malaysia were well-known participants, the inclusion of Turkey had not been seen publicly before.

Turkey has moved closer to Iran recently, in both international trade, as well as inter-governmental cooperation, since the incident involving a vessel attempting to enter restricted waters off the Palestinian Territory of Gaza resulted in the deaths of several Turkish nationals, but there are troubling signs of cooperation, which raise the risks that agencies within the Government of Turkey may be facilitating Iranian sanctions evasion:

(1) Last week, authoritative American media reported that Turkish intelligence services had identified ten Iranian nationals involved in espionage, on behalf of Israel; They had met with their Israeli handlers inside Turkey, and had subsequently been identified by Turkey to Iran. Some have been reportedly executed by hanging, according to published reports.

(2) Classified intelligence on Iran, delivered to Turkey by the United States and by Israel, has reportedly been shared, by Turkey, with Iran.

(3) The chief of a major Turkish intelligence agency is known to have close ties with Iran, and has been accused by some reliable sources of Anti-Semitic sentiments.

Since intelligence services are well-versed in the formation and operation of shell and front companies, and given the obvious pro-Iran leanings of Turkey's intelligence agency, it is reasonable
to assume that Iran has suggested that some officers in the Turkish Government assist it in evading existing global sanctions, and that it has facilitated payments, both on and out of Iran, that violate UN sanctions.

Pay particular attention to transactions where you are receiving payment from those Turkish banks who have branches or subsidiaries in Iraq. I have previously named them on this blog; an adept Tehran purchaser/sanctions evader could easily route the payments as follows:

(A) From an Iranian bank to an Iraqi bank. (No compliance problems from the Iraqis, unfortunately.)
(B) From the Iraqi bank to a Turkish bank's branch in Baghdad.
(C) An intrabank transfer, to the Turkish bank's Ankara or Istanbul headquarters.
(D) Payment to the US or EU bank. The original Iranian payment is three steps removed, and therefore unknown to the recipient, or its bank.

Therefore, compliance officers at international banks whose clients are engaged in the sale of goods to Turkish companies will want to carefully examine those transactions. I know that it is probably too much to expect your customers to get letters, from the Turkish purchasers, that are the functional equivalent of End User certificates, but you can ask for them. Such written assurances might very well be sufficient, should US regulators, or law enforcement agencies, come around later, asking why your customer's entire shipment of goods showed up in Iran. 

(1) Are dual-purpose, meaning that they have  potential military applications in WMD or ballistic  missile programs, and could be used by Iran for that purpose.

(2) Are goods that have not been previously ordered by the client's customer previously, or in such quantities that far exceed the customer's possible short-term needs.

(3) Are ordered from Turkish companies that are not known to your bank client.

(4) Are located in Eastern Turkey, near the Iranian frontier, and the goods purchased are not normally shipped to that area.

(5) Are being sold for a price that exceeds current market pricing, or where your bank client has urgently requested that the payments be transferred, or where you cannot verify the identity of the purchasing corporation.

Given Turkey's drift into the Iranian orbit, you need to be careful with Turkish transactions.  


Saturday, October 19, 2013


Readers who wish to view the complete text of the Order to Cease and Desist Issued upon Consent, against Commerzbank AG, and Commerze Bank AG, New York branch, for ineffective anti-money laundering controls, can find it here*.
Cease & Desist Order

Friday, October 18, 2013


The jeweler and businessman who were engaged in the secret purchase of a 12 carat yellow diamond that convicted Ponzi schemer Scott Rothstein's wife hid from the court-appointed trustee, have both entered pleas of guilty, to Obstruction of Justice charges, in Federal Court. Kim Rothstein, Scott's wife, was to have testified against them at their trial. Her availability as a witness most likely persuaded the defendants to enter a guilty plea, and she probably will get credit for this.

Kin Rothstein's much-delayed sentencing will now proceed, and you can expect that she will not get anywhere near the five-year maximum, due to her Substantial Assistance. Sentencing is now set for November 12th. The Court has already hunted that she will get some prison time, so do not expect home confinement or probation.

Thursday, October 17, 2013


Today (October 17) Bank Frey & Co AG, a Swiss financial institution under investigation for banking US taxpayers, announced that it will "cease business activity." The announcement stated that the banks was financially sound, and will not be liquidated.

The stated reasons for the closing( direct quotes):
(1) Increasingly difficult market conditions.
(2) Ever-growing regulations and the unsustainable requirements that smaller private banks are required to comply with.
(3) The [Swiss] tax dispute with the USA.

Though Bank Frey is not currently under indictment in the United States, this action may have taken place at this time due to the recent guilty plea of Swiss-American attorney Edgar Paltzer, in US District Court in New York City,* to Conspiracy to Commit Tax Fraud, in connection with accounts of US taxpayers in the bank. It appears that Paltzer is cooperating with American authorities.

Readers who did not see the original article covering the New York Federal case  can find it here**.
* Case No.: 13-cr-0282 (SD NY).
**US Accuses Swiss Lawyer and Banker of Assisting in US Tax Evasion at Swiss Bank


Being that money launderers are forever seeking weaknesses in the system, through which to drive dirty money, the question arises: did anyone find a new opportunity to launder criminal profits during the 16-day US Government shutdown ? Given that many regulatory agencies were probably not deemed to be essential services, obviously, agency reviews  of SARs filed were a casualty, but is there anything else ? Perhaps if we see a spike in new criminal investigations, covering crimes that occurred during the shutdown period, someone will identify specific tactics and strategies employed to move money during that period.

I am wondering whether money launderer-controlled charitable organizations might have been used to move the proceeds of crime during the shutdown period, but there must be other effective, albeit temporary, openings that were exploited. If any surface, I will post them here.

Wednesday, October 16, 2013


The hits just keep on coming: A south-bound 1999 Ford Ranger, driven by Mexican national Edgar Montoya-Heredia, was stopped at the Calexico border crossing, and referred to secondary inspection. Hidden in the spare tire were 24 packages containing $322,860 in US currency. The subject, who stated that he had been visiting a friend in an American hospital, was taken into custody, and charged with  bulk cash smuggling*. he claimed that he had only bought the vehicle three months before.
* Case No.: 13-mj-08822-PCL (SD CA).


Okke Ornstein, who was sentenced to 38 months in a Panamanian prison, in connection with his convictions in four separate white-collar cases in the Republic of Panama, failed to appear for his fifth criminal felony trial and has illegally fled the jurisdiction for refuge in Europe. He is believed to be hiding somewhere in the Netherlands, where there is a pending criminal investigation against him for child pornography.

Ornstein is thought to have fled Panama, rather than risk arrest for years of unpaid child support owed to the mother of his two adopted children, who is the former companion of convicted master fraudster Marc Harris, Ornstein's ex-partner in a Ponzi scheme that collapsed after Harris' arrest. Ornstein received immunity from prosecution in that case. He has a reputation in Panama, not only as a fraudster, but also as a serial blackmailer; He is regarded in Panama City as a danger to the community.

The fugitive, who has been posting to the Internet in Dutch of late, should be considered a dangerous career criminal, and should he attempt to establish an account relationship at an EU bank, it is hoped that the banks' compliance officers are all readers of this blog.

Ornstein, who is not a fan of the undersigned's articles about him, appearing frequently on this blog, has repeatedly claimed that the information about him that has been published is untrue, but I believe that his four felony convictions speak for themselves. He is a danger to the investing public, and let us hope that Panama has contacted INTERPOL, to have a Red Notice issued against him.

Tuesday, October 15, 2013


Downtown Miami
Things are heating up in Miami, and I am not referring to the temperature; individuals who have been reporting on the rampant money laundering occurring in, through, and out of, the Bolivarian Republic of Venezuela, have been targeted, threatened and harassed, and there is more trouble coming to the Magic City.

Here is what we have seen lately:

(1) A Miami media figure, who has been extensively covering Venezuelan money laundering news, had a visit, at his home, from unknown visitors, who left a threatening note, warning him from continuing to expose the rampant laundering in Venezuela. Fortunately, he was not home at the time.

(2) Two Venezuelan expats, both known opponents of the regime, were the object of intentional automobile accidents, conducted by a pair of Cuban agents who have been conducting surveillance of individuals who are outspoken critics of the Maduro regime. The obvious intent is to intimidate regime opponents. Please note that they are known to drive a white Range Rover while conducting surveillance. It is doubtful that they have registered as agent of a foreign government, as Federal law requires. Remember that a Venezuelan agent in the "Suitcasegate" case was convicted for such unlawful activities in Miami a while back. Let's hope that Miami FBI office is watching the watchers.

(3) A Colonel in the Venezuelan Army, whose initials are R.V.L.P., is reportedly due to arrive in Miami this week, to supervise the campaign of intimidation. Look for him to pose as a civilian, and a tourist. Unfortunately, CBP will probably allow him into the country, as he is not designated under any OFAC sanction, but he does pose a threat to the Miami Venezuelan community, as well as those agents whose identities thus far have remained unknown.

(4) One of Miami's more experienced politicians, who is based in Doral, the Miami-Dade municipality with the largest number of Venezuelans, and who is no friend of the Maduro regime, has promised to actually publish a blacklist of Venezuelan money launderers. If he is referring to the list I am familiar with, and which I have discussed on this blog, its publication will greatly upset the Government of Venezuela, as well as cause compliance officers at Miami-area banks to run to their client lists, and then to their attorneys, for advice.

Notwithstanding any implied or express threats from Venezuelan or Cuban agents, we will continue to cover Venezuelan money laundering activities on this blog; please stay tuned, as things will certainly get ugly, but Miami can handle it.

Monday, October 14, 2013


We have all seen the latest update on the North Korean freighter, seized by the Republic of Panama when it attempted to illegally transit the Panama Canal with undeclared military cargo; the weapons and aircraft hidden under tons of sugar were all in operational status, and the MiGs even had fuel in their tanks, but there is much more to the story. Details emerging on the true destination of the missiles, arms, and fighter jets are alarming many in Latin America, though they are curiously absent from mainstream North American and European media.

Here is what was supposed to happen, before some unknown source tipped off the Panamanian Government, which searched, and detained, the North Korean vessel, before it could enter the Panama Canal:

(1) After transiting the Canal, The missiles and small arms were to be offloaded at a clandestine port in Ecuador, close to Colombia. The FARC was then slated to take possession of these arms, and therefore upset the balance of power between its troops and the Colombian Armed Forces, as Colombian military aircraft would thereafter be at risk for missile attack, and several of the FARC Fronts, thus rearmed, would be able to take the offensive once more. Apparently, the peace process, currently under way in Havana, is being conducted by the FARC in bad faith.

Illegal cargo
(2) The Venezuelan portion of the plan, started by Cuban officials working in the Maduro government, involved publicly releasing fabricated information regarding a planned invasion of Venezuela by Opposition forces. There was no such invasion plan.

(3) The Maduro Government ordered that the MiG fighter jets were to be deployed from a clandestine airstrip in northern Ecuador, reportedly using Cuban pilots, to attack targets in Venezuela's principal cities, and the operation blamed upon the Venezuelan Opposition, former Colombian President Uribe, and several American conservatives who are outspoken critics of the Maduro Government. This fabricated "offensive" would be used as a pretext for the Venezuelan Government to respond violently, arresting or eliminating the entire Opposition leadership, and moving Venezuela closer to an absolute police state, under close Cuban supervision.

The Cuban general officer who was one of the planners of the operation, Air Force General Pedro Mendiondo Gómez, died shortly after the operation was terminated by the seizure of the North Korean vessel; his death is suspiciously listed as an automobile accident. The North Korean general involved has disappeared, and his whereabouts are unknown.

While this may sound like something from a Tom Clancy novel,  I assure you that there is a factual basis for this information. As a matter of fact, the day that the vessel was seized,  a former Venezuelan Ambassador and security analyst, Thor Halvorssen, who is one of the leaders of Venezuelans in exile, was the first to warn about this operation, and advised that it posed a clear and present danger to both countries. But for Mr. Halvorssen's predictions, and the timely intervention of Panamanian authorities, this plot would have become reality. The Spanish-language version of the Miami Herald covered this case, in an article published on Saturday, substantially after it occurred; no other articles have appeared in the press.

Anyone who believes that the FARC is ready to make peace with Colombia, or who believes that the Maduro Government is anything other than an evil dictatorship, guided by Cuba, should now recognize the ugly reality; the FARC and the Maduro Government want to take their respective countries down a very long road, where there is no light at the end of the tunnel, only darkness.


We have previously reported that Viktor Bout's appeal of his Federal criminal conviction was affirmed by the Second Circuit. His attorney of record, Albert Dayan, has now filed a Petition for Rehearing and Rehearing En Banc*.

The grounds for the petition, which Mr. Dayan's brief states involves questions of exceptional importance:

(1) Outrageous conduct of the United States Government violated Due Process.
(2) Conspiracy to Commit Reckless Murder is a crime that does not exist.

In another development, Bout's wife, Alla Bout, has told Russian media that her husband has sent a letter to Mr. Dayan, terminating his representation, and that Bout has decided not to proceed further with the appeal process, which is contradicted by the filing of the Petition for Rehearing En Banc.

Mr. Dayan's office has advised that he has not as yet received any such communication from his client.
*Meaning that, if granted, the case will come before all the judges of the appellate court, for a their decision.  

Sunday, October 13, 2013


Balbina del Carmen Herrera Arauz, the leader of Panama's Democratic Revolutionary Party (PRD), has been sentenced to three years in prison for revealing the contents of emails that reportedly implicate Panamanian President Ricardo Martinelli Berrocal in the Finmeccanica bribery scandal. Herrera, who is a former candidate for the presidency, released private e-mail messages in Panama's biggest scandal, in which individuals linked to Martinelli reportedly received large kickbacks, to be delivered to the Panamanian President, for government contracts. Whether Martinelli will be charged with corruption in Italy, after he leaves office next year, is one of the more interesting debates in Panamanian politics.

Panama's fatally flawed criminal justice system rarely indicts or convicts the guilty, but Sra. Herrera may have been targeted for a specific purpose. The problem is, it is difficult to ascertain whether she was charged because of the threat that her disclosures posed to Mr. Martinelli, or other factors.

 Herrera was the 2009 presidential candidate who received substantial support from the late Hugo Chavez of Venezuela. She professes political views on the extreme left, and her election could have moved Panama into the Venezuela-Ecuador-Nicaragua orbit, and away from the influence of the United States. She has been linked to Hezbollah, as well as to individuals who held power during the Noriega presidency. Do not expect her to cease her opposition to the present government.


True story: a pair of Colombian fraudsters, engaged in a Ponzi scheme that promises investors a 100-150% return in thirty days, have recently latched onto their nation's most familiar Ponzi-face, as a marketing tool. This pair took the old facsimile American one hundred dollar bill, containing the the image of Colombia's master Ponzi schemer, David Murcia Guzmán, which has been out there for years, and turned it into their personal scheme, by adding the names and supposed telephone numbers of the fraudsters, and place the promised huge return right on the face of the document. In essence, the new schemers are relying upon Murcia's notoriety/fame to sell their scam.

What is being done is to trade upon the early, successful, years of the Murcia fraud, and suck in victims, some of whom did originally make good money through Murcia, before the Ponzi scheme imploded.You simply cannot make this stuff up. One wonders what Mr. Murcia, currently scheduled to be returned to Colombia,to serve his sentence, after he complete his US prison term, thinks about this attempt to steal his brand.

Saturday, October 12, 2013


The Special Tribunal for Lebanon has issued an arrest warrant for Hassan Habib Merhi, named as an associate of Hezbollah, for his role in the assassination of Rafik Hariri, and twenty one others. 


Convicted Colombian billion dollar Ponzi schemer, David Helmut Eduardo Murcia Guzmán, in an extensive interview, has named several of Panama's senior officials and politicians as members of an organized crime group that he refers to as Panama's Mafia, and asserts that several of them stole millions, or even billions,  of dollars entrusted to them.

Murcia has now gone public with information, previously reported here, regarding his extensive dealings with Panamanian President Ricardo Martinelli, and alleged that Martinelli, to whom he delivered a large amount of cash, is guilty of grand larceny. Though Murcia's reputation for truth may be questionable, due to his multiple criminal convictions, and operation of an international Ponzi scheme that defrauded millions, other sources have repeatedly confirmed Murcia's claims that he lost literally billions of dollars to several prominent Panamanian businessmen and political figures. You can take his statements with a grain of salt, but you cannot ignore the evidence.


Douglas Bates

Douglas Bates is a workers' compensation and personal injury attorney in Plantation, Florida; Mr. Bates was indicted in August, in one of the Scott Rothstein Ponzi scheme Federal cases, where he stands accused of perpetrating an elaborate charade upon investors in the Rothstein fraud: misrepresenting that he referred many important cases to the Ponzi schemer, to convince the victims, including a New York-based hedge fund, that the phantom settlement clients Rothstein claimed to represent were real.

Out on bond, the Magistrate Judge imposed an "onerous" Special Condition upon Mr. Bates, according to his attorney. I will quote it here verbatim from the bond hearing:

    "Cease and desist in the practice of law, in any manner, while on release, immediately."

His lawyer filed a motion to amend the conditions of his Pretrial Release, arguing:

(A) The order amounted to a determination of guilt without trial by jury.
(B) The order was a denial of the presumption of innocence.
(C) The order was a denial of Due process; it amount to a taking of his law business.

The US Attorney responded that the Magistrate was correct, in that he found that Bates' "pervasive criminal activity" kept Rothstein's Ponzi scheme alive, when he provided, on law firm stationary, false opinions and statements.

Bates has now appealed the Magistrate's ruling to the District Judge handling the case.  The issue: whether a lawyer who was a principal actor in a Ponzi scheme poses a sufficiently clear threat to the public to terminate his legal practice, while he is out on bail, and prior to his trial. There are valid points to be made on both sides of the argument.

When the District Judge makes his ruling, we shall update our readers accordingly.

Friday, October 11, 2013


R/V Teknik Perdana
The Venezuelan Navy, entering Guyanese maritime territory that Venezuela claims for itself, has seized The vessel and crew of the Research Vessel Teknik Perdana, owned by US-based Anadarko Petroleum, and brought it into Venezuelan waters. The Guyana Ministry of Foreign Affairs has firmly objected to this act, in extremely strong public statements, and stated that this incident could seriously damage the relationship between the two countries, as it violates international law, and existing agreements between the two countries.

The vessel, with a US-based crew, was operating in the Roraima Block, on behalf of the Government of Guyana, conducting an exploration of the sea floor, when it was intercepted by the Venezuelan naval vessel "Yakuana" and forced to sail to Margarita Island. it current status is unknown. There has been no response yet, by the United States, but you can be certain that it will come shortly, as the recent Venezuelan expulsion of American diplomats in Venezuela, and the subsequent similar American action against Venezuelan diplomats in the US has shown.

Roraima exploration block
Guyana has been, for many years, under the influence of the Castro regime in Cuba, and Raul Castro in particular,  and for that reason it is believed that Venezuela has not aggressively pursued its maritime territorial claim. Informed sources advise that the failure, on the part of Venezuelan President Maduro, to object to the Guyanese contract with Anadarko, at the time he visited Guyana recently on a official visit, was not well received by the Venezuelan military, which contends that the disputed maritime area is under Venezuelan sovereignty, and that the Anadarko agreement should not have been permitted without objection.
Most likely, the Venezuelan Navy initiated this incident to embarrass President Maduro, and it does  demonstrates the weakness of his current position as national leader. The government-controlled press in Venezuela has been completely silent about this incident, indicating that it was not behind the seizure of the vessel, and does not want its citizens to have one more topic to criticize Maduro about. His regime appears to be on its way out, but how that plays out is anybody's guess.

 This seizure could further poison US-Venezuelan relations, and result in an American retaliation, diplomatic or otherwise, that will raise risk levels for foreign investment in Venezuela. The United States has historically responded vigorously to seizures of its vessels and crews, going all the way back to the Barbary Wars, on the north coast of Africa in the nineteenth century. Do not expect it to be ignored.