Sunday, March 30, 2014


National Assembly of Cuba
The National Assembly of Cuba, in an effort to bring a much-needed $2bn into the country's treasury, has approved a new foreign investment law, with significant changes from the existing legislation. Could this new law attract the wrong type of "investor" perhaps ?

The new foreign direct investment law provides:

(1) Taxation of profits has been cut by half, to only fifteen (15) per cent.

(2) Personal income tax, and labor tax, has been abolished for investors who qualify under the new program, which is still being created.

(3) All foreign nationals are eligible, including Cuban exiles, provided they they have not been vocal opponents of the regime, generally referred to by the Cuban Government as the "Miami Mafia," though existing sanctions may pose a problem.

One wonders, since Cuba is, frankly, desperate for cash, whether effective due diligence will really be conducted upon those foreign companies that choose to jump into the fray. Money launderers for Latin American narcotics traffickers know that the information will definitely not be shared with American law enforcement agencies, as Cuba is isolated from such contact by the existing 50-year embargo, and sanctions. Therefore, you can expect that enterprising money launderers, who are holding narco-cash, will certainly attempt to, using shell companies and clean front men, place some of their clients' criminal proceeds into Cuba, inside the so-called Bamboo Curtain, far from American prying eyes.

The beauty of laundering the proceeds of crime inside Cuba, is that one need only wait, until a democratic government is eventually, installed in Cuba, and American investors flock to the island. At that time, not only will a handsome profit be had, the criminal origins of the investment capital will never surface.

There is a definite risk for American investors who will purchase foreign-owned businesses in a future democratic Cuba; if the sellers are later indicted, in the United States, they may choose to disclose the criminal origins of the Cuban businesses that they have sold, and US seizure and forfeiture could be the end result, depriving the US investor of the business that it had recently purchased. 

Saturday, March 29, 2014


Joel Steinger

Joel Steinger, the former owner of Mutual Benefits Corporation, once the largest life settlement/traded life policy firm in the world, this week entered a plea of guilty to a fraud count in his 2008 criminal case, bringing to an end a decade of indictments against executives and staff at the closed company, which was closed down by regulators, and found to be a billion dollar Ponzi scheme.

The other 25 counts pending against defendant Steinger are to be dismissed, under the plea agreement, in which he admitted that he doctored the life expectancies issued to investors, misled his victims, and orchestrated the massive Ponzi scheme, in which losses are estimated to be $800m, to cover insurance premiums, and to refund money to unhappy investors, while taking $15m out of the company. The Eleventh Circuit Court of Appeals held, in a case involving Mutual Benefits, that life settlements constituted  securities, and were required to be registered with the Securities & Exchange Commission.

The Mutual Benefits scandal gave the life settlements industry a black eye, from which many observers believe it has still not recovered. Sentencing is set for June 6; the Plea Agreement recites that he faces consecutive 20 year sentences, and a minimum 10 year sentence, for committing an additional crime while out on bond. Steinger, who is disabled due to a chronic back injury, has been in custody, under medical care, for the past eighteen months.

The company's trustee, Fort Lauderdale attorney Anthony Livoti, is scheduled to be sentenced next week. He was convicted by a jury in 2013 on multiple counts, including money laundering, and could receive life in prison. The firm's outside counsel, Michael McNerney, is currently serving a five-year sentence.

 Mr. Livoti


In the shadowy world of dollar-denominated Venezuelan sovereign bonds, where brokers have  covert relationships with Venezuelan government officials, and pay illegal kickbacks in the millions of dollars, to receive allocations of the bonds, three parallel criminal, civil, and SEC cases have provided a small window into how Politically-Exposed Persons (PEPs) violate the Foreign Corrupt Practices Act on a grand scale. The details were exposed because the operator of an investment fund was running a Ponzi scheme that was the subject of a criminal indictment in US District Court in Connecticut.

Francisco Illarramendi, who pled guilty in 2011, to running a $500m Ponzi scheme in his Connecticut hedge fund, has still not yet been sentenced. Admittedly a complex case, where the calculation of loss can be extremely difficult, his sentencing, which has been postponed several times, has been reset again, this time for July 10th. What the real reason for the delay ? Here is one theory.

If there are additional parties defendant in the case, who are now taken into custody, Illarramendi might receive a potentially shorter sentence, should he testify against them, prior to his own sentencing. Sometimes, Federal prosecutors deliberately delay sentencing, to afford a defendant who had already pled the opportunity of testifying, and thereby most likely receiving a lighter sentence than he would have, had he not cooperated at the trial of another. Rule 35, of the Federal Rules of Criminal Procedure, allows the Court to grant a Downward Departure, from the suggested Federal Guidelines sentence, for Substantial Cooperation, if rendered before sentencing. Is this what is delaying the sentencing of an individual who was solely responsible for a major loss in the pension fund of PDVSA, the Venezuelan government oil monopoly ?

Illarramendi can, technically, receive two bites of the apple; he can also be eligible for a sentence reduction, if the US files a motion within one year of sentencing, which generally is not spotted by the media or the victims, and could result in his release years early; if it happens, the victims of the Ponzi scheme may feel that they have been denied justice in this case. The US Attorney, however, may feel that his assistance was worth it; conviction of other major conspirators is important.

Though information on indicted parties, who are outside the United States, and not in custody, is sealed, to prevent them from learning of the charges, and eluding arrest, it is believed that there are two individuals who may be under sealed indictment in this case:

(1) Moris Beracha, whom we have covered in detail in a previous article, entitled Will Prominent Venezuelan Businessman be charged in massive Connecticut Hedge Fund Ponzi Scheme ? if you have not yet read this article, and hyperlink at the end of the page, it is humbly suggested that you do, and they supply essential context to the story.

(2) Javier José Ardura Gomez, Beracha's associate for a number of the years that Beracha allegedly funneled money to Illarramundi, to keep the Ponzi scheme going. Ardura comes from a background in Swiss banking and finance. Both Beracha and Ardura, who lives in Spain, have avoided entering the United States, ever since Beracha was sued by a Receiver, seeking to marshall assets of the hedge fund, to repay victims. Ardura's relationship to Illarramendi's Ponzi scheme, and to other PEPs who have a sordid history of working in the shadows of Venezuelan government finance, including Venezuelan Structured Notes, will be the subject of a subsequent article. He keeps an extremely low profile for a person involved on such a grand scale, but his financial affairs, and his links to Beracha's holdings, serve to expose a web of interesting connections, which the Receiver may want to look at.

Both of these individuals have substantial assets in the United States, though some of them have been artfully acquired, so as to conceal beneficial ownership. Whether the court-appointed Receiver for the hedge fund, currently engaged in a civil suit against Beracha, will seize any of them is not known. In our next installment of this article, we will look at some these assets. Can anyone here spell Foreign Corrupt Practices Act ?
For further reading:
Federal Judge rules that Receiver's suit against Moris Beracha to recover $170m Hedge Fund Ponzi Scheme can move forward


Okke Ornstein
On the run from the Panamanian criminal justice system, convicted career criminal Okke Ornstein has managed to avoid his scheduled prison term by artfully eluding the authorities, and popping up in other parts of the world, but this may soon come to an end. Why ? It seems that Okke has crossed a specially-designated global terrorist organization, and Hamas does not have a reputation for forgiveness. Even the most arrogant white-collar criminal knows better than to steal from terrorists.

As we have previously reported, Ornstein's involvement with a Palestinian refugee charity that was a Hamas front, ended badly. He reportedly embezzled more than$35,000 from donations, which he was soliciting on the Internet. Soon thereafter, he disappeared from the Netherlands, where he and a Palestinian fundraiser, Amin Abu Rashed, who has been linked to two other US- sanctioned charities, were working together, on a bogus charity that claimed to be supporting Palestinian refugees forced to flee Syria, but in truth and in fact was a Hamas front.

Amin Abu Rashed
Ornstein's problems are multiplying; his multiple fraud convictions in Panama, and prison sentences, have led to a referral to INTERPOL requesting that a Red Card be issued for his apprehension. He is believed to have left the Netherlands, where he originally fled from for Panama, dodging an investigation into his involvement in a child pornography business. Soon after arriving in Panama, he served as general manager for Ponzi schemer Marc Harris. He has been a thorn in the side of the Panamanian business community for far too long.

Will it all end badly for Panama's most prolific fraudster ? And what will it be, a long prison term, in a Central American jail, or terminated "with extreme prejudice ?" We cannot say, but this career criminal has given Panamanian and Americans far too much grief, to allow him to continue to operate.

Thursday, March 27, 2014


The recent arrest, by US authorities, of a Canadian attorney, working in the Turks & Caicos Islands, on charges of money laundering, is a painful reminder that a select group of Canadian lawyers, working in the tax havens of the Caribbean, have been engaged in money laundering for decades. Unfortunately, due to a lack of law enforcement resources, political will, and a criminal justice system known to be extremely lenient on white-collar crime, the Government of Canada has seen fit to ignore the problem.

Generally, only when the Canadian lawyer/laundrymen violate American law is justice served. Many of these lawyers. whether they operate out of the Turks & Caicos, or the other British Overseas Territories, facilitate their clients' tax evasion schemes, and some move the proceeds of crime into non-transparent offshore accounts.

Many legal observers point to the fact that large Canadian law firms often have one or two partners deeply engaged in Canada's political parties, and they have been known to exert pressure upon local prosecutors, when lawyers at their firms have been suspected of money laundering. Additionally, I am not blind to the fact that many lawyers serving in Crown Prosecution Service Canada understand that bringing money laundering charges against lawyers at large firms may ultimately result in themselves being denied the opportunity to be hired by one of these firms, when they leave government service.

One wonders what it will take to motivate Ottawa to move against the small circle of Canadian attorney-laundrymen; meanwhile, they are free to operate in the old Spanish Main.


Four judges of the Supreme Court of Panama have been criminally charged with fraud, intimidation and interference, after they allegedly leaned on another judge, to dismiss charges against a company that blocked the distribution of La Prensa newspapers containing a story about the role of President Martinelli in the massive Finmeccanica corruption scandal. Charges, which include influence peddling, and abuse of authority, directly point a finger at the President of the Court, José Ayu Prado.

The other judges named:
(1) Alejandro Moncada Luna
(2) Wilfredo Saenz
(3)Secundino Mendieta

Panama's Minister of Tourism, Salomón Shamah, was also charged. Shamah, a controversial figure who has been linked to arms and narcotics trafficking in Colombia, had his US Visa revoked several years ago. He reportedly is associated with Panama's powerful organized crime group, which is composed mainly of individuals of Middle Eastern background or heritage. They are said to virtually control criminal activities in the Republic, and to wield influence in all the local government agencies.

The charges filed against the Supreme Court remind us of the depth to which corruption has sunk in the Republic of Panama. I have often reminded our readers that the rule of law does not exist in the Panamanian court system, and they cannot depend upon a fair shake there, should the need arise to seek judicial relief to enforce rights and obligations. Court corruption is a major factor in Panama's high level of Country Risk.

Wednesday, March 26, 2014


Steven Lippman and Scott Rothstein

Though convictions of participants in Ponzi schemes generally receive maximum media coverage, often including press releases by the US Attorney's office, when a defendant receives a sentence reduction, that news usually is not picked up by reporters, and thus never appears in print. Of course, if the Ponzi scheme victims saw that a perpetrator of the fraud was being released from prison early, they might get agitated, especially if their monetary loss was significant.

This week, a District Judge in the Scott Rothstein case reduced the sentence of Rothstein law firm attorney Steven Lippman by one third. Lippman has been sentenced to a term of three years, for campaign contribution violations; his duties at Rothstein Rosenfeldt Adler included illegally "bundling" campaign contributions, as part of Scott Rothstein's efforts to gain influence among elected officials.

The Court reduced his sentence after the US Attorney filed a Motion, under Rule 35(b), indicating that Lippman had rendered Substantial Assistance in the prosecution of others. One wonders what the victims of the Rothstein Ponzi scheme felt, if they saw the small article, which appeared in local media, mentioning the sentence reduction. Though Lippman had a minor role, he was part of an organized billion dollar fraud, which forged court documents, including judge's signatures, in a scheme that, in part, took advantage of the public's trust in lawyers, to accomplish a massive Ponzi scheme.


Bo on the party circuit, living large
If you were wondering whatever happened to Bo GuaGua, the playboy son of two prominent corrupt Chinese PEPs, both convicted, and presently serving time, he's currently attending law school at New York's Columbia University. Bo is believed to have control of at least a portion of his parents' illicit wealth, and has declined to return to China since their arrests. his expensive British, and American, private schools, and later university, education, (Harrow, Oxford, Harvard) cost far more than his family's reported income.

 Apparently, a graduate school degree in Boston was not enough for him; now he needs a professional degree as well. Or is he just using the student status to avoid a probable prison term in China, perhaps, for corruption ? Anyway, since the fact of his attendance became public knowledge, he has conveniently changed his name to Bo Kuangyi, which he claims is his grandfather's name. My hat goes off to those staff members at Columbia, and other universities, who allow the "princeling" children of dirty PEPs to hide behind new identities, while they freely enjoy spending their parents' bribe and kickback money* on wine, women & song and allow them to live in a free society, while their parents clamp down on dissent, taking money all the while.

Many media sources are now reporting his new alias; hopefully, compliance officers at US banks are reading this, and will decline to open accounts for him. Do not forget that his mother poisoned a British businessman, and threatened other Brits with dire consequences, if they disobeyed her, and thereafter had the temerity to visit China. Please send this law student back to China, where he can face the music, or at least give up his family's ill-gotten gains, as a warning to others.
* Bo's parents are believed to be part of a covert group of high-ranking government officials who illegally harvested human organs from Chinese nationals opposed to the central government, which could account for a large portion of the family's reputed overseas wealth. 


Latin American media outlets have published a photograph of convicted Colombian Ponzi schemer, David Eduardo Helmut Murcia Guzmán, with the President of Panama, Ricardo Martinelli. Murcia reportedly laundered much of the three billion dollars he took from his victims in Panama, and Panama insiders have pointed to Martinelli's supermarket chain as one of the recipients of the illicit profits, which was brought in on speedboats, literally damp with seawater on arrival.

The exact extent of the relationship between the Ponzi schemer and the president remains a mystery, but Murcia, now reportedly in WitSec, the US witness protection program, allegedly is seeking the return of billions of dollars, all stolen from him by sleazy Panamanian businessmen, when he was arrested and extradited to Colombia, and later the United States. Details of Martinelli's role are presently unknown, but if he is in possession of some of the master Ponzi schemer's wealth, he may have to deal with it, when his presidency, and the immunity that it confers, ends.


The newly-appointed attorney for Viktor Bout associate Richard Chichakli, convicted of sanctions violations, and engaged assisting his client with previously-filed post-trial motions, has notified the Court that his client wishes to raise two additional grounds for, alternatively, a new trial, or to set aside the verdict. The thrust of Chichakli's arguments is that he failed to receive a new trial.

The two issues that were raised this week in a letter counsel sent to the trial judge:

(1) That classified information was presented to the court, by the US Attorney, and access was denied to both standby counsel, and the defendant. This information materially prejudiced the Court against the defendant, therefore denying him his right to a fair trial. Sources with personal knowledge of Chichakli and Bout's activities during the past two decades advise that they were engaged in operations, in support of the American intelligence community, as well as illegal arms trafficking into conflict zones. Could negative information, supplied Ex Parte, have poisoned the mind of the Court against the defendant, and what was that information ? That is a strong statement to make.

(2) Chichakli requested that Viktor Bout's trial judge, Shira Scheindlin, be called as a witness in his case, specifically to testify about the credibility of a principal prosecution witness in the Bout case, DEA Special Agent  Robert Zachatriasiewicz. Chichakli alleges that that the trial judge in his case failed to rule on this request.

Viktor Bout
Is Chichakli merely grasping at straws, in a futile effort to gain a new trial, or is he placing additional issues in the record, for appellate purposes ?  We note that the Court has, to date, failed to make a ruling, disposing of all post-trial motions, and sentencing has been delayed for that reason.

We shall continue to update readers on all developments as they occur.

Tuesday, March 25, 2014


Eddy Marin: very minor player, still drew prison time
Even individuals on the fringe of a Ponzi scheme often find themselves charged with a crime, when the scheme implodes, and prosecutors cast a wide net to catch the perpetrators, irrespective of their level of involvement. The Scott Rothstein case is no exception to this principle.

Rothstein's billion dollar scheme, which sold victims participation in phantom out-of-court settlements of sexual harassment, age discrimination, and whistleblower cases, has resulted in numerous convictions, often after guilty pleas, of fringe players. This week, an individual who assisted Rothstein's wife, Kimberly, in disposing of some of her jewelry, and lying about it to investigators, pled guilty to Obstruction of Justice. He will serve ten months in Federal Prison, and also have one year of Supervised Release, the post-incerarion form of parole in use in the Federal justice system.

Would he have only faced probation in a non-Ponzi case ? We cannot say, but if you are, even tangentially, involved in a Ponzi scheme, or learn, to your dismay, that one is ongoing at work, run away fast, and don't look back., for it will eventually explode, taking down everybody.

Monday, March 24, 2014


On the left, the Nimitz, on the right, the Iranian version
When American aerial surveillance spotted an aircraft carrier under construction at a port facility in Iran recently, they quickly noticed that it bore the same designation (CV 68) as the Nimitz. A closer look revealed that the Iranian vessel was a smaller copy of the original, and was little more than a mock-up, apparently built atop a barge.

Apparently, Iran intends to make a motion picture of an incident, which took place in the Gulf, several years ago, when a civilian airliner was mistaken for a possible missile, and was destroyed by American armed forces. Obviously, Iran intends to use the incident for propaganda purposes.     


Okke Ornstein, in transit 
Okke Ornstein is on the run; he reportedly embezzled $35,000 from a Hamas charity formed to aid Palestinian refuges in Syria. You may have read my coverage of his involvement in the charity, in partnership with Hamas' principal representative in the Netherlands, Amin Abu Rashed*. It appears that Okke has taken the charitable donations, and left town abruptly. Hamas is not happy, according to information received in the Netherlands.

If you are familiar with my previous articles about  Okke Ornstein, a/k/a Okke Van Ooijen, you know that:

(1) He is a fugitive from justice in the Republic of Panama, where he has been convicted in several criminal cases, and where he is a wanted man, who must now serve several prison terms, and also appear for some yet-unresolved criminal charges. His file was turned over to Interpol's local liaison.

(2) He was the general manager for the Ponzi scheme operation run in Panama by the master schemer, Marc Harris, now serving time in a Federal Prison in the United States.

(3) He operates a child pornography business on the Internet, and is believed to have originally fled his native Netherlands, to escape a criminal investigation.

(4) He has run a number of frauds in Panama, including, but not limited to, the Tulip Fund, which was exposed by both government regulators, and private consultants.

Now, Mr. Ornstein has clearly outdone himself; he is known to be on the run, current whereabouts unknown, having hurriedly left the Netherlands. Who will catch up with him first, the terrorist Hamas organization, or law enforcement ? The former may choose to terminate his criminal ways permanently; the latter will seek to return him to Panama, and the prison cell which awaits him. Either way, his criminal career is about to come to an end.
*Hamas Terrorist Financier Amin Abu Rashed and Fugitive Okke Ornstein in Syria

Sunday, March 23, 2014


Ethnic Russian population appears here in red
If you are adjusting Country Risk in Eastern Europe, due to the Russian occupation of Crimea, pay special attention to those areas where there is a component of ethnic Russians living outside Russia. Those jurisdictions are the most likely to experience pressure, whether political, social or military, from the Government of Russia, if NATO and the US fail to meet the current challenge thrown down in Crimea.

These countries, which have either Russian populations, or are former Russian territory, are at the top of my list for future problems from the Russian bear. They are potentially at risk, and you must factor this into your updated Country Risk assessments for each:

(1) Moldova, which was formerly part of the old Soviet Union. Historically, it was part of Romania, before it was ceded to Russia after the Second World War. Note well that it already has a breakaway province, not recognized by most of the world, namely Transnistria.

(2) The eastern part of the Ukraine, which is composed of a large ethnic Russian population.

(3) The Baltic countries, Estonia,Latvia, and Lithuania. Declared independent after the First World War, but occupied by the Soviet Union at the start of the Second World War, and newly independent again after the Soviet Union was dismantled. Russian nationals were force-placed there between 1945 and 1990.

(4) Two countries located in the Caucasus region: Georgia and Azerbaijan. Georgia has already suffered the loss of two of its districts to Russian action.

Compliance officers should monitor the Ukraine situation closely, for the outcome will affect whether Russia moves against other territories on its frontiers.

If you remember what happened in the 1930s, in the ethnically-German Czech Sudetenland, you will understand the gravity of the situation. Protecting ethnic minorities is a time-worn excuse for territorial expansion. 


After months of rumors, an investigation into the family background of Venezuelan leader Nicolas Maduro, has concluded that he is not eligible to serve as his country's president, pursuant to Venezuelan law. Maduro, it has been established, was born in Bogotá, Colombia, and his family moved to Venezuela, for the first time, when he was two years of age. The law requires that only native-born Venezuelans are eligible to serve as president.

This raises an interesting issue: Since Maduro was the late Hugo Chavez' personal choice to succeed him, reportedly due to Maduro's longtime loyalty to Cuba, rather than other, more independent Venezuelan leaders, did not Chavez know about Maduro's ineligibility, or did he deliberately ignore it ?

More than one million protesters took to the streets of Venezuela on Saturday, voicing their fierce opposition to the Maduro government.  Earlier in the week, student protestors clashed violently with police. The Armed Forces of Venezuela, which have, to date, failed to choose sides in the domestic dialogue, may now seek to enforce the law, and remove Maduro from office. Opposition congressmen may also seek political relief, or seek a remedy through the corrupt court system. The exact impact of Maduro's ineligibility is not yet known, but it could result in a regime change.

Whatever happens in the short term, the issue of Maduro's legitimacy further erodes his power, and compliance officers updating Country Risk on Venezuela would do well to adjust their calculations accordingly. Frankly, any compliance officer who fails to recommend against any new financial exposure in Venezuela has lost touch with the reality on the ground. Now the time to mitigate any and all existing financial exposure, to, as much as possible, reduce it to zero, and to redline any new business whatsoever, until further notice. 

Friday, March 21, 2014


Reza Zarrab, under arrest in Turkey

News from a very troubled Turkey this week includes details from a 300-page report, prepared by Turkish prosecutors, alleging a huge organized crime Iran sanctions evasion ring, involving Turkey, China and the UAE. The group, reportedly run by the  Iranian national Reza Zarrab, who holds a Turkish passport under a variation of his name, evaded international sanctions upon Iran, through gold smuggling, and other covert means of wealth transfer.

As the investigation continues, and high-level Turkish government officials are implicated, all the way up to the president himself, who has sought to illegally curb the free press, in a futile effort to control information, compliance officers would be well advised to:

(1) Raise Country risk on Turkey.
(2) Carefully examine all client transactions involving Turkish companies, to avoid any possible unwitting role in facilitating an illegal Iran sanctions violation.
(3) Consider mitigating all your financial exposure in relation to clients engaged in international trade with Turkey, in any form, until you complete Enhanced Due Diligence upon all such customer relationships.

Thursday, March 20, 2014


Mitchell Dinnerstein, recently appointed to represent convicted arms trafficker, Richard Chichakli, in his post-trial efforts to set aside the verdict, or to obtain a new trial, has asked the Court to appoint associate counsel. Apparently, the sheer volume of the trial transcript, and discovery, in the case, is too much for attorney Dinnerstein, and he has requested help.

The lawyer wants to address the Rule 29  and 33 issues, which deal with setting aside the verdict of guilty, and for a new trial. District Judge William Pauley denied the motion without further comment. These pending motions, filed Pro Se  by Chichakli, remain outstanding, and must be resolved by the Court, before sentencing can occur. 

Wednesday, March 19, 2014


The commander of the FARC 36th Front, who was arrested in Guatemala recently, was later extradited to the United States, to face pending drug and weapons charges pending against her. Sonia Cruz Quinceño's prosecution is a clear sign that the US is continuing to pursue the FARC leadership, notwithstanding the extensive peace talks taking place in havana, with the Government of Colombia.

With the FARC in military disarray, but still failing to bargain in good faith, actions like these will continue to disrupt the FArc, and keep Country Risk on Colombia at acceptable levels.


The recent announcement, to the effect that the individual who managed the last three successful presidential campaigns in Venezuela has been engaged to run the campaign being overseen by Panama's current president, Ricardo Martinelli, is extremely disturbing. Martinelli has all but declared that he will run Panama from the sidelines, after he leaves office, and he has promoted his wife for vice president.

If the truth be known, the reason that Hugo Chavez, and Nicolas Maduro, were elected to Venezuela's highest office, is a combination of massive voter fraud, election place misconduct, and software designed to fix the elections, in the favor of the Bolivarian candidate. A Martinelli nominee is not the best choice for Panama's future, especially with the Lavitola corruption investigation in Italy expanding, with allegations that government officials are involved in cocaine trafficking into Europe, and the rampant drug money laundering that the Martinelli administration has permitted.

Martinelli, who was elected as a reformer, fell quickly into the quicksand of corruption and mismanagement of government funds; he needs to be replaced by someone who can truly clean up the corruption in the court system, terminate the government officials who allow Panama to remain a major money laundering center, and finally, start arresting the seventy-five individuals, mostly Venezuelan nationals, who are practicing their dark craft openly in Panama. 

Sunday, March 16, 2014


The Cuban Government is reportedly preparing for an armed conflict in Venezuela, according to reliable sources. This information comes from Opposition elements inside Cuba, and from exiles abroad who actively solicit strategic information about developments from contacts within the island nation, and elsewhere.

Regarding the ongoing shipment of oil from Venezuela to Cuba, the Cuban Government has completely filled all its oil storage facilities, including its military, as well as strategic, reserves, in anticipation of the total termination of oil shipments. The loss of Venezuelan oil imports will have a major effect upon the Cuban economy, due to the current barter arrangement through which Cuba receives oil. It is also believed that Cuba sells off a small portion of the oil it obtains from Venezuela, in regional markets, to obtain hard currency. The loss of Venezuelan oil can be compared to the economic impact upon Cuba that occurred when the Soviet Union dissolved, and with it millions of dollars in annual financial support. it will devastate the country.

The most disturbing development is the alert, served upon specific members of the military reserves with combat experience, in six of the country's administrative regions. The call-up was for reservists under age of 50. If you were wondering why the high age limit, Cuban troops have not served in battle in Central America or Africa for the last 20 years, and eligible soldiers from those conflicts would be at least 35 years old at this time. Soldiers who have been notified, but will not be available or eligible, have reportedly been ordered not to disclose the details of the alert.

Revolutionary Armed Forces of Cuba

Taken together, one must assume that the Cuban Government is bracing for what it regards as an inevitable armed conflict in Venezuela, and plans to keep the Maduro regime in power, through any means available to it. This information should be taken as additional evidence that the dysfunctional Venezuelan economy could soon suffer a total meltdown, as the result of widespread armed conflict in Venezuela. Foreign investors, and foreign financial institutions with exposure there, could experience a catastrophic loss.

Please note also that the Cuban economy, without its Venezuelan support, could crash hard, impacting foreign investment in its growing tourism industry. Country Risk for both nations would ascend into the level of unacceptable risk.


Finally, an anti-money laundering measure that makes sense. JP Morgan Chase has reportedly announced that it will no longer open any new correspondent accounts for foreign banks. Though a purely defensive measure, to respond to existing AML/CFT deficiencies, it deserves serious attention.

Here's why:

(1) There is no shortage of correspondent accounts in the United States; every nation, no matter how small or remote, already has a number of financial institutions with correspondent relationships with American banks. Unless you are a tiny, out of the way, micro-bank somewhere off the beaten path, you already have a conduit into the American financial structure.

(2) Any newly-formed foreign bank can easily piggy-back into the New York banking center through an existing relationship. If this new bank becomes moderately successful, and later needs a direct connection with the US, they can purchase a bank that has one already.

(3) Obviously, we do NOT need any new banks from countries that have no effective AML and CFT, are obscure banks controlled by organized crime, or are located in countries where corrupt PEPs, drug kingpins, or terrorist financiers, abide. If no new correspondents were allowed, greedy relationship officers would no longer be besieging their superiors to open those dodgy relationships.

(4) If big US banks are to effectively curtail money laundering, terrorist financing, and organized crime, they need time to re-qualify those correspondents that they already maintain, to weed out those that have proven themselves to be problematic. Once a correspondent account is closed, it will be be eligible to be reopened anywhere. How's that for a negotiating point, to bring your correspondents into line ?

I commend JP Morgan Chase for taking this extraordinary step; may others emulate them.


Regular readers of this blog known that I live in a major American city, Miami,where we have more than our share of financial institutions operating under Consent Agreements, and Cease & Desist Orders, meaning that they are under intense regulatory pressure, some time-sensitive, to enact changes and reforms, upgrade existing programs, and report the results to the agency or agencies involved*.

What I have noticed is that the remedy sought by many of these banks in regulatory trouble is to bring in outside banking consultants, particularly those with experience in cleaning up BSA/AML/CFT defects, and under-capitalization issues. The problem is that there are a number of charlatans out there, posers who would have you believe that they are equipped, through training and experience, to solve your regulatory problems. They mislead anxious bankers, by boasting of their intimate relationships with leaders in the exact regulatory agency that imposed the sanctions. Unfortunately, this is far from the truth.

These fraudsters typically contact financial institutions, after the news breaks of the issuance of regulatory action, especially where the agency orders the engagement or appointment of a qualified outside professional to solve deficiencies, especially in the compliance sector, though capitalization deficiencies also draw them out. Their six-figure retainer fees are often judged by the bank to be the cost of solving their problems, but this rarely occurs.

Often, these "consultants" promise to have the regulatory actions terminated within a short period of time; they often advise their new bank client that all interaction with the agency should be handled through them, and schedule a flurry of meetings between themselves and agency staffers. Next, they often advise that there is major progress, but the extraordinary amount of time involved requires additional retainer payments. The bank has now laid out middle six figures, and received little for it.

The consultant, who has promised a speedy resolution, and termination, of the order or agreement pending against the bank, fails to obtain the desired result. He may have also promised to bring in needed capital, a new book of substantial client business, or some other major asset that the bank needs or desires, but it does not materialize.

When engaging any outside consultant for remedial action, after regulatory problems surface, especially BSA/AML, ensure that your due diligence covers these actions, at a minimum:

(1) You have checked out the consultant's prior success record. He must have consistently been able to terminate regulatory processes in the past, to justify his fees. Some of his former clients may hesitate to be critical; did his employment result in a successful outcome at their bank ? Check OCC records carefully.

(2) There is no litigation on record against him, especially from unhappy bank clients.

(3) He has no record being accused of fraud in other contexts.

(4) He is not suspected of having received immunity from prosecution, when he was employed by a financial institution. Though you may not be able to readily ascertain this, if he worked at a bank where there was a major criminal indictment of officers, it is possible that he was guilty, but not charged, in exchange for testimony against others. Ask around if there was a major case, or bank failure.

While I am the greatest proponent of the advantages of bringing in qualified professionals, to clean up regulatory deficiencies, please make sure that they are truly capable of rendering effective assistance, and are not fraudsters preying upon banks that are under the regulatory microscope.
* This is the first of a series of articles examining threats to banks involved in regulatory issues.



Bulk cash smuggling of narcotics profits continues to stream south on a massive scale, if seizures are any indication of the volume. US Customs inspectors at the Calexico border crossing have arrested a California resident, Manuel Eduardo Velazquez-Comparan, who attempted to smuggle US Dollars into Mexico.

Vazquez, who was driving a Chevrolet Cobalt, was found to have secreted $499,730, within the rear bumper, and the rear seat headrest. He admitted that he was to be paid $1500 for the smuggling operation..

Saturday, March 15, 2014


Andreas Markus Bachmann, the former Credit Suisse Relationship Manager/Asset Manager who was part of the bank's program of serving affluent Americans, who were engaged in cheating the taxman, has detailed his money laundering tactics, in connection with his guilty plea* to the charge of assisting them in tax evasion. In a stipulated Statement of facts, Bachmann admitted to committing most of the money laundering techniques that we expect to find laundrymen, not bankers, engaging in.

Among his admissions:

(1) Bachmann structured (less than $10,000 each) wire transfers into the United States, so that there would be no mandatory reporting requirements, when his clients took cash.

(2) He paid his American clients using correspondent accounts of Credit Suisse located in financial institutions inside the United States.

(3) He visited his clients in the US, and showed them their account statements, discouraging them from
requesting, or taking possession of the hard-copy of their statements.

(4) He formed companies in offshore tax havens, and employed those front companies as account holders.

(5) he managed his client's accounts from an entity located physically outside the bank, and independent of the bank.

(6) He filed false W-8BEN forms, knowing that the information on Beneficial Owners was false.

(7) He provided investment advice to his American clients inside the US, even though he was not licensed by the Securities and Exchange Commission.

(8) he employed the classic money laundering technique known to me as the "swap," whereby illicit funds of clients, that are located in the US, and which the clients wish to covertly move offshore, are
given to other clients, who already have funds offshore, and need onshore cash. The accounts in Switzerland are later adjusted to reflect the transfer. It is an American version of Hawallah, and does not involve any risky bulk cash smuggling, but the results are the same.

(8) He met with his US clients in Toronto and Vancouver.

Bachmann was intercepted at JFK International Airport, attempting to smuggle $50,000 into the country, for a bank client. He is the first of seven Credit Suisse bankers reportedly involved in what can only be described as organized tax evasion, and charged in the United States.

When William Dudley, the president of the Federal Reserve Bank of New York, says that there is evidence of deep-seated cultural and ethical failures at many large financial institutions, it is obvious that one of his targets was the morally bankrupt Swiss banking system. Just how far the US Department of Justice is prepared to go, to shut down Swiss facilitation of American tax evasion, remains to be seen. Recent Swiss dilatory tactics appear to be working. Will the Attorney General now fast-track the investigations, and obtain indictments of Swiss financial institutions, and the the senior officers inside them ? Take off the gloves, please; it's been long enough.

*United States vs. Markus Walder, et al, Case No.: 11-cr-0095 (ED VA).

Thursday, March 13, 2014


Large international trading companies that refuse to create and maintain an effective compliance program are playing with fire; OFAC repeatedly cites the total absence of an operational compliance program in most of the cases where it levies a major civil penalty for sanctions violations. When will the senior management of these companies learn that compliance, in 2014, is effectively mandatory ?

 In the most recent case, OFAC hit Ubiquiti Networks, of San Jose, California with a civil penalty of $504,225, for violations of Iran Transactions & Sanctions Regulations. What the company reportedly did:
(1) Set up a UAE firm as the company's exclusive distributor for Iran, then a sanctioned jurisdiction, and thereafter shipped sufficient quantities of its broadband wireless connectivity technology to Dubai, so that the UAE firm could fill orders.

(2) Shipped wireless broadband equipment to greece, having reason to know that the intended end user was Iran.

The total arrogance of such companies amazes me; do sales staff honestly believe that regulators, or law enforcement ,do not track and trace such orders, or does greed take over ? There will certainly be reputation damage, which will directly affect the company's future earnings, standing in its industry, and prospects for government contracts; dollars and cents lost forever.

 In any event, this case provides an abject lesson in the need for compliance, irrespective of whatever industry you are working in. Readers who wish to review the complete text of the Civil Penalties Enforcement information of this case, issued on  March 6, 2014, can access it here.*

Wednesday, March 12, 2014


Mitchell Dinnerstein, the New York criminal defense attorney recently appointed as new counsel for Richard Chichakli, appears to be taking a more pro-active approach than his predecessor, who was designated stand-by counsel for trial, as the defendant had elected to represent himself.

 Mr. Dinnerstein's appointment does not appear to be so limited; by a letter to the Court, he has indicated that he wishes to supplement his client's Rule 29 (Motion for Judgment of Acquittal) and Rule 33 (Motion for a New Trial) motions, who were filed Pro Se, and without any citation to legal authorities, or reference to specific trial testimony. He justifies his late request by referring to his recent appointment as counsel. I for one would welcome a memorandum of law in support of the motions, and it may finally get around to issues involving Chichakli's allegations that he was targeted, due to operations that he and Viktor Bout engaged in, on behalf of the United States, which America's intelligence community might not want to become public knowledge.

I have previously believed that the Court would summarily deny all the post-trial motions this week, and them conduct the sentencing forthwith, but the Court may want to bend over backwards in this case, and give new counsel for a Pro Se defendant an opportunity to present support for his client's pending motions, lest a new appellate issue be created. 

Tuesday, March 11, 2014


The Attorney General of Switzerland has announced that a fine, for aggravated money laundering, has been imposed upon Stanford Bank (Swisse) AG, Allen Stanford's European entity, in the amount of one million Swiss Francs. The funds have been frozen for the past five years, while an investigation was conducted.

Additionally, between six and nine million Swiss Francs will be set aside for pending claims of victims. The reported 200m SF balance will be eventually returned to the victims, through the American proceedings.

The Swiss Government announced that US authorities will receive the banking documents, and transcripts of hearing conducted during the Swiss investigation, which has now concluded.  A recent US Supreme Court decision has apparently paved the way for Stanford victims to further advance their claims.

Monday, March 10, 2014


Scott Rothstein (l), Russell Adler (r)
Individuals who are involved in a Ponzi scheme sometimes find themselves charged with other crimes, which were committed incidental to the criminal enterprise, but which facilitated its illicit goals. Russell Adler*, who was a name partner at Scott Rothstein's now-defunct law firm, has been charged with Conspiracy to Violate the Federal Election Campaign Act, and Conspiracy to Defraud the United States.

Adler, and other Rothstein, Rosenfeldt Adler law firm members, fronted for managing partner Scott Rothstein, by making campaign contributions in their own names, and later received reimbursements, disguised as firm bonuses. Adler contributed to presidential and senatorial campaigns for Republican candidates; Rothstein intended to use the massive contributions for the purpose of acquiring political influence over elected officials; We call that corrupt activity, but here the penalty will be minimal.

Adler's case involved the filing of a Criminal Information, which generally indicates an arrangement with prosecutors has been reached ; he is scheduled for a change of plea next month, meaning that he will not be contesting the charge. Whether he had a role in the billion-dollar Ponzi scheme, in which bogus court settlements were sold to unsuspecting investors, may never be publicly known, but he will face justice, on a reduced level, compared to some of the other defendants, but justice all the same.
*United States vs. Adler, Case No.: 14-60050-cr-COHN (SD FL).

Sunday, March 9, 2014


If you are a compliance officer charged with assessing, and updating, Country Risk, for your employer, the Russian takeover of the Ukrainian Autonomous Province of Crimea should have caught your attention. It is relevant, not just for the purposes of raising Country Risk on the Ukraine, & on Russia itself, but to alert you to new regional risk issues.

The United States, which has sent token additional military support, including operational US military units, to both the Baltic countries, and to Poland, is paying attention to the increased risk. No European country has occupied sovereign territory of another since the Second World War, but Russia has taken territory in Asia, in both Georgia and Moldova, ostensibly to protect Russian nationals. Adolph Hitler used that excuse to occupy the Czech Sudetenland in the 1930s, and we all know what the ramifications of that act were; a European conflict that became a global war.

Though the risk of an actual war is remote, minor incidents could occur, and the consequences would be severe from an economic standpoint. Therefore, watch the entire Eastern Europe region closely, and be prepared to increase Country Risk, across the board, should events ensue. 


Venezuelans burning the Cuban flag

The people of Venezuela, divided in the past, and previously unable to effectively band together against the regime of President Nicolas Maduro, have now become a unified force, determined to unseat a government whose agents and thugs have killed and wounded peaceful unarmed protesters in the streets of Caracas. While government-controlled media has inaccurately depicted the Venezuelan situation as a civil war, with opposing sides, most Venezuela observers agree that more than 90% of the country's population is with the Opposition.

The bogus civil war ploy, which has unfortunately been accepted without question by many in Latin America, has been advocated by the Government of Venezuela, through its tightly-controlled managed news outlets, and repeated by the radical left-leaning governments in the region. It is not even close to the truth; Maduro has no popular support, no clique of believers. everyone in Venezuela wants change.

Even the Organization of American States (OAS) has bought into the big lie; its members, with the notable exception of the US, Canada & Panama, have recommended that the parties seek to resolve their differences amicably, but the Government of Venezuela has a long history of failing to deal in good faith with the Opposition, and no consultation will ever solve Venezuela's problems.

There will be no civil war in Venezuela; the war, if and when it comes, will be between the Venezuelan people, and agents of their repressive government, supported by special operations troops from Cuba and Hezbollah. Perhaps if the United States wakes up from its long, fifteen year sleep regarding Venezuela, it might want to weigh in on the right side of history.



Saturday, March 8, 2014


Consumer complaints, centered around what issuers refer to, albeit incorrectly, as prepaid debit cards, are giving the card industry a bad name. You don't know that term ? You are not alone, as the name itself is a contradiction in terms. Let's discuss:

(1) A debit card allows users to make purchases, by deducting funds directly from their checking accounts.

(2) A prepaid card, which is not tied to the user's bank account, has funds directly loaded, or reloaded onto it, and funds are deducted at point of purchase.

(3) A so-called"prepaid debit" card is neither; it requires the user to deposit money, not into either his designated bank account, or onto the card itself, as a credit, but into a "pre-funding account."

The user accesses his money through a PIN; he may also unwittingly give the PIN to an online merchant, who may then deduct the amount of the purchase, or more, or take funds illegally, and not deliver the merchandise, which is the principal consumer complaint. Apparently, unscrupulous merchants are asking their customers to purchase a prepaid debit card, knowing of its vulnerabilities, and then reneging on delivery of the goods or services.
Typical charges
The other problem is the unethical, immoral, but strictly legal,  repeated deduction of various and sundry clearly excessive fees by certain resellers, who give instructions to the issuers to make the deductions from the pre-funding account, which are obeyed. These extreme charges may be buried in ten pages of legal disclosures that consumers sign, but rarely actually read, or even taken from the account without any written disclosure whatsoever, many issuers are honest, but the industry is being pulled down by greedy clients, or resellers, of the issuing banks.

Listen, if you want protection from a bank, obtain a debit card; if you want to absolutely limit your exposure to a sum certain, purchase a prepaid card, but do not run for this hybrid, the prepaid debit card, which confers no protection, is susceptible to fraud and abuse by both resellers and vendors, and which offers you no avenue for relief, should there be a problem. One merely needs to go to the complaints appearing on the Internet to confirm this.

The money is reportedly kept in  a"pre-funding account"and co-mingled with that of other clients. Since these entities are corporations, there is no civil liability of the operators, should the company become insolvent, or file for bankruptcy. This is not an FDIC-insured bank account, nor is the money actually loaded or charged up on your physical card.

If you search the Internet, you will find horror stories, first-person accounts of individuals who woke up to find excess admin charges, and other nonsense, deducted from their cards. Please avoid this dangerous financial instrument, lest you also get burned.

Friday, March 7, 2014


Lest you buy into the fiction being published by government-controlled media in Venezuela, asserting that a group of Venezuelan expats in Panama, together with president Martinelli, are responsible for the rioting in the streets of Caracas, and elsewhere in Venezuela, consider this: there is a massive unpaid bill, due and owing to food service companies located in the Zona Libre, and owed by the Government of Venezuela. The pretext for breaking relations had no factual basis.

When Venezuela cut diplomatic ties with Panama, it also severed trade, and commercial relationships. It has defaulted on the payments for food and other necessities, and I can only assume that someone in the Maduro government decided to stiff the Panamanian merchants. This could seriously injure sectors of the Panamanian economy.

Thursday, March 6, 2014


The District Judge in Richard Chichakli's criminal case has granted his request, and assigned him new standby counsel. The defendant, who is representing himself Pro Se, has a number of post-trial motions still pending. he will not be sentenced until the motions are resolved.

Chichakli had complained to the Court that his court-appointed standby counsel had failed to visit him since his conviction after a jury trial. He is expected to appeal his conviction to the Second Circuit, and navigating the procedural landscape of the Federal appellate process will require the guidance of an able professional.  

The case is being closely followed, due to his close relationship with convicted arms trafficker Viktor Bout; Bout was a co-defendant in his case, but cannot be tried for procedural reasons; he was not extradited for this case.


Route of the seized vessel
This week's seizure, in the Red Sea, by Israeli Naval Commandos, of an Iranian shipment of Syrian M-302 (302mm) heavy rockets, destined for Hamas in Gaza, is bad enough, but the fact that Iraq played no small role in the incident, illustrates exactly where the Iraqi Government stands: squarely behind Iran. We can no longer trust Iraq to be an ally of the West, when it comes to Iran.

It is the circuitous route that the rockets took that illustrates Iraq's de facto alliance with Iran:

(1) The arms were flown, from Damascus International Airport, to Tehran, reportedly by the Qods Force, the unit of the IRGC that operates outside Iran. Israeli media haas reported that the rockets were of Syrian manufacture.

(2) Next, the rockets were transported to the Iranian port of Badar Abbas, where a number of previous covert arms shipments originated.

(3) Then, A Panamanian-registered Iranian freighter, the KLOS-C, was loaded with the rockets, and sailed to the Iraqi port of Umm Qasr. There, bags of Iranian cement were placed on top of the rockets (like was dine with the arms-laden North Korean freighter seized by Panama). One wonders how this was accomplished, in light of the international sanctions in place against Iran. Obviously, Iraq can no longer be trusted. Both Iraqi Customs officers, and port officials, knew about the shipment, yet did nothing. The bags of cement clearly indicate "Made in Iran," and all inbound and outbound cargo is required to be inspected.


(4) The freighter departed, and was intercepted in the Red Sea, off Eritrea, near Sudan. The anticipated destination was Port Sudan, and the arms were slated to be shipped overland, through Egypt, into Gaza.

(5) The crew, who were not Iranian nationals, claim ignorance, though we are wondering who loaded the cement atop the rockets.

(6) After Naval Command missile boats intercepted the freighter, and confiscated the cargo, the vessel, under Israeli command, changed course for the Israeli port of Eilat.
One of the seized rockets
This is but one of several covert Iranian arms shipments seized in transit in the part few years; while the illicit cargo here was for Hamas, other seizures were destined for Hezbollah, and Syria.

When calculating risk levels for your bank, or your client, doing business in Iraq, or making investments there, consider that Iraq's close relationship with Iran potentially affect the status, and safety, of any assets owned there, as it increases war risk. Remember that, the next time a bank client inquires about the risks of doing business in Iraq.


The Government of Venezuela has abruptly broken all diplomatic, trade and cultural relations with the Republic of Panama, in what can only be described as another feeble attempt to assign blame for the country's current crisis to a third party, in order to divert attention from the issues at home. Venezuelan President Nicolas Maduro was especially critical of Panamanian President Martinelli, accusing him of being a "lackey" for the United States, whom Maduro has consistently accused of instigating what he has described as destabilizing activities inside Venezuela. Panamanian authorities have denied the charges as being totally bogus, and insulting.

Inasmuch as no evidence was produced by the Government of Venezuela, in support of its allegations, most Venezuela watchers have seen this as merely a desperate act to blame external forces for the chaos in the streets of Caracas. No factual basis for the charges of Panamanian interference in Venezuela have been proffered, nor has there been any news verifying the allegations.

It is noteworthy that Panama's relations with Venezuela's ally, the Republic of Cuba, have recently soured, ever since a Panama Canal-bound North Korean freighter was seized by Panama, and found to be carrying undeclared, and illegal, military cargo. Fighter jets hidden on that ship were known to be destined for Ecuador, to be part of a false-flag military operation, conducted by Venezuelan agents with Cuban assistance, to discredit the Venezuelan Opposition.* Other military material was reportedly destined for the FARC**.

With these accusations, the Government of Venezuela has lost what little international credibility it had left;  the statements of President Maduro appear to be an irrational attempt to distract the people and the media from the deteriorating situation.
*North Korean weapons on Seized Ship were destined for the FARC, and for Terrorist Attack in Venezuela
** The details of this information may have been subject to news management, in light of the pending peace talks between the FARC and the Government of Colombia.

Tuesday, March 4, 2014


A court in Egypt,  reportedly acting upon a petition filed by a number of local attorneys, has ruled that the Palestinian organization popularly known as Hamas is a terrorist organization. The court went on to ban all activities of the group in Egypt, and ordered that all Hamas offices located in the country be closed.

Monday, March 3, 2014


If you look closely at the photos of the government's agents shooting peaceful Opposition protesters in the streets of Caracas, the Taurus handguns illegally imported into Venezuela by the Bolivarian regime* figure prominently, as their sidearm of choice. While there are no publicly-available statistics on the caliber of bullet taken from the bodies of the deceased, rest assured that many of the lethal projectiles were 9mm rounds, which are fired by the Taurus knockoff version of the Beretta, that was distributed to the motorcycle-borne assassins.Venezuelans were prohibited from possessing firearms in public in 2012, but these characters were the sharp point of the governmental stick.

Readers from Venezuela and Brazil have been asking how the controls on international distribution of 9mm pistols were successfully circumvented. Insiders have declared that the unassembled components of the weapons were shipped, to different recipients, and then delivered to the governmental arsenal, where they were received by the entity best known by its acronym, CAVIM, meaning Compañia Anónima Venezolana de Industriales Militares,  and where the illicit weapons were quietly assembled.

These were the pistols that created chaos, and dealt death, to the Opposition protesters on the streets of Caracas.
*Venezuela prepares for Civil War