Wednesday, April 30, 2014


With Panama's presidential election only a couple of days away, Panama watchers are concerned that the front-runner, Arias, will precipitate a constitutional crisis with his victory, due to his choice of running mate. According to the Panamanian Constitution, a close relative of a sitting president cannot either succeed him, or serve as vice president, yet President Martinelli's wife , Marta linares is on the ticket as VP.

It is believed that Martinelli has a majority of the judges on the Supreme Court of Panama in his pocket,  and who will dismiss any constitutional challenges to her taking office, but a political crisis is the last thing that Panama needs right now. Civil unrest, including violent demonstrations, has appeared whenever the population is angered, due to any perceived injustice, especially when they feel powerless, in the face of presidential power. It could get ugly in Panama City next week.   

Tuesday, April 29, 2014


If your bank has clients in the petrochemical industry, be advised that certain dodgy oil brokers, located in Spain's Canary Islands, are offering for sale what they describe as oil of Nigerian origin, available and already en route to a refinery in the Caribbean. Don't you believe it for a minute, for the oil is the property of the Government Cuba, which is still under total US sanctions, and is, in truth and in fact, of Venezuelan origin, but under Cuban title and possession, by virtue of the barter agreement in place between the two countries. Apparently, the brokers intend to falsify the records, in order to evade the sanctions. The also claim that your purchase be swapped for oil already on route, so as to speed its delivery and processing time.

As such, the purchase of these shipments, which are offered by the brokers while allegedly in transit to a refinery on the other side of the Atlantic from their point of origin, which is arguably a commercial impossibility, is prohibited to US entities, citizens or residents, and would result in substantial fines and penalties from OFAC.

The other possible alternative is that the entire operation is a fraud, and the brokers do not intend to order the delivery of the products, but to take the money and run. Either way, this is not a transaction for anyone to engage in either as a purchaser, or as a financial institution assisting a customer. 


Six Venezuelan nationals were taken into custody, by the authorities, in Panama City this week, and delivered to the Attorney General of Panama, after they attempted to distribute campaign fliers falsely accusing the Opposition presidential candidate, Varela, of money laundering, and other crimes, in the legends Sports scandal. Those arrested had false identification, purporting to show that they worked for the Varela campaign.

Given that Arias' presidential campaign is reportedly being managed by a Venezuelan national who formerly was a senior campaign adviser to the late Venezuelan president, Hugo Chavez, the hiring of foreign nationals in an already discredited attempt to smear Varela, is extremely disturbing. President Ricardo Martinelli's wife, Marta Linares is the vice presidential candidate on the Arias ticket, and should he not be able to serve for any reason, she would become president. Rumors abound in Panama that this is Martinelli's goal.

Panama is in the eighth day of a nationwide strike of construction workers, and many expats living in the country are apprehensive about the election. An election scandal would destabilize the nation, and raise Country Risk, which is already elevated, due to fears about the possible revival of the 30% corporate income tax on foreign-derived income. 

Monday, April 28, 2014


With the Panamanian presidential election just a few days away, yet another scandal has erupted. Vice President Juan Carlos Varela, the Opposition candidate for president, has been linked, by outgoing President Ricardo Martinelli, and his political party, to the billion dollar Legends Sports online gaming scandal. Varela has denied any involvement in Legends, also known as Legendz, and known online as, closed abruptly after its principals, and local US agents, were indicted.

Last year, 34 individuals, and 23 entities, most of them incorporated in Panama, were indicted in US District Court in Oklahoma, and charged with money laundering, conspiracy and operating an illegal gaming enterprise. Online gambling is illegal in the United States. Martinelli reportedly sought to smear Varela, just prior to the election, by asserting his connection with the Legends Sports scandal.

Varela challenged Martinelli to produce the evidence that he claims to have, implicating Varela in the Legends case, but no smoking gun has been presented, causing Martinelli to lose face in Panama, and reportedly increasing the number of Varela supporters. Dirty campaign politics, when exposed, backfired.Varela is now considered to have as many voters in his camp as  José Domingo Arias, the candidate of Martinelli's party; his wife is the vice presidential candidate on that slate.

Varela supporters at event

Sunday, April 27, 2014


The recent filing of personal bankruptcy, by a noted British financial professional, due to his reported involvement with a $3bn fraudulent Venezuelan bond, reminds us that there are more counterfeit, and outright fraudulent, Venezuelan Government bonds and financial instruments out there, than there are genuine ones. Please, due to the high incidence of fraud, avoid any and all Venezuelan paper like the plague.

It seems that investors are failing to perform even the most rudimentary forms of due diligence on bonds being offered for sale. Here are some of the red flags:

(1)  The official language of the Bolivarian Republic of Venezuela is Spanish; any "original" document in English is probably part of a scam.

(2) Are there any typos, grammatical errors, errors in syntax, errors in the fill name of the relevant agencies, or title of officers, with their full legal names ? Bank counsel always double- and triple-check their documents, especially financial instruments, as mistakes can be extremely costly, and potentially effect the legal interpretation of an instrument. If there are errors, it is a fake.

(3) Have you independently verified, through a trusted third party, the bona fides of the instrument, including whether the signatures are genuine ?

(4) Has the seller/holder/vendor shown you a bill of sale, evidencing exactly how he or she obtained ownership of the instrument ?

(5) Is the issuing entity or agency legally authorized to issue the instrument ? Did you contact them ? Some fraudsters are even working inside the issuing Venezuelan government agencies; watch for this.

(6) Have you ruled out the possibility that it is merely a very good color copy of the original ? Watermarks, holograms, or other means of authentication, please.

The risk levels for ANY Venezuelan financial instrument that is being offered for sale, from anyone, is extremely high at the moment, and I advise you to ignore any such offers, period. There are far too many fraudsters out there hawking counterfeits.  


A bulk cash smuggling ring, several of whose members have already entered guilty pleas in US District Court in Brownsville, Texas* took advantage of the long reach of a major American bank, to move funds across the United States, where they could be withdrawn in cash, and then illegally smuggled into Mexico. The alleged ringleader, Oscar Aguilar, has entered a not guilty plea in the multi-million dollar case.

The gang opened accounts at Bank of America branches in south Texas; thereafter, confederates made multiple deposits in B of A accounts in Florida. The cash was later withdrawn in Texas, always in amounts under the $10,000 reporting requirement, for transport into Mexico. The organization took full advantage of the fact that B of A has branches nationwide, to move the drug proceeds from the east coast of the US, to the Mexican border.

While many banks often routinely query individuals making deposits for others about the circumstances of the transaction, few interfere with such matters, as it would impede the ability of the bank's customers to have employees, or friend, deposit money for them Fewer still prohibit cash deposits made in such a manner. However, a pattern of  high cash withdrawals in another part of the country is a red flag for the movement of criminal proceeds. Does your compliance program alert you when this occurs repeatedly ?

* Case No.: 13-cr-00830 (SD TX).

Saturday, April 26, 2014


Next month's presidential election in the Republic of Panama has become an ugly street fight.

(1) Outgoing President Ricardo Martinelli, whose wife Marta Linares is the vice presidential candidate, under candidate José Domingo Arias (CD), is openly planning to be the power behind the throne, and evade the constitutional prohibition on his own reelection.

(2) Juan Carlos Navarro (PRD), the third candidate, though he reportedly has at least 30% of the voters surveyed, is not given much of a chance of being elected. There are many uncommitted voters who are believed to be for Martinelli's chosen candidate.

(2) Sitting Vice President, Juan Carlos Varela (PPP), the Opposition candidate, reportedly cut a back room deal with Martinelli during the last election, wherein Varela was to join with Martinelli, and be named president the next time around. Martinelli, who some experienced Panama watchers say became drunk with power, shortly after taking office, reportedly reneged on the arrangement, making the two of them deadly political enemies.

(3) Unfortunately for Varela, both he and Martinelli were reportedly involved in laundering criminal proceeds for the imprisoned Colombian fraudster, David Eduardo Helmut Murcia Guzmán.  If either plays that card, openly, against the other, before the election, it could backfire.

(4) Martinelli seeking to avoid any blowback regarding Murcia, has reportedly engaged the services of a retired former senior DEA agent, to uncover as much dirt on Varela, as can be found before the election.

(5) Rumors continue to circulate in Panama City, to the effect that the results of the election will be affected by widespread fraud, to be perpetrated by Martinelli's CD party; the fact that he engaged, as the principal  campaign consultant, an individual who is believed to have assisted in rigging one of Venezuela's previous presidential elections, has not gone unnoticed in Panama. Most observers already have conceded that Arias will probably prevail, and that the election will not be fairly conducted.

Should the predicted election fraud occur, and be exposed, and the expected filing of criminal corruption charges against Martinelli, in Italy, occur post-election, then Country Risk levels for Panama are expected to surge into the unacceptable sector. Compliance officers at bank whose clients have ongoing business in Panama may want to quickly reduce their short-term exposure at this time.


The government of Ecuador has ordered the the entire US Military Group Ecuador (USMilgroup), approximately twenty Defense Department civilians, and active-duty US military, out of the country. They have been told to leave Ecuador before the first of May. The Milgroup, which has assisted the Ecuadorian military for the past forty years, has not been charged with any misconduct, has been a target of Ecuador's radical leftist President, Rafael Correa, in recent months. Correa has indicated his opposition to any close relationships between the Milgroup and the Ecuadoran military officer corps.

Though there were no specific allegations, Correa has made some vague remarks  about the conduct of the Milgroup. Correa shut down the US counter-drug aviation operation in Manta, Ecuador, soon after taking office in 2007. Diplomatic relations with the United States have been cool in recent years, and thus latest Ecuadorian effort, to further reduce the US presence  there, could result in an increase in the level of Country Risk for Ecuador, especially where it applies to US companies and investors.


When Ponzi schemes implode, law enforcement casts a wide net, to catch even peripheral participants, and this week they arrested two of their own. A police lieutenant and a detective in Fort Lauderdale have been charged, in US District Court, with using their official positions to commit civil rights abuses to further the interests of convicted attorney/Ponzi schemer Scott Rothstein, and his associates.

It has been alleged that lt. David Benjamin received $185,000, in cash and jewelry, from Rothstein, and the detective Jeff Poole, to effectuate an arrest, on false charges, of one individual, and to also order another person,  a possible witness, to leave the state immediately, or face arrest. Rothstein often employed law enforcement officers as off-duty bodyguards, and for other tasks, some of which reportedly involved using their law enforcement status and privileges. The charges filed here indicate that some of those "duties" crossed the line.

Both defendants worked for the Broward County Sheriff's Office. The filing of a Criminal Information against both officers indicates that they are probably cooperating with the US Attorney's Office. They have been on leave from their law enforcement jobs during the investigation; they were terminated after criminal charges were filed against them. 

Thursday, April 24, 2014


In my recent article on the sudden appearance, of copies of checks that evidence illegal presidential  campaign contributions, signed by convicted fraudster/Ponzi schemer David Helmut Murcia Guizmán, O remarked that I would be following up, should copies surface. You can see them above.

Remember, the official unit of currency is the  Balboa, which is pegged to the US Dollar, the de facto currency,  at 1:1 . Those figures on the checks are in dollars. Both of the payees on this instruments are corporations controlled by Ricardo Martinelli. Total contributions on the two checks: $141,000 .


Money launderers working to protect Iranian interests in Latin America are desperate to move the estimated hundreds of millions of dollars presently located in Venezuelan banks out of the country, but President Nicolas Maduro has prohibited Caracas bankers, and the Central Bank, from allowing their dollars to leave his embattled nation. Should a democratic government come into power, it is all but conceded that such assets would be immediately frozen, and Iran fears the total loss of its accounts there. They might not even have to wait for that to happen, as corrupt Venezuelan government officials, on their way out the door, into a life of luxury in exile, should the regime fall, might just steal some of it, for personal use. There is no honor among thieves.

Well, it is doubtful that, even if Maduro was to grant permission to move those funds, the most likely tax haven destination, the Republic of Panama, would even accept them. The Superintendent of Banking, in a rare moment of candor, stated recently that there was between thirteen and seventeen billion dollars, of "flight capital," that had been 'looted' from Venezuela. Venezuelan-Panamanian relations are at an all-time low, due to Venezuela's reported massive default on payments to Panamanian companies.

Additionally, The Government of Panama has threatened to close one of the two Venezuelan banks with branches in Panama. Though the grounds for this action have not been made public, the bank under threat is said by to be holding Iranian funds in excess of $100m. One Venezuelan bank's Miami branch is busy hiring a team of compliance officers,  to perform look-backs on all its Latin American customers, and file SARs in a rush, before the roof falls in, later this year. I can only assume they anticipate an AML audit shortly. This is not a good year to be a Venezuelan bank. 

Tuesday, April 22, 2014


Okke Ornstein
One of Panama's most prolific career white-collar criminals, on the run from the police, is still trying to game the system. Okke Ornstein, who has four criminal convictions, and is in hiding from Panamanian authorities, has, through his counsel requested Clemency*, seeking to avoid serving his consecutive sentences. Ornstein has additional criminal charges pending, which he avoided by fleeing the country.

His attorney has asserted that Ornstein, presently a fugitive from justice, is in poor health, and he fears that he may come to harm in a Panamanian prison. Unfortunately, Panamanian law on Clemency is quite clear: a petitioner may only qualify for Clemency if he has only one conviction, and he cannot have engaged in criminal conduct since that conviction.

The petition is an obvious ploy, made solely for the purposes of delay; Ornstein cannot be arrested during the approximately 30-day period while the Court considers his request. Perhaps the Panamanian court will allow justice to be served, and dismiss the bogus Clemency petition forthwith.

One of his criminal convictions can be see here:


* In the United States, in my experience, a fugitive defendant must surrender himself before he can seek any affirmative relief from a court. It appears that Panama has no such protection of the public interest.


Miami is the epicenter of the Venezuelan expat community, and it is often accused of being the focal point for the laundering of illicitly-acquired wealth coming from Venezuela, but if we are to use the amount of Venezuelan "flight capital" being laundered as the yardstick by which we measure which American city is guilty of moving the most Venezuelan dirty money, Houston, Texas may very well top the list. Here is a summary of my reasons why:

(1) The money laundering operations in Houston are dominated by, but not limited to, trade-based money laundering through the petrochemical industry, involving suppliers of goods and services to Venezuela's government-owned oil conglomerate, PdVSA, and other companies, all of whose deliberately non-transparent financial operations provide a cover for their illicit activities. Goods are provided for prices far in excess of global market pricing, and services, if they are rendered at all, are seriously inflated.

(2) Some of the purported "payments for goods and services" are drug profits, which have been folded into the PdVSA treasury and accounts, by narcotics kingpins. This is a well-known fact among former PdVSA staff, many of whom have left both the company, and their country, for a life of exile. Since PdVSA receives dollars, for its oil exports, and narco-profits are also earned in dollars, mixing the illicit income with the legitimate does not present as problem, especially in a corrupt environment where all participants are either bought off, or otherwise silenced, preventing any internal whistle blowing.

(3) Additionally, the proceeds of extortion and kidnapping operations, conducted in Venezuela, have also found their way into Houston, in this manner, where the legitimate sales of goods, albeit for inflated prices, serves to wash the dirt off this cash. The funds are later transferred, upon the orders of the groups involved in this organized activity.

(2) The companies, most of whom were originally inexperienced shell corporations that magically secured lucrative contracts with PdVSA, resulting in what I can only describe as obscene profits, in the many millions of dollars, per transaction, have become major players.

(3) The owners of these companies are living the high life in Houston, with luxury homes, and all the major adult toys, leading jet-set glamorous lives. If you are familiar with Venezuelan politics, you would recognize a number of them, as they are mostly members of the so-called Bolivarian Elite, all Politically Exposed Persons, PEPs, with close ties to both the Venezuelan Government, and the senior management of PdVSA.

(4) After the wash, dry & fold spin cycle, the squeaky-clean "profits" find their way into tax haven bank accounts of Venezuelan Government officials, including the PdVSA leadership, looking like anything other than the bribes and kickbacks which they are. Some of the profits, of course. remain with the Houston operators; A money launderer's gotta eat, right ?

(5) Some of the now-clean profits actually are contributed to bona fide charitable operations, though a number of those beneficiaries provide support for radical leftist operations within the United States, some of whom have engaged in disruptive and destabilizing street demonstrations and actions that have threatened the peace of urban areas.

(6)) My investigation has identified eighteen corporations that are engaged in what I can only describe as racketeer-influenced corrupt activities. The best estimates are that more than three billion dollars has been laundered through these companies. Rumors abound about ongoing criminal investigations of these companies, as there are obvious Foreign Corrupt Practices Act, as well as money laundering, and RICO, violations, but I have not seen any arrests, yet.

(7) The participants do not skimp on protection: full-time bodyguards on staff, coupled with the state of art security, at a level one generally only sees for senior government figures. They also have retained the services of one of Venezuela's most notorious "reputation protection" firm, whose duty is to flood the Internet with so much garbage that any serious inquiry will require one to wade through page after page of fluff, meaningless web entries, all designed to obscure damaging information about the activities of the subject of your inquiry. This is a common practice among the Bolivarian Elite, whose sweetheart government contracts, with excessive profits built in for them, are the rule, rather than the exception. Also, some of the Bolivarian Elite are convicted felons, accused murderers, and major white-collar criminals, and they do not like to have those facts exposed on the web, hence the widespread use of Internet protection companies.

Are any of your bank clients involved in purchases or sales with any firms in the petrochemical industry, in the Houston area ? If so, I recommend that you examine both your client, and its customers, closely, under a compliance microscope. You do not want to be one of the banks later identified, in any major Federal criminal case, as an unwitting participant in a major money laundering operation.

Monday, April 21, 2014


The candidates debate; Arias is at center
José Domingo Arias, the choice of the ruling political party as the next president of the Republic of Panama, and the favorite, has promised his supporters that, should be be elected, he will reinstate the country's tax law, requiring all corporations to pay income tax of 30%  of their foreign-derived profits. This pronouncement, which he has made several times while on the campaign trail, could in theory result in a balanced budget for Panama, but the potential economic fallout could be catastrophic for Panama.

If all the expats who take advantage of Panama's tax exemption for profits earned outside the Republic were to pack their bags (including their bank accounts) and leave, Panama would not only be plunged into depression, with unemployment quickly rising, but dirty money would find another tax haven to do business. Do you have clients who are invested in Panama ? What are they to do, I wonder ?

Is this really going to happen ? Just the threat of across-the-board taxation is enough to fill the outbound Copa flights. We will be monitoring the situation as we get closer to the election; pay attention.


The Reserve Bank of South Africa,  the country's central bank, has levied major multi-million Rand fines upon four major financial institutions, for deficiencies, in Anti-money Laundering and Counter-terrorist financing. The banks are:

(1) First Rand Ltd. (FSR).

(2) Nedbank Group Ltd. (NED).

(3) Barclays Plc (BARC).

(4) Standard Bank Group Ltd.  (SBK).

The deficiencies were in these areas:

(A) Verification of customer information.

(B) Maintenance of records.

(C) Managing and processing Suspicious Transactions.

If your bank clients are engaged in international trade into South Africa, and any of these banks are routinely involved, you should perform, at the every least, due diligence procedures upon all companies and entities in South Africa that they are doing business with, to rule out any potential money laundering or terrorist financing issues. 


President Martinelli and David Murcia Guzmán

New evidence has emerged to confirm previous allegations that the convicted Colombian Ponzi schemer, David Helmut Murcia Guzmán, was laundering his criminal proceeds through two companies* owned and controlled by Ricardo Martinelli, during the 2009 election campaign of the current president of the Republic of Panama. We have previously made those charges on this blog, based upon the accounts of witnesses with personal knowledge of the operation, but the discovery of documentary evidence now leaves no doubt as to the truth and accuracy of their information. We have previously reported that as a newly-elected president, Martinelli ordered the Attorney General of Panama to close a pending criminal investigation into the allegations in 2010 and later accused her of illegal wiretapping, to discredit her.

The checks were written on accounts of corporations owned by David Murcia, and have caused a political firestorm in Panama City. Martinelli's wife is a candidate for vice president, and the president has stated that he intends to maintain control over his country, after he leaves office, behind the scenes, which has alarmed many of the American expats residing there.

Whether an effective criminal investigation will now be mounted is unclear, given the strength of presidential power, and the rampant corruption that pervades government agencies. As soon as the actual checks are made public, we shall post them on this blog.
* Ricamar SA, and CD SA.

Sunday, April 20, 2014


Irene Shammon
We continue to see lesser players in the Scott Rothstein $1.2bn Ponzi scheme charged with criminal activity, due to their role in the massive fraud, where Rothstein's law firm sold phantom legal settlements to investors. Irene Shannon, formerly known as Irene Stay*, was charged with Conspiracy to Commit an Offense against the United States, specifically being money laundering, and bank fraud.

The defendant, who was the bookkeeper at the now-defunct Rothstein, Rosenfeldt Adler law firm, and who later was designated Chief Financial Officer, allegedly:

(1) Unlawfully moved investor money from the firm's trust accounts, into the RRA operating account, to pay firm operating expenses, and bank overdrafts, and to pay for houses, luxury automobiles, and other extravagances of Scott Rothstein and his wife, both of which are presently serving sentences in Federal Prison.

(2) Engaged in check kiting, using checks given by co-conspirators in the scheme, to temporarily fatten up firm bank accounts, so that it qualified for interim financing at those financial institutions. The total amount of money she moved in that way exceeded $10m. This constitutes bank fraud.

The charging document was a Criminal Information, which is generally an indication that she is cooperating with law enforcement in the case. The maximum penalty is five years in Federal Prison, plus three years of Supervised Release, and a substantial fine.

Who at the firm will be charged next ?
*Case No. 14-cr-60081-RSR (SD FL).

Saturday, April 19, 2014


Richard Chichakli has filed a detailed list of errors that he asserts were committed at his trial, in a 37-page pleading that appears to be supplemental to his Rule 33 Motion for a New Trial, which is still pending, together with other post-trial motions that we have covered in earlier articles on this blog.

To briefly summarize the defendant's position:

(1) There was ineffective assistance of counsel. One should remember, however, that Chichakli chose to defend himself, and he only has Stand-by counsel.

(2)The Court improperly admitted the lay opinion of the bob-expert witness, Al Monica.

(3) There was jury misconduct.

(4) The Court improperly used Federal Evidence Rule 404(b) evidence, which cover prior criminal conduct, as a basis for the conviction.

(5) The Court erred in charging the jury.

(6) The Court failed to rule on defendant's motion concerning "secret evidence," and improperly precluded admission of relevant evidence helpful to the defendant.

(7) The Government failed to produce the search warrant authorizing the search of defendant's property in May 2005, and failed to produce the evidence seized from the search in Discovery.

(8) Notwithstanding missing witnesses, defendant's cross-examination of government witness, concerning an adverse finding regarding credibility, was improperly denied.

(9) The Court failed to issue a jury charge on a missing witness.

(10) The Court's jury instruction on the indictment was prejudicial to the defendant.

(11) The Court improperly charged the jury regarding the evidence.

(12)  The defendant was not afforded a fair trial, and was prevented from preparing a meaningful defense.

It has, of course, occurred to me that the presentation of these issues serves to preserve them for the purposes of any appeal from the defendant's conviction, should the Court deny his motion for a New Trial, as such motions are rarely granted in Federal Court.


If you thought that the vintage 1980 "Miami Vice" days of banking were gone forever, when heavy bags of drug profits were delivered directly into the front doors of Brickell Avenue financial institutions, think again. The dirty cash is back, but the game has changed. Now, it's suitcases of large denomination currency, sneaking in the back door, from Venezuela, for the purpose of rescuing Florida banks that, for one reason or another, are now seriously undercapitalized, and in dire trouble with regulators. Blessing or curse ?

The problem is that one of the conditions attached to the money is that one cannot inquire as to either the Source of Funds, or the Beneficial Owner. These restrictions have caused some banks to summarily decline such a windfall, even those who are, frankly, desperate to attract investors to recapitalize. Others have not been so choosy. Also, those individuals who are offering this obviously dirty cash are asking a steep price for their bailout money: bank stock, and in some cases, a controlling interest. It's sort of like making a deal with the devil, and you know what ultimately happens to the offeree.

It is not known exactly where this money is coming from, it is most likely drug profits from the Cartel del Sol, laundered Iranian funds, money received by corrupt PEPs in the manner of bribes and kickbacks, PdVSA profits, siphoned off by corrupt officials, or other illicit funds, and with Venezuela's strict currency control making US Dollars more desirable than gold, it had to have come from some well-funded, and powerful, individuals and organizations.

 Just like in the bad old days, the funding arrives as dinero en efectivo, what you and I call bulk cash. How does one get a pair of large Samsonite suitcases full of currency into the United States, you say ? Smuggling it in via business jet, (which is also the preferred method of delivery into the Republic of Panama, by the way) would seem to be the technique with the smallest amount of risk, but there are other methods known to be generally successful, including some that you would not suspect. There are other players out there, hidden in the shadows, who may surprise you.

One wonder what will ultimately happen, when the "donors" start making offers to bank management that they are unable to refuse, or their front men, who own your  bank stock, are indicted for their involvement in criminal activity. Will the bank end up seized by the United States, or simply be abruptly closed up by regulators, leaving all the other shareholders out in the cold, with a worthless investment ?

So I ask the question: where are the alphabet-soup lettered government regulators in all this ?


American media was in a frenzy this week, after a photograph was taken, at Tehran's Mehrabad Airport, Of a US-registered business jet, N604EP, serial number 5462, parked on the field. FAA records showed that the aircraft, a Bombardier CL-600, was registered to the bank of Utah, as Trustee. Exactly who was on board the aircraft when it arrived is not known. In light of the universal sanctions in place against Iran, and that fact that no media investigators could find any records showing that the aircraft had any of the necessary US Government approvals which are required when any American-registered aircraft plans to enter Iranian airspace. How could this happen, and when will the Bank of Utah, a small community bank, be slapped with major OFAC fines and penalties for this incident ?

Subsequent inquiries appear to have confirmed that the owners are a Ghana-based engineering firm, with close ties to the country's former Vice President, which makes them PEPs, and that the owners were able to register the aircraft in the US through a giant loophole in FAA regulations. Although only US citizens can own an N-number aircraft, if a foreign owner places title in a trust, with a US trustee, the foreign beneficial owner, who in essence is the beneficial owner, or beneficiary, through referred to as a trustor, can enjoy the many benefits, and legitimacy, of US registration of their aircraft. There are reportedly in excess of 10,000 aircraft registered in the United States through this clever loophole, which conveniently conceals beneficial ownership. This is a method through which major aviation companies evade both the spirit and the letter of the law, which is designed to confer the intengible benefits of US registration upon American citizens.

Though the Federal Aviation Administration has taken steps to insure that required maintenance is performed, and that a standarized form of trust agreement is executed, and made available to the FAA*, even the most primitive money launderer know that any trust instrument opens doors for financial criminals that one can drive a truck through. All you have to do is quietly change the name of the beneficiary of the trust, which is not a recorded or public document, commit your criminal activity, and change it again, leaving no paper trail. Whether it be career criminals, OFAC-sanctioned terrorists, or smugglers of illicit substances, nuclear weapons, the plans for the Cruise Missile, or a vial containing the Bubonic Plague, the perpetrators have the legitimacy of an American-registered aircraft to hide behind. How many airport operators in the developing world will risk the wrath of the United States Government by seizing an N-registered aircraft upon mere suspicion, as opposed to one locally registered ? You know the answer to that question.

To make matters worse, reports have said that the Ghana owners engage in chartering the aircraft out to whomever wants to pay for it, including Americans who are believed to have used its services. The incident merely highlights the fact that trusts can, and are, used daily to hide beneficial ownership, for all sorts of reasons, some of them for the purposes of confidentiality,  but others for illegal reasons. This needs to change. All trusts should be recorded, and reporting, and recording changes in beneficiary, should be mandatory. until that happens, trusts will remain a major facilitator of crime.
* See The Trustee's Burden: FAA Clarifies Noncitizen Trust Policy for Aircraft Registration , Air and Space Lawyer, Vo.26, No.1 (2013).

Friday, April 18, 2014


This morning's earthquake in Mexico, which registered at 7.5 on the Richter scale, has caused property damage, but there are no known fatalities at this time. You can be certain that certain money launderers, operating in the US, and charged with the movement of the proceeds of American drug sales south, have indeed noticed, and are already hard at work, making plans to move narco-profits into Mexico, disguised as earthquake relief funds. Be alert for their bogus charities.

As you know, Mexico amended its regulations a couple of years ago, to severely limit Dollar transactions, especially the deposit of USD Currency. This natural disaster gives clever money launderers the opportunity to place drug profits into Mexican banks, when it comes in as wire transfers from what appear to be American charities. After all, what Mexican bank compliance officer can refuse charity ?

I would not be surprised to learn than some laundryman has a charitable entity (NGO)  literally on the shelf, anticipating such an event. I doubt that it actually has qualified under Internal Revenue Service regulations, but then again, the money launderer does not intend to be around when law enforcement agent come calling, sometime in 2015, to check on it the "charity."

Of course, should any bank compliance officer ask the tough questions, he will probably be persuaded by the ploy that people are dying in Mexico, or some other emotional appeal.  


That's NOT Google, my friends, but a new search engine that opens the door to purchase drugs, weapons and financial crime sources and methods. Ever since Silk Road was shut down, purveyors of illicit goods, which include websites that sell aids to financial crime, and assorted other aids for the usual white-collar suspects, have had no central marketplace place to sell their wares. Unfortunately, this has now come to an end; it is called Gram, and the beta (testing) version has now come online. Yes, drugs and guns are available there, but more important, the tools financial criminals need are also for sale. The site advertises that there is no child pornography, hitmen for sale, or investment schemes; I am not impressed with its ethics.

I won't send you the URL, for obvious reasons. You can't get there from your favorite search engine. The site can only be accessed through the Tor Project, the web anonymizer that many readers are familiar with, because, once downloaded, the Tor browser  randomly selects an Internet Protocol (IP) address each time you log on. The website address, which uses the pseudo-domain name ".onion", is opaque, with sixteen alpha-numeric characters. The Tor network.which employs a complex routing scheme, has been variously described as a facilitator of criminal activity, and a legitimate privacy tool.

There, one can select websites offering forbidden fruit, and I quote some here:
(1) One hundred original money laundering methods.
(2) Patriot Act-proof money laundering that works for Bitcoin, cash or even stolen credit cards.
(3) Anonymous bank account, high limits.
(4)Counterfeiting money tutorial.
(5) Money laundering tutorial.
(6) Money laundering guide for PayPal.

Website advertising heroin for sale

The list is endless; I noted that many of the vendors are located in Belgium.The vendors accept BTC, USD, GBP and EU in payment. While it is merely a search engine, one wonders how long it will be before law enforcement agencies become aware of it, and seek to shut it down. I recommend that you do not seek to access it, lest you and your IP address somehow shows up as a "Person of Interest," somewhere in the intelligence or law enforcement world.

Thursday, April 17, 2014


The explosion of so-called prepaid debit cards in the financial marketplace should alert you that a small minority of unethical distributors, seeking to impose excessive, and cleverly undisclosed, charges and fees upon unsuspecting users, have hooked onto what they regard as a source of windfall profits.

Let's be clear about our terms:

(1) A credit card is an extension of credit, given as needed, by an issuer, to a user. The user has no money on deposit; he must repay the debt, to keep his credit line in good standing. 

(2) A debit card is simply a card that provides ready access to your bank account, and users draw out their money at will, directly from their balance, and without any extension of credit, to pay bills and make purchases.

(3) A prepaid card is good only for the amount of money that is electronically deposited, from time to time, directly onto the card. It is a good fit for employers who wish to place wages and salaries on cards, one-time users who have no credit card to make specific purchases, travelers, businessmen who don't want to carry cash, and for gifts. 

(4) What is described by some distributors as a Prepaid Debit Card, is an inconsistency in terms; all debit cards are prepaid; the problem is that some unethical prepaid debit card distributors employ a curious device known as a "pre-funding account." This means that the money first goes into the distributor's account, and is then, minus whatever charges and fees the distributor chooses to deduct, loaded on the card; The user is ambushed. Some Prepaid debit card distributors deduct excessive and undisclosed charges immediately

Some online prepaid card distributors, who are often not registered with either FinCEN or their state department of financial regulation, as a money service business, and work out of post office boxes or disposable email addresses:

(1) Fail to specify exactly what costs will be taken from the card, giving the company carte blanche to be abusive. This is obviously a violation of the law.

(2) Hold the funds "temporarily," claiming that they are either clearing, or that processing is taking place, neither of which is true and correct. This may be a major temptation for the distributor to quietly decide to borrow funds, or take even more illegal and/or clearly excessive charges.

(3) Steal money outright. The Internet is full of such stories, especially where the user's account is abruptly closed, without reason, and only some of the funds are returned, after a substantial delay.

(4) Sell the cards for a substantial fee upfront, and then fail to perform. They think that most unbanked individuals are too poor to bring a civil action, or complain to consumer authorities.

Bottom line: there's no such thing as a prepaid debit card. It is a prepaid card. If you want a debit card, go to a real bank and get one; don't rely upon non-bank fraudsters and fee gougers to obtain one; you may regret it. If you need a prepaid card, get a prepaid card. Do not get anything were your money goes through a third party before being loaded, the so-called prepaid debit card.


The Ukraine has filed criminal charges against OAO Sberbank, for terrorist financing. The bank has reportedly been paying anti-government militia, which have been taking over government buildings and
installations in Eastern Ukraine. Most observers are waiting to see how quickly OFAC sanctions will follow.

Rather than engaging in the time-consuming task of disbursing cash to the recipients, the bank has been charging up their debit or prepaid cards.

Wednesday, April 16, 2014


Alexey Binetsky, the Russian attorney for convicted arms trafficker, Viktor Bout, in an interview for Russian media, disclosed that he has petitioned the Russian Federal Security Service, on behalf of his client. Binetsky stated that US law enforcement agents, operating in Thailand, committed criminal acts against his client. He believes that an investigation is in progress.

Bout's counsel also claims that the agent violated international law, on the extraterritoriality of the crimes that his client was later convicted of. He stated that he has asked the President of the Russian Federation for $1.5m, to engage American counsel, to act on behalf of Bout, who is serving a 25-year sentence in the United States. He admits that his client has no funds at this time to pursue any possible remedies, and Binetsky now says there will be no action until he retains new counsel.

Binetsky also was quoted as saying that US counsel will seek relief of his conviction, in the United States Supreme Court, though it appears that the time for filing a petition for a Writ of Certiorari, to overturn his conviction, has expired.  


Reports from the Ukraine indicate that a major Russian bank, with branches in the Ukraine, is providing financial support to the Russian agitators occupying government building, through daily payments to them. The funds are said to be the equivalent of $200-$500 per day, and payment is effected through the Russians' debit or prepaid cards.

The bank has not been publicly named, but you can bet that the US Treasury knows its identity. If you have international clients engaged in trade with Russian companies, you might be well advised to warn them of the possibility of OFAC sanctions against banks that they have exposure to, whether in bank accounts, letters of credit, outstanding debts owed by their customers, or any such ongoing relationship that would be affected by the imposition of sanctions. They may want to reduce their financial exposure  at this time.

Tuesday, April 15, 2014


Here's another case that illustrates how even fringe figures, far removed from a Ponzi scheme, end up being charged, when a Ponzi scheme implodes. Patrick Daoud, a prominent Fort Lauderdale jeweler entered a guilty plea to a single count of Obstruction of Justice, in US District Court recently; Daoud lied under oath, when being deposed in a bankruptcy proceeding of the law firm of convicted $1.3bn Ponzi schemer/attorney Scott Rothstein, now serving 50 years for his crimes.

A close friend of Mrs. Rothstein (now also doing time), Stacie Weisman*,  quietly sold a 12.08k yellow diamond, that belonged the Rothsteins, to Daoud, who claims he did not know who the true owner was. When called to testify, at a deposition, about the diamond, Daoud committed perjury, by denying any part in the sale of the diamond. Daoud was sentenced to ten months of Home Confinement (house arrest), and two years of Probation.
* Ms. Weisman was herself sentenced to three month in jail, nine months of Home Confinement, and three years of Supervised Release, for her part in this attempt to sell the diamond covertly, and out from under the Trustee, who was accumulating assets, to repay the victims.


Nevin Shapiro
Lawyers who represent Ponzi schemers are often placed under the microscope, even if they were not involved in their client's criminal activities, and sometimes, something comes from it. A Miami attorney for convicted Ponzi schemer, Nevin Shapiro, Maria Elena Perez, has had charges filed against her by the Florida bar, the agency that regulates attorney conduct.

Perez represented Shapiro in his criminal case; to gain an advantage for her client, namely a major supporter for his sentencing, the NCAA, the National College Athletic Association, she deposed witnesses, in connection with her client's pending bankruptcy proceedings, and made that information available to the NCAA, which was investigating the University of Miami for improper conduct in its athletic department, to which Shapiro had contributed. The NCAA had no subpoena powers, so Perez used the depositions to help the NCAA.

Perez' aim was to have the NCAA testify favorably at Shapiros' sentencing, as she was attempting to get for her client as small a sentence as possible. There was even a plan to have NCAA representatives state that they wanted Shapiro to travel around to colleges and universities, to relate his experiences with making illegal contributions to an athletic program.

Now, the NCAA investigators have been fired, Shapiro received a 20-year sentence for his $930m Ponzi scheme, and Ms. Perez faces the consequences of trying to game the system to aid a major Florida Ponzi schemer in obtaining a short sentence for his crimes. Lawyers for Ponzi schemers would do well to take heed of the lessons learned from this case: everyone involved in a Ponzi case, including even defense counsel, must assume that they are potential targets.  

Sunday, April 13, 2014


Buried in the recent news, concerning the arrests of two Canadians and an American, charged with money laundering through the Cayman Islands, was this gem: one of the methods employed by one of them, a Canadian attorney, based in the Turks & Caicos Islands, was a TC foundation.

While we have been warned for years, about the use of foundations formed in the Republic of Panama as a tax evasion and/or money laundering device, you might want to check to see whether any of your bank clients are moving money through a Turks & Caicos foundation. There is a reason for my concern.

The Cayman Islands are now believed to be the next target of the Internal Revenue Service, in its global quest to unmask wealthy Americans hiding their money offshore, to evade taxes. It is noteworthy that the present case, involving Joshua VanDyk, Eric St-Cyr, and Patrick Poulin, involved the use of undercover IRS agents, to ferret out professionals who are aiding and abetting tax cheats. For those of you not well versed in the Caribbean,  the US Dollar is the official currency; the island chain's decided to not join the Bahamas in its move to independence, and it remains a British Overseas Territory.

I do know that many TC foundations are legitimate, and do positive things in their country, but I am wondering whether a small minority are being used to shield a money laundering enterprise. We have already pointed out to our readers the presence of a number of dodgy Canadian attorneys plying their trade in the Turks & Caicos Islands, where the amount of legitimate legal work could not possibly support their overhead; perhaps you might want to take a fresh look at any bank client contact with TC, unless the client actually has a brick-and-mortar business there.

Friday, April 11, 2014


The attorney for convicted hedge fund Ponzi schemer, Francisco Illarramendi, has filed a motion for temporary release, asserting that his client cannot properly review the more than 15,000 pages of government-produced documents, to ascertain the exact amount of victim loss. It is claimed that he cannot assist his counsel, while in custody in a state correctional institution.

The United States Attorney in Connecticut,  in a written opposition, has objected, on the following grounds:

(1) The defendant cannot be trusted, he lied to the Court and the Government after he pled guilty.
(2) The defendant committed serious violations of the conditions of his bail.
(3) He has had more than two years, since his conviction, to ascertain the amount of loss. He himself earlier had estimated it as a $300m loss. The stated grounds for his temporary release, to calculate the amount of loss, are not necessary to assist his counsel with the documents.
(4) His Pre-Sentence investigation Report (PSIR) reportedly calculated his guidelines sentence as Life in Prison. Since there is no more parole, he would die in custody.That makes him a serious flight risk.

Illarramendi has gone through four different attorneys during this case, and the Court has stated that it will not allow any more continuances. There is a sealed pleading, referred to in the Government's filing, referring to certain unspecified misconduct of the defendant, committed while he was out on bond. He obviously has attempted to game the Court system, and Government is obviously tired of it, as is the Court.

This is a 2011 case, and it is high time for the sentence to be pronounced. The defendant has run out of excuses to delay justice any further. Is a life sentence fair in a white-collar case ? Ask his victims.


If you were one of those individuals who were wondering when the trial judge in the Richard Chichakli case was going to rule on his post-trial motions, and finally get around to sentencing the defendant, his new court-appointed counsel, Mitchell Dinnerstein, has thrown a legal monkey wrench into the works.

To quote from his filing:

"After my careful review of the trial transcript, and doing conversations with Mr. Chichakli, about certain motions that he wanted pursued, I came to the conclusion that a question may arise as to the defendant Chichakli's mental competency to assist in his own defense, as required by 18USC §4241."

Granted, Chichakli has, since a verdict was rendered against him, in a case where he chose to represent himself Pro Se, with standby counsel, filed a number of letters to the Court, some of which may constitute supplemental information, for his pending post-trial motions, but others are unusual. Chichakli, who has had no legal training, may have just been trying to create appellate issues, but the letters, and the grounds cited, may have caused his new counsel some concern.

Observers who are aware that Chichakli, and his partner, Viktor Bout, were involved in a number of confidential matters, in which they rendered assistance to agencies of the United States Government,  and which could possibly be embarrassing, may fear that this competency examination is simply a means to discount the accuracy of any such information, should Chichakli choose to disclose it.  

The Court has ordered a psychiatric examination to determine whether Chichakli satisfies the prerequisites for mental competency. A report by the appointed forensic psychiatrist is due on May 3, 2014.

Thursday, April 10, 2014


Local sources in Panama advise that the Government of Italy has filed criminal charges, for corruption, against Panamanian President Ricardo Martinelli. It is apparently waiting for his term in office to end before making it official, and asking for his extradition. Martinelli has Italian citizenship.

 One source states that the charging documents have been delivered to the Ministry of Foreign Affairs, whose officials served them upon the president, who reportedly was defiant and arrogant, and denied that he would ever be tried in Italy. Given that the leading presidential candidate standing for election as Panama's next president has stated that he has chosen Martinelli's wife for Vice President,  you may expect a political crisis in Panama after June 30.   

Wednesday, April 9, 2014


A columnist in a Cayman Islands publication has taken the radical position that the war on money laundering, like America's previous efforts to ban alcohol sales  between 1920 and 1933, is an abject failure, and it has resulted in increased costs to all, and a loss of personal and financial privacy, and has allowed governments to restrict liberty, and to abuse its own citizens, all the name of money laundering suppression.

The article, The Destructive Effort to Combat Money Laundering, Tax Evasion, and Terrorist Financing, which appeared in the Cayman Financial Review, makes three important points:

(1) AML laws generally only hurt legitimate business; criminal enterprises find a way to operate around, or despite, such laws and regulations, and the law enforcement agencies that seek to enforce them through arrests and indictments.

(2) FATCA has resulted in a wholesale closure of the foreign accounts, of American nationals, everywhere, as foreign banks do not want the headache, and potential civil, and even criminal, liability.

(3) Non-bank remittance services, from the developed to the developing world, have taken a huge hit due to AML/CFT laws.

His solution, and I quote verbatim:

"To many of those who have signed up for the war against money laundering are either
  obsessed with increasing their own power, or have a delusional, utopian vision, where
the rights of the individual, and liberty are not as important as the "collective," the war
on money laundering has failed for the last quarter of a century, because it had not pre-
vented terrorists, drug dealers and assorted criminals from transferring money around the
world.... What it has done is greatly increase the cost of transferring money by innocent
people and businesses, greatly reduced access to banking services for millions, destroyed
personal and financial privacy for much of the world's population, and enhanced the ability
of government officials around the world to abuse their citizens. "

While some of this may be true, if we abolish AML/CFT, then we would need to deal with increased risk of terrorist attacks on the US, and the EU, and I am not willing to let radicals blow up our world. Money laundering laws may not be perfect, far from it, but I will not accept the alternative, which is chaos.