Monday, September 29, 2014


                                                 "The Weed of Crime bears Bitter Fruit."

A Federal Judge in Miami, obviously sick and tired of seeing the relatively short sentences meted out to money launderers, slapped a Madrid laundryman with a one hundred and fifty (150) year sentence. Alvaro López Tardón, who is said to have moved eight tons of cocaine in Europe, and who chose to launder his criminal proceeds in Miami, laundered over $14m in the Magic City, over a decade.

The defendant purchased high-end condominiums, including one million dollar one on Miami Beach, that was his residence, seventeen luxury cars, including a Bugatti Veyron, and a Ferrari Enzo, a million dollars of watches, and sundry other jewels. His associates bulk cash smuggled the money into the US, wired it to third parties, as well as to his controlled shell companies and front operations.

Tardón was convicted of one count of Money Laundering (20 years), and thirteen counts of Money Laundering Conspiracy, at ten years each. US District Judge Joan Lenard ordered* that he serve the conspiracy counts consecutively, which is another 130 years. He also drew a $2m fine, and a money judgment, to cover the forfeiture of assets seized, in the amount of $ 14,358,639.64. Since he's probably not a citizen, expect his deportation after he serves 127 years, 6 months.

As they say, let the punishment fit the crime. Let us hope that this case serves as a deterrent: you launder money in Miami, you go to prison for a long, long time.
* Case No.: 11-cr-0470-JAL (SD FL).

Sunday, September 28, 2014


It would appear, according to the best sources, that the Islamist terrorist group, Boko Haram, owes its funding to prominent Nigerian businessmen and PEPs. These individuals are reportedly funding the purchase of most of the organization's arms, ammunition, equipment and uniforms. 

The route that the terrorist financing takes is said to be:
(1) Funds are delivered by the funding parties to the Central Bank of Nigeria.
(2) the CBN transfers the money to accounts located in Cairo, where a well-connected Nigerian national, with jihadist links, purchases the arms, which are then shipped to BH.
(3) Alternatively, motor vehicles are purchased, and shipped to Benin, and transported into Nigeria, where they are sold at a reduced price, giving BH the cash it needs.   

One wonders why one does not see any visible international law enforcement efforts to interdict the efforts of those who are providing material support to Boko Haram. Neither the United States nor the UK has come out and discussed any ongoing programs to suppress terrorist financing to BH, and it is doubtful that Nigerian authorities will identify the senior PEPs involved. 

We know that BH also derives some of its income from illicit business matters inside Nigeria, and we intend to cover these in upcoming articles, but we ask the question: since the funding pipeline is known, as if the identity of the Nigerian arms trafficker who is the BH purchasing agent in Cairo, why haven't the Egyptian authorities, (with Western assistance if necessary), shut it down ?


This Fall, the Securities & Exchange Commission will continue to discuss a proposed change on the regulations governing the required minimum wealth that Accredited Investors must hold, to allow them to invest in exempt (unregistered) securities. The question is: will this change result in more, or less, financial crime, involving financial fraud ?

As you know, to be an Accredited Investor, one must:
(A) Have earned at least $200,000, during the past two years, with an expectation that it will continue, or...
(B) have a total household income of at least $300,00, for the same period, for a married couple, or...
(C) Have investable assets of at least one million dollars, exclusive of real estate holdings.

The proposals seem to going in this direction:
(1) $500,000 in income for the past two years, or...
(2) $2.5m in liquid assets, exclusive of real estate.

While the agency's intent, in the proposed increase in the floor, for designation as an Accredited Investor, there may be an unexpected, and unwelcome, result here.

(A)  Those investors who qualified before, but are now under the minimum, but still want to invest, could be driven to investments that contain a larger number of fraudulent operations, than they would have seen with exempt securities. Investment opportunities, which are later found to be fraudulent, might blossom, and target those now-disenfranchised investors, to their damage and detriment.
(B) Those with more than the $200,000 previously required, may be pooling their funds with others in similar situations, meaning those in the $200-$495,000 range, are look for alternative investments that do not cater to Qualified Investors, due to either high risk, or fraud.

We should take a hard look at the potential financial crime fallout, which could occur if the definition of Accredited Investor is raised, and see whether the possible increase in financial crime can be suppressed, whether through a high-profile public awareness campaign, or some other steps, to insure that good intentions do not result in an increase in investment fraud.


Art imitating life imitating art. Thanks for the memories, from one who lived it. In September 1984, the new television series Miami Vice brought the dark side of Miami life into American living rooms, and after that, the world's image of Miami would never be the same. Though the program took, at times, poetic license with Miami's drug-fueled life (and economy), its honest portrayal of the city opened more than a few eyes in Peoria.  

Friday, September 26, 2014


I have long warned Western compliance officers to avoid the use of articles in the Chinese press for due diligence purposes, due to the country's institutional censorship practices. Now, the arrests of a number of Chinese newspaper editors and journalists, charged with extortion, constitute an additional ground to steer clear of any content generated in the Chinese media. Journalists, and their supervisors, have reportedly been leaning on Chinese companies to pay them to run favorable articles in their newspapers.

The companies are also subject to receiving threats about publishing negative news stories about their corporate business, should they fail to pay up. The money is cleverly designated as advertising costs, but flows into the pockets of newspaper management, as well as the rank-and-file, according to published reports from China, which is trying to clean up the rampant corruption which pervades many sectors of the country's  economy, as well as its government agencies.

A troubled Chinese corporation could buy favorable coverage, and deceive the casual due diligence investigator who relies solely on Chinese print media for negative information. Conversely, a good corporate credit risk, who fails to cooperate with the greedy extortionist/journalist,  might be disqualified by inaccurate articles filed out of malice. Some companies, on the verge of an initial public offering, or some other important event, have been specifically targeted, due to their vulnerability.

This is but an additional reason to seek independent information sources, when performing due diligence inquiries on Chinese nationals, or entities. I have often suggested using competent investigative agencies, based outside the Peoples' Republic, in Hong Kong, Taiwan (Republic of China) or Singapore, whose staff are fluent in not only China's official language, Mandarin, but also the regional dialects used by the subject company. 

Thursday, September 25, 2014


Compliance defects, when exposed in a very public way by regulators, can result in real financial damage to a bank, especially when its securities are publicly traded. The Consent Order imposed earlier this year, on The Bancorp, Inc., the holding company for the Bancorp Bank, for multiple BSA violations, involving deficiencies in its compliance program, and which caused a major decline in the price of the bank's securities, continues to cause financial pain. In addition, the filing of a major shareholder class action against the bank, represents a new and potentially dangerous threat.

The bank's common stock, which was trading at around twenty dollars a share last Spring, has dropped to $8.85 as of the date of this article, which is close to its low for the past year. The stock took a 25% hit immediately after news of the Consent Order was released, and it has never recovered since. Senior bank officers, who usually hold stock in their company, have here suffered financial losses, as the direct and proximate result of the bank's compliance failures.

To add to the bank's compliance-related troubles, earlier this month, Pomerantz LP, a prominent New York-based law firm known for securities litigation, filed a class action suit against The Bancorp, Inc., for violations of the 1934 Act. There are two additional parties defendant: The bank holding company's CEO/Chairman, and its CFO.

The complaint alleges that the defendant made materially false and misleading statements, regarding the company's business, operational and compliance policies, and there are other issues. This is not the appropriate forum to discuss misrepresentations made to regulators, but when they become public knowledge, in the course of the litigation, the bank could suffer major reputation damage. While the filing of criminal charges against a bank are extremely rare, because they can trigger an inquiry into whether a bank's charter should be revoked, do not rule it out in this case.

The takeaway here: compliance deficiencies can, and will, hurt the very bankers who fail to maintain banking best practices, when it comes to maintaining an effective AML/CFT program.


Sketch of Defendant, from Russian news article 
Roman Seleznev, the Russian hacker who has been charged with stealing, and selling, Seattle consumers' credit card numbers, and generally wreaking havoc in the local business community, continues to have problems while in custody, and they include allegations that the Bureau of Prisons has effectively denied him proper access to counsel. Russian authorities have consistently asserted that Russian nationals are being unfairly treated, before, during, and after, their Federal criminal trials.

The defendant's lawyers have filed objections to, and affidavits in support of, their client's reputed mistreatment at the Federal detention center where he is awaiting trial, FDC SeaTac, in the State of Washington. As the probable result, he has now been moved from the administrative segregation unit, the SHU, and into general prison population. If he is a security risk, why move him ?

The problem remains his denial of access to counsel; he is not being permitted contact visits with his counsel, who complain that he needs to review discovery documents, for trial preparation, and to execute documents, which cannot occur at present. He is also being denied the ability to receive legal mail, unopened except in his presence, and unread by BOP staff.

Considering the financial damage that the defendant wrought in Seattle, through his criminal conduct, it would be tragic if a conviction was reversed on appeal, solely because certain law enforcement staff, considering him a "high profile" prisoner (his father, Valery, is a member of the Duma, the Russian Parliament) are denying him even the most basic access to his attorneys.

The District Judge in his case has, thus far, stated that he will not "micromanage" the defendant's custody situation, but counsel has requested an open-court inquiry into exactly why Seleznev is considered a high-profile case, deserving of a denial of the rights granted to all defendants, even non-citizens. He may be despicable, but level the playing field for his trial, please.

Remember, there is still the issue of his reputedly illegal abduction from the Maldives, by Secret Service agents. Though most Federal decisions have historically ignored the circumstances of exactly how a criminal defendant was brought before the Court, there are a minority of cases where clearly unconscionable conduct resulted in a decision favorable to an individual abducted from another jurisdiction.


The fact that former Panamanian President Ricardo Martinelli spent at least $24m on weapons, mostly for the use of his internal security force, has received a lot of media attention in the Republic of Panama this week, but the true purpose of those arms purchases, to give the Institutional Protective Service (SPI), whose primary role is to protect the president, sufficient firepower to be able to conduct a military coup, has not been publicly disclosed.

Fifteen million dollars was reportedly used to obtain not only arms and ammunition for SPI, but anti-riot gear. Those items included, according to published sources, 65,000 tear gas grenades, with launchers, 5000 smoke grenades, 324,000 pepper gas shells, and 35,000 shotgun rounds. The balance of the arms purchased were intended for Panama's small self-defense force.

Reliable sources in Panama advise that ex-President Martinelli, who was reportedly unwilling to step down at the end of his term in office, intended to overturn democratic rule in Panama, using his newly-armed internal security force, and remain as president indefinitely. His plan became known to the United States, and he was allegedly warned that such a move would result in direct American intervention. There is unverified information that both Vice President Biden and Secretary of State Kerrey are said to have played a role in conveying the American position to Martinelli, who cancelled his coup planning.

There is still the question of that massive arms purchase; most of the weapons apparently cannot be located, and the whereabouts of Ricardo Martinelli, who is facing an imminent indictment in Italy for corruption involving kickbacks paid by a government-owned entity to him, are unknown.


Wednesday, September 24, 2014


With all the frenzy appearing in the financial media, involving coverage of Treasury's new regulations aimed at discouraging inversions, legal efforts US companies make to avoid taxes, by merging with an overseas entity, this might be a good time to note that the increased enforcement of new regulations that close tax loopholes, might just catch a few sophisticated money launderers.

American companies routinely engage in having their foreign subsidiaries lend them a portion of their profits, to gain access to those funds, without having to pay US corporate income taxes on the money.* A new Treasury regulation treats these loans as dividends, thereby making them a taxable event.

Money launderers working for US clients, who have cleaned funds overseas, routinely set up controlled offshore companies, disguised as non bank financial entities, to "loan" their criminal proceeds to a domestic company, which will use the "borrowed" funds to purchase real estate. With increased US scrutiny of legitimate loans from overseas subsidiaries, American law enforcement agencies or regulators may accidentally stumble upon some of these contrived loans. Let us hope that the agents who happen upon such bogus transactions recognize them for what they really are: repatriation of laundered criminal proceeds being invested in the Continental United States. This could represent an unexpected bonus, due solely to the new rules restricting inversions.
* Sometimes known as hopscotch loans.


If you had any doubts about the significance of the Arab Bank case, take a look at the Verdict Form*; it found the bank liable for all twenty four of  the specific terrorist acts listed by the Plaintiffs. This is not an inconclusive finding of fact; it directly links the banks to the deaths and injuries perpetrated by Hamas, after which the bank paid rewards to the next of kin of the suicide bombers and terrorists imprisoned for their acts.

The verdict will, of course be appealed, but since jury verdicts are generally regarded as sacrosanct by appellate judges, absent any fundamental errors, you must assume that it will be affirmed on appeal. This could open the floodgates to a huge number of new civil suits against banks that have failed to interdict terrorist financing operations which pass money through their accounts, to designated terrorist organizations.  Traditional AML compliance programs will require specific CFT strengthening, for risk management purposes, lest a bank be sued, for failing to identify, in real-time, terrorist financing.  

Tuesday, September 23, 2014


There's a story behind my photograph, which appears on this page. It was taken in Tel Aviv, where I was lecturing at a government conference, for a story about me in an Israeli magazine. Unfortunately, it was not appreciated by World-Check, and never appeared at that time outside of Israel.

I do have the magazine article, as a pdf document, if anyone wishes to read it. Please email me at : if you wish to see it. I do caution you that it is in Hebrew.    


If you are not paying close attention to what is going on in Hong Kong, you may have missed this: two of the world's largest international banks have now make it extremely difficult for clients who are using companies incorporated in the British Virgin Islands (BVI) to open accounts with them. Many Chinese businessmen routinely employ BVI companies, for both legitimate tax avoidance, as well as illicit purposes, and two of the big banks have decided that the risk levels are too high for comfort. Banks in the US and EU should follow suit, in my humble opinion. I have never bought the argument that wealthy foreign clients need BVI companies for privacy; It's tax evasion, my friends, or worse.

If HSBC and Standard Chartered now choose not to open accounts for many BVI companies in Hong Kong, should you consider following suit ? I know, you are always being told by your clients' counsel that their BVI bearer shares are being held by a "Custodian," but have you ever looked on the official website to see exactly who the authorized custodians are ? Some of them are local entities, whose parents you might not be comfortable doing business with yourself, due to their "colorful" histories. I know that I personally have issues with a number of them. Have you ever taken the time to vet the Custodian of a BVI company ? I doubt it.

No prudent compliance officer should be comfortable asking a BVI-domiciled custodian to verify beneficial ownership of one of its clients; the economy of the jurisdiction prospers, in large part, due to its corporate formation industry, and relies upon repeat business, and word-of-mouth. The temptation to protect their clients, where your verification of information that they supply is virtually impossible, presents too great a risk for my liking. They may also unreasonably delay your inquiries, forcing some banks to make business decisions that they later come to regret.

Of course, if you are old school, like me, you find the utter concept of bearer shares a recipe for the facilitation of tax evasion, money laundering, terrorist financing, and various and sundry other white-collar crimes.  If your client must conceal beneficial ownership, he's a prime candidate, not for privacy, but for tax crimes, or worse. Also, given the obscene number of Chinese nationals who have acquired BVI companies over the years, many of whom are PEPs, there's really no secret about the probable true purpose of a number of of BVI companies; laundering criminal proceeds, from corruption.

HSBC and Standard Chartered are, for once, correct. Tell your new foreign client to come back with a corporation formed in a jurisdiction where you can actually ascertain beneficial ownership from the original stock certificate, the transfer ledger, and a supporting opinion of counsel.



In the motion picture "Groundhog Day, " Bill Murray's character was forced to painfully relive the same day, over and over again. That same story is often repeated, when it comes to AML deficiencies of American banks; regulators cite them, and then cite them again, at a future time, but the banks named continue to fail when it comes to maintaining an effective AML program.

The jury verdict, handed down yesterday against Arab Bank, may succeed in scaring bank directors into creating, and maintaining, effective compliance regimes, lest they find themselves potentially at the wrong end of a multi-million dollar judgment, which will shortly be the fate of the Arab Bank, and the resultant negative publicity surrounding such a case.

It is interesting that a group of American trial lawyers, as an unexpected result of the Arab Bank case, may have done what US regulatory agencies have been trying to do for years: cause the banks to seriously implement AML/CFT programs that work. 

Sunday, September 21, 2014


 US Dollars & gold

Have you seen the video, on YouTube, of the millions of US Dollars, lying on the floor of a home, in Ninevah Province, that Islamic State has seized, and which belongs to former Iraqi Speaker of Parliament, Sunni leader Usama Al-Nujayfi ? It purports to show millions of dollars, in clean, wrapped $100 notes, together with two gold ingots. The Islamic State is making much of the criminal proceeds they allegedly have found. if you have not seen the video, it is also available on the website of MEMRI, at

Usama Al-Najayfi

If this is true, then the allegations of corruption that were leveled at Al-Nujayfi three years ago could be accurate; it is said that he spent US$600,000 to upgrade his home, and the source of those funds is a puzzle. Was the cash found illegally diverted from America's Iraq reconstruction program, or US aid to the country's military, or kickbacks he received ? In 2011, there were allegations that Al-Nujayfi had taken many trips abroad, which were a mystery, because they were not connected to his position in parliament, but no investigation was ever initiated that I can find.

Please, don't tell me that this individual has multiple bank accounts in Europe.


Jacket for print version

Readers who speak Chinese, and who may have been looking for the print version of "The Laundry Man" in that language, be advised that, at this time, only the e-book is available. The hard-copy version has not yet been approved for publication by the censors in the Peoples' Republic of China (PRC).

As soon as the print version is approved, and available, we will release that information on this blog. Thank you for your continuing interest in "The Laundry Man."

E-Book in Chinese


Attorney David Boden
David Boden, who reportedly received a million dollars for serving as General Counsel, at convicted master Ponzi schemer Scott Rothstein's law firm, RRA, has been charged* with Conspiracy to Commit Wire Fraud, in US District Court in Fort Lauderdale, Florida. Boden allegedly certified the status of a number of confidential (though non-existent) out-of-court settlements, in discrimination and harassment cases, which ultimately cost those investors a loss of $2.4m . The case was initiated by the filing of a Criminal Information, which is generally an indication that the defendant intends to enter a plea of guilty; The crime carries a maximum sentence of five years in Federal Prison, plus three years of Supervised Release, and a $250,000 fine.

Florida Bar records indicate that Boden was not admitted to practice in the State of Florida, which means that, according to Florida Supreme Court Rules, he could not:

(1) Appear in any court, on behalf of his client, the RRA law firm.
(2) Appear before any administrative agency.
(3) Appear before ant other tribunal.

The exception is, of course, if and when admitted when authorized by that specific tribunal, like a Pro Hac Vice admission, for a single case only, in Federal Court. Boden is admitted to practice law in the State of New York, and official records there show him with a Hollywood, Florida address.

One wonders why a law firm, composed of attorneys admitted in Florida, did not have as General Counsel, a lawyer who could attend court hearings on its behalf. Florida rules specify that in-house counsel must designate themselves as "Authorized House Counsel," but it does not appear that Boden adhered to that rule. He is believed to have had a larger role in the fraud than this case would indicate, and it is not clear why he was only charged with a minor crime, though for the purposes of convenience, the US Attorney's office will obtain a conviction without having to try the case, which is but one of many in the Rothstein scandal. Were there evidentiary issues ? We cannot say.

Also charged in the case was a local broker, Richard L Pearson, who received a commission in the transactions cited above. He has been charged with the same offense.
* Case No.: 14-cr-60229-KAM (SD FL).

Saturday, September 20, 2014


A number of recent events, all involving the disputed territory of Kashmir, all appear to be potentially creating a Perfect Storm that may result in armed conflict involving India. Any major military action will have a significant effect on the Indian economy, on foreign investment there, and on the risk levels associated with financial exposure of Western banks, and of their clients.

Here's why I am concerned:

(1) Both India and China have sent approximately 150,000 troops to the contested border between Indian-administered Kashmir, and China.

(2) There has been new movement of Chinese soldiers into the Chumar area of Ladakh, which is Indian territory.

(3) With elections coming this fall, the Indian Government could be posturing for its domestic audience.

(4) Bilawal Bhutto Zardari, a rising politician g in Pakistan, which claims all of Kashmir, has stated that he intends for his country to take control of the entire region. Being that he is the son and grandson of  Pakistani Prime Ministers, he  may very well end up as the country's principal leader, and his extremist nationalistic attitudes could force India into yet another war in South Asia.

The status of  Kashmir, which had a Muslim majority at the time of partition, in 1947, was intended to be solved by a plebiscite, which was never held. Proponents of independence for Kashmir further complicate the tug of war between India & Pakistan, and increase risk.

I fear that one or more of these new factors could result in a limited military action, which may spin out of control, and draw India into armed conflict , once again,with either Pakistan or China. It is suggested that you raise Country risk for India, until after the elections, for until that time there is a clear and present danger of an incident, which could spark a major military response on India's part. 

Friday, September 19, 2014


If you are a compliance officer at a Florida bank that has a number of clients who are physicians, and medical groups composed of physicians, you need to be aware of the fact that the statutory cap on non-economic damages, in cases where there is loss of life in a medical malpractice claim, was declared unconstitutional earlier this year, by the Florida Supreme Court*. Furthermore, a decision in that same high court is pending, on a case which will probably result in a similar ruling, eliminating the cap on how much can be recovered, on all other types of medical malpractice claims. Attorneys for the Florida Medical Association, in a published opinion, have stated that this is the likely outcome of that second case.

This means that medical malpractice judgments against doctors will now be permitted, without limitation. Those judgments that greatly exceed malpractice insurance coverage then expose all the assets and holdings of Florida physicians, and their professional associations. Physicians, and their corporate or professional entities, could become insolvent, as the result of multi-million dollar judgments, where plaintiffs' attorneys seek to levy on all their assets. Some may be forced into early retirement, under greatly reduced economic circumstances.

Some doctors might be forced to consider bankruptcy, with all the resultant negative consequences to their lives, as well as their practices. Others may be forced to close their doors, and move to another state, where they may still be faced with unsatisfied judgments.

Given that the earliest that plaintiff's attorneys could most likely obtain these new substantial judgments would be early 2015, Florida financial institutions that have financial exposure to physicians practicing medicine in the state would be well advised to take a hard look at their clients' lines of credit, secured and unsecured obligations, including investments where the bank was the lender, and all other personal and professional debts of the clients, that are presently owed to the bank. Have all the relevant assignments and mortgages been executed ? Are there personal guarantees of clients' spouses in the files ? Is there any exposure secured by out-of-state assets ?

Proper risk management means assuming the worst case scenario, especially for affluent professional clients whose debt service depends on a continuation of their cash flow. If, as some experts warn, we are now going to see an explosion of medical malpractice suits, with large verdicts, now is the time to
minimize your bank's risk levels for your physician clients, long before the new, unlimited MedMal judgments come down the road, and hit your clients hard.



Non-biometric passport
Two Iranians have been detained by the authorities in Kenya; they were carrying forged Israeli passports. Their destination was Israel, via Europe. Their bogus travel documents were copies of the old non-biometric passports. previously-seized forged Israeli passports had misspellings. What their purpose was in travel to Israel is not known, but it is doubtful that these two individuals were engaged in legitimate matters; whether it was terrorism, or some criminal activity, we can only guess. Last year,
one of those arrested with a forged Israeli passport was an Iranian national.

The takeaway from this little lesson; if you have a new prospective international client who is presenting you with one of the old types of passport, you will be well-advised to demand secondary government-issued identification, of the type that you can easily verify. It may even be necessary to inquire at the embassy or consulate of the country where the passport was issued to verify identity to your satisfaction, if you have doubts about the passport. Inquiries with your local law enforcement contacts may also help.

Remember also that a national of a country will be fluent in at least one of that country's official languages, and knowledgeable about its geography. Ask questions during the CIP process, to ascertain whether he or she possesses that language capability, and familiarity with information that a national of that country will have.
Note identifying logo on biometric passport


The Second Circuit Court of Appeals, affirming a lower court decision, has ruled that the Government of Iraq cannot maintain a civil action against the companies that reportedly paid bribes and kickbacks in the UN-sponsored  corrupt Oil-for-Food program, which was operated during Saddam Hussein's regime. The defendants included some of the world's most prominent multi-national corporations, including Banque Paribas.

The thrust of the decision:

(1) A RICO action against the defendants could not be maintained due to the legal principle of In Pari Delicto (of equal fault)*.

(2) There is no private right of  action for violations of the Foreign Corrupt Practices Act (FCPA).

(3) The other counts are properly brought under state, and not Federal, law.

Readers who wishes to review the complete text of the decision, can access it on the Second Circuit website**.

* Since both parties are equally at fault, the Court will not involve itself in resolving one party's claim over the other. Members of the Hussein regime were recipients of the kickbacks.

Thursday, September 18, 2014


I have read the submission of the US Attorney's Office in Seattle, regarding the objections lodged by counsel for the Russian hacker, Roman Seleznev, as to his restrictive confinement in the Federal correctional facility in SeaTac. Three of the defendant's lawyers have filed affidavits, attesting to their inability to meet with their client, give him access to Discovery, and prepare his defense with his assistance.

The boilerplate reply of the US Attorney's Office, saying that he is in the SHU because he is a security risk, and if he has a complaint, he should file an administrative appeal with the Bureau of Prisons (BOP), strains credibility. The affidavits show that the BOP is clearly interfering with his right of access to counsel, and to adequately prepare for trial, and it would appear that their facility is inadequate, in disrepair, and ill-suited for any detainee who need to prepare a defense in a complex case. Put this defendant in a modern facility where everything works, please. Attorney visits with broken microphones are unacceptable, as are restrictions to one telephone call per month. The defendant is a hacker, not a terrorist.

I can see parallels with the mistreatment endured by Richard Chichakli in his pre-trial confinement, and be assured that I am being absolutely objective about the facts. Viktor Bout also had trial preparation problems while in custody. The Russian media is asserting that Russian nationals are not receiving a fair trial in Federal Courts in the United States. If the Bureau of Prisons keeps playing games with Russian detainees, which infringe their rights, I may start agreeing with them.

Let me humbly suggest, to the authorities in Seattle that they move Seleznev to a country jail in the area, one which has an ongoing relationship with Federal authorities, to house pre-trial detainees, and which is better able to give the defendant adequate access to counsel, access to the telephone and a non-Internet connected computer, so that he can review the Discovery, and prepare for trial.

Do we really want to see the defendant convicted by a jury, and then have his conviction overturned on appeal, because the constitutional rights available to every defendant, even a disruptive hacker like Seleznev, were not granted ? I think not. 


What was the amount again, $14.8m, from Qatar, for the Brookings Institution ? The disclosure that many foreign countries provide significant funding for American "Think Tanks," non-profits whose academics often provide information and reports on those countries for decision-makers, has called into question the objectivity of such reports. Certain members of the US Congress are calling for full disclosure of funding, when scholars testify on Capitol Hill, for they fear that such financial support could influence the recommendations of these experts.

Why am I bringing this up for compliance officers, you ask ? If you are responsible for  updating Country Risk, or monitor emerging threats, you might be accessing some of the relevant articles, written by the scholars and retired military and government officials who reside at one of the Washington Think Tanks. The new information indicates that you had best take that information with a grain of salt, especially if the subject of the article is a government that is a financial contributor to the NGO.

While this may be a knee-jerk reaction on my part, to the news about undisclosed foreign sponsors, a quick check of the older articles, written by the NGO whose information that you want to rely upon, has written on the subject, should tell you whether the information is skewed or slanted in any direction other than that of objectivity. You can also rely upon authors at think tanks whose work you are familiar with. In any event, do not dismiss the think tank scholars out of hand, for many of them accurately contribute to our knowledge of unfolding events in faraway places.
Note: if you are curious, an enlarged version of the above chart, which allows you to read the names of all the US-based think tanks in the picture, can be seen here:

Wednesday, September 17, 2014


Robert Allen Stanford, who is serving 110 years, for conducting a Ponzi Scheme second in notoriety only to that of Bernard Madoff, has filed, Pro Se, his initial Brief of Appellant. Though the Court limited him to a maximum of 30,000 words, Stanford has filed a 299-page brief. for which the Court has already taken him to task, and for which he is, again, requested leave to file what he says is a maximum of 50,000 word brief.

Stanford has filed these Points on Appeal:

(1) Whether the SEC had jurisdiction, and regulatory authority, over Stanford International Bank, or its certificates of deposit. The Indictment was defective.

(2) Whether the simultaneous civil (SEC) and criminal prosecutions violated Due Process, and constituted Double Jeopardy.

(3) Whether the trial court violated the 4th Amendment protection against Illegal Search and Seizure.

(4) Whether the trial court abused its discretion for failing to hold a pre-trial hearing to determine whether the defendant had any untainted funds to pay for his defense.

(5) Whether the trial court abused its discretion, when it disqualified his choice of legal counsel, and forced ill-prepared counsel to proceed to trial.

(6) Whether the court violated his right to a fair trial, by failing to respond to certain Jury Notes.

(7) Whether the defendant was deprived of a fair trial, due to pre-trial publicity.

(8) Whether his 5th, 6th and 14th Amendment rights were violated by the Court for deeming him competent for trial, and giving him insufficient time to prepare.

(9) Whether the trial court abused its discretion by giving the defendant inadequate time to prepare for trial.

(10)  Whether the failure to provide certain specific jury instructions violated the defendant's right to a fair trial.

(11)  Whether Due Process was violated,  when the case proceeded, with insufficient elements to prove violations of the Mail Fraud Statute.

(12) Whether the issuance of a modified Allen Charge* deprived the defendant of a fair trial.

(13)  Whether the defendant's sentence was improperly enhanced.

(14) Whether the Court's failure to be impartial violated his 5th and 6th Amendment rights.

(15) Whether, under the Cumulative Error Doctrine**,  the issues presented here amounted to a denial of his right to a fair trial, and undermined the reliability of the verdict.

I don't know who wrote this Pro Se brief, but I doubt that it was the defendant himself, for it contained profuse citations to legal authority, and appears to be well-written. Will the jury verdict be overturned, though, in the absence of the Court finding sufficient, reversible error in any of the points ?

When the US Attorney has filed its brief, we will return to this case, and examine the responses to the issues raised by Stanford.
*Allen Charge: An instruction, given to a deadlocked jury, to encourage it to continue deliberating, until it reaches a verdict. Named for a US Supreme Court decision, Allen vs. United States.
** Cumulative Error Doctrine: Where a number of errors committed in the trial court, in which no one alone is sufficient to warrant reversal, but in combination necessitates a reversal, on the grounds that the defendant was denied a fair trial.


The recent airport seizure, in the Republic of South Africa, of $9.3m in brand-new, uncirculated US $100 notes, which had arrived from the Nigerian capital, Abuja, begs the question: which American bank was the source for all that new cash ? The money was not declared, contrary to South African regulations, and it was taken from two Nigerian nationals, and an Israeli, all of whom arrived on a business jet.

The individuals who were attempting to smuggle in the cash alleged that the money was for arms purchases, on behalf of certain unspecified Nigerian security services. That begs the question: why wasn't the payment, as large as it was, to be made via wire transfer, if it was a government services ? The story was obviously a fabrication, as any official purchaser would have filed the necessary customs declaration upon arrival. This was dirty money, notwithstanding its uncirculated condition.

This brings us to the primary issue at hand: How did these individuals get their hands on this cash ? What Nigerian financial institution obtained it, and what American bank sent it, and for what legitimate reason ? Perhaps some of our readers who work at the Department of the Treasury might want to obtain the serial numbers from South African authorities, using the Legal Attache at the US Embassy in Pretoria, to learn the origin of this dirty cash. 

Tuesday, September 16, 2014


Federal Detention Center SeaTac
Having been there myself once upon a time, I know that most jailhouse complaints have no basis in fact, but are lodged because the individual in custody has nothing better to do. There are notable exceptions, however, and we have seen more than I like to see, when it comes to Russian nationals in custody, in Federal cases.

We have been covering the case, involving the Russian hacker, Seleznev, in US District Court in Seattle, and it appears that his problems are real. His attorneys have filed  three affidavits, detailing the difficulties they are experiencing, with securing client contact:

(1) Seleznev is being held in the Special Housing Unit  (SHU), which is an isolation unit, as the Court will not allow him into General Population, due to his access to money, which could influence other inmates to assist him, and possibly to obtain identities for escape.

(2) The SHU apparently has a solitary attorney visiting room, with a glass partition, and the microphones used for communication are defective. Counsel cannot confer with his or her client.

(3) Only a thin opening in the partition, suitable for single sheets of paper at a time, allows the passage of documents between attorney and client. This is unacceptable for complex criminal cases.

(4) The defendant's efforts to place telephone calls to his attorney are not being facilitated by corrections staff, according to his attorney. he is getting one (1) per month. Other SHU detainees get regular calls. This is clearly wrong.

(5) Letters from his attorney were not delivered to him for seventeen days,  and were delivered already opened, a violation of BOP regulations regarding attorney mail, when marked as "special mail," which can only be opened, to check for contraband, in the detainee's presence.

(6) The inmate was reportedly told, by BOP staff, that he will never be allowed into General Population, and get regular access to his attorneys, the way other defendants do. If all this is true, his right to counsel is being interfered with.

(7) The defendant must review electronic and non-electronic Discovery. He needs access to a computer for that purpose.

Are these complaints the Russian Government has been making, about how Russian nationals in the Federal system are being denied their rights, correct ? I had thought that the complaints had no merit, and were being made solely for political purposes, but now I am not so sure. Someone needs to tell those people as FDC SeaTac that the defendant, no matter what we may think of him, is being denied his 6th Amendment Right to counsel, and his 5th Amendment Right to Due Process.

Monday, September 15, 2014


Francisco Illarramendi, whose Ponzi scheme disguised as a hedge fund is about to result in his serving a Federal sentence of as much as 70 years, has sold his home. Located in pricey Fairfield County, Connecticut, Illarramendi and his wife received $3,418,500 for their mansion, according to real property reports from New Canaan. If you are interested in driving by the residence, to see just how well hedge fund managers, especially crooked ones, live, the address is 61 Parade Hill Lane. See the photograph above if you cannot make a personal visit. It's not too shabby, as you can see from here.

Did the court-appointed Receiver, assigned to garner assets of the hedge fund for the victims, who reportedly lost an estimated $300m, get the check ? We cannot say, but inasmuch as the wife of the Ponzi schemer was required to turn over their joint tax refund check to the Court, and since Illarramendi, presently in custody, could not have attended the closing in person, but had to execute the deed, the odds are that probably most of the closing proceeds, after payoff of any bona fide existing mortgages, is now in the hands of the Receiver, who surely had a representative at the closing.

Venezuelan expats living in the United States are anxiously awaiting the sentencing of Illarramendi; their wait will soon be over. They are still reeling from the impact of the dismissal, by the Receiver, of his civil suit against Illarramendi's close associate and sometime financier, Moris Beracha, who seems to have dodged the bullet thus far.  Was he forced to make a monetary settlement with the Receiver ? The court file is silent, and the mystery remains. Do you know ? There is also Javier José Ardura Gomez, a Spanish businessman whose involvement has been a matter of intense speculation since the Ponzi scheme imploded. How does he figure in, and why does he no longer come into the United States ? As you can see, questions abound in this case.


Things aren't going too well for the Arab Bank, which is presently in trial, in US District Court in New York, being sued by the victims and heirs of American victims of Hamas terrorist acts committed in Israel. The bank's defense counsel could be doing a better job of representing their client.

First, the bank flat out refused to make discovery, which one does not do in a Federal case if you expect to win. It declined to produce relevant books and records, asserting that such acts would violate Jordanian bank secrecy laws. (The bank is headquartered in  Jordan). This position has been untenable in the United States since the Bank of Nova Scotia case. As the result, the bank's ability to conduct a defense has been severely curtailed by the Court.

Second, the bank's expert witness on Hamas, an Irish academic who has written a book about the designated terrorist organization, testified that she was unable to find any connection between Hamas and charities operating in the region. When cross-examined, she admitted that she cannot read Arabic. Exactly how was she able to conduct research of Hamas activities, when she was unable to read any documents ?

The trial continues, and we shall report on the outcome, but I think you have a pretty good idea of what that will be.

Sunday, September 14, 2014


The President of Mexico, Enrique Peña Nieto, in a speech given last Friday in Reynosa, has declared that the strict, and to date highly effective, restrictions on Mexican businesses making large US Dollar deposits, in banks and MSBs, will now be partially lifted. Sr. Peña stated that the reason for the change was that Mexican companies were hurting honest businesses and corporations.

The restrictions, which imposed a USD$14,000 monthly limit on dollar deposits, now contain an exception. To qualify, these conditions must be met:

(1) The business must have been established for a minimum of three (3) years.
(2) The business must allow the authorities to monitor all its financial transactions.
(3)  The business must prove that it needs to make monthly deposits in excess of $14,000 in order to operate.

In recent years, Mexican narcotics traffickers have been forced to bulk cash smuggle their dollar profits into Panama, and other Central American jurisdictions, in order to deposit their drug profits earned in the US. They have also resorted to shipping the cash back into America.

Will this new exception to Mexico's extremely effective method of denying traffickers a safe haven for their dollars ? It is too soon to say, but experienced money launderers will probably do the following to qualify:

(A) Buy into, or otherwise take control of legitimate businesses that have been established for the mandatory three years.
(B) Bribe, threaten or otherwise coerce underpaid and corrupt inspectors and regulators who visit their entities into certifying to their superiors that they are in full compliance with the law.
(C) Make sure that the businesses they purchase can show that they need to deposit large amounts of dollars to compete, and survive.

Is President President Peña's new policy a dangerous step backwards in his country's anti-money laundering efforts ? Absolutely. It will only serve to open the floodgates again to drug dollars entering the global financial structure, which will further empower the Mexican Cartels.


The Superintendent of Banking in the Republic of Panama has warned the banking public of a fraud that claims to originate in is office, and seeks to relieve account holders in Panamanian banks of some of their money. It's the usual "tax clearance letter" scam. The letter appears below, and it is obviously intended for English-speaking account holders.


Ever since the end of the recent Gaza hostilities, there have been ominous threats of war, emanating from Hezbollah-controlled South Lebanon. Some of the statements and rumors are extremely disturbing:

(1) Hezbollah intends to invade Galilee, the area in northern Israel adjacent to the frontier with Lebanon, in force during the next conflict.

(2) Hezbollah fighters have acquired extensive combat experience in Syria, which increases the organization's ability to inflict serious casualties upon Israel Defense Forces in any future clash.

(3) Hezbollah's vastly increased missile inventory will rain down upon all of Israel's cities, causing a large number of civilian casualties.

(4) Sounds of possible tunnel networks, possibly constructed between Lebanese border villages and Israel, could result in an underground armed invasion into Israeli towns, resulting in the killing of noncombatants and kidnappings.

Israel has previously announced that, in the event of any future conflict initiated by Hezbollah, that it will take the battle into Lebanese territory, and assign responsibility to that country's government for its failure to rein in its non-state actors. Given that Israel destroyed some infrastructure outside Hezbollah-controlled territory in 2006, the last time it battled Hezbollah, you may assume that it will again inflict  similar damage.

In addition, given that there are probably a number of Lebanese banks that are moving money for Hezbollah, in the post-Lebanese-Canadian bank environment, notwithstanding all the Beirut bankers' denials, One must assume that the Israeli military will target the downtown Beirut financial community this time, so as to degrade Hezbollah's ability to rebuild and rearm. I do not think that Israel will exercise the level of restraint that it did in 2006.

Therefore, as a prudent risk management venture, so long as war drums are beating in Lebanon, international banks with financial ventures there, or whose clients are heavily invested in-country, should take steps to minimize their exposure at this time. Hopefully, you have already increased Country Risk levels to the point where there will be a red flag on any new financial exposure.


Last week, the Foreign Correspondents' Club of China published a report* that confirmed that the Government of China has increased its campaign harassment and intimidation of foreign journalists. the report particularly focused on China's response to journalists who  report negative news, be it stories about corruption of Chinese PEPs, issues involving misconduct of Chinese Companies, or the activities of Chinese nationals who oppose their government's policies.

Whether it has reached the point where compliance officers conducting due diligence investigations of Chinese nationals or entities cannot rely upon the global media to report on negative information relating to the subject of their inquiries, I cannot say, but its is suggested that, when it comes to ascertaining whether a prospective wealthy Chinese client is a PEP, you are best served by engaging a Hong Kong, or Taiwanese firm to check them out. Mainland China resources are not going to provide you with the blunt truth about your client, if it contains negative information.

Any compliance officers whose research often involves Chinese clients should review the complete text of the document; The link is below.

The Foreign Correspondents' Club of Hong Kong is also reporting harassment, intimidation, and interference with their journalists' efforts to report truthfully and completely truth about events in China.

*Position Paper on Working Conditions for Foreign Correspondents in China


The Islamic State is reportedly earning in excess of $1m per day, from the sale of oil, trucked into Turkey, and sold through black-market channels.  Though the United States has voiced its strong objections, directly to Turkey's leadership, the illicit commerce, which amount to terrorist financing, continues.

Most observers believes that this illegal oil trade is being allowed to flourish because of these reasons:

(1) Islamic State holds a large number of Turkish diplomats hostage, and the Government of Turkey fears that they will be beheaded, should it incur ISIS anger. This is a reasonable assumption, given the three summary executions of Westerners witnessed lately.

(2) Turkish consumers are actually reaping a benefits from the illicit oil sales, for it has reportedly caused retail prices for gasoline to fall.

(3) A number of wealthy Turkish businessmen, and their PEP associates, have financially benefitted from this technically illegal trade.

Given Turkey's currently frosty relationship with the United States, and the EU, Western influence thus far has failed to cause Turkey to terminate the entry of oil tankers carrying ISIS oil into the country.

Since in Turkey, such activities do not occur without tacit approval of government, and given the history of corruption among the country's PEPs, a significant portion of the oil profits is certainly flowing into the overseas bank accounts of some senior Turkish PEPs. Remember also that the adult children of Turkish ministers have been implicated in massive corruption.

It might be prudent to check all your major Turkish bank clients; has anyone been making large deposits ?  Are any wire transfers coming into their accounts from new sources, perhaps ? 

Friday, September 12, 2014


Yesterday, according to reliable reports, Hamas made cash payments to a large portion of the reportedly 40,000 employees of its ministries in Gaza, whose salaries have not been paid for months. Hamas' taxation of commerce transiting the cross-border tunnels from Egypt dried up when the Egyptians destroyed the illicit tunnels. This cash distribution, known to be individual payments that ranged from $275 to $1240, were made in US Dollars, said to have been deposited in Islamic National Bank of Gaza*, located in Gaza City. Since the currency in common use in the Territories is the Israeli Shekel (NIS), the cash, once withdrawn, was immediately converted by local currency exchangers. Hamas alleges that these payments are merely loans; it declines to identify the source of these funds.

What's wrong with this picture ? Whether the money came from Hamas' benefactor, Qatar, or other donors, Hamas is a Specially Designated Global Terrorist (SGDT) organization, and I would truly lie to know what US bank is making a fat profit by shipping millions of dollars in greenbacks to the Middle East, knowing very well that the end user is Hamas. Is such a bank not guilty of Providing Material Support to Terrorism ?
* Controlled by Hamas, and OFAC-sanctioned in 2010. Also known as National Islamic Bank, Palestine Islamic National Bank, Islamic National Bank Company, and National and Islamic Bank.


The high-profile seizure of tens of millions of dollars in cash, from companies located in the fashion district of Los Angeles should serve as a painful reminder that money laundering operations more often than not involve more than one method of cleaning dirty cash. In this case, US-generated drug profits were laundered through a combination of both trade-based money laundering, and the Black Market Peso Exchange. Such a combination can skew the appearance of the indicia, or Red Flags, of each type of technique or method, making detection more difficult.

Inasmuch as most law enforcement investigators are generally not familiar with market pricing in the apparel industry, substantially raising or lowering the sales price of manufactured goods, the cloth necessary to create finished products, and associated raw materials, the use of the fashion industry for trade-based money laundering was predictable. Factories in Latin America are typically used for manufacturing, or for making unfinished goods, for final assembly in the US, thus creating a golden opportunity for money launderers to conceal drug profits in "sales" to foreign manufacturers, which were, in essence, controlled by the cartels.

The BMPE, which can be hidden within virtually any international industry, and which is often extremely difficult to identify, was the supplemental technique employed. The takeaway from this case: money launderers are, unfortunately, very creative when it comes to constructing a scenario with multiple techniques. running at the same time A sufficient number of the traditional red flags may not be readily apparent to the untrained eye, so take even a small number of inconsistencies found in a target's trade or business as grounds for further inquiry.    

Thursday, September 11, 2014


 Remembering Superintendent Morrone, whom I had the honor of knowing, and the other 2965 victims of 9/11 on this day. Rest in peace.

Port Authority Police Superintendent Fred Morrone

Wednesday, September 10, 2014


Charges of securities fraud, where the perpetrators formed over 5000 companies in Belize and Nevis, and conducted bogus sales, in order to illegally drive up the price of securities, and then sell off their holdings at a huge profit, contained an interesting fact. The fraudsters used prepaid cards to assist them in laundering their profits back into the United States, loading as much as $50,000 per month on cards.

Prepaid cards, which are often employed by money launderers to move funds, without violating US currency reporting requirements, are then used by their criminal clients to purchase goods and services, and maintain an affluent lifestyle, without any exposure for bulk cash smuggling.

The sheer volume of companies formed in Nevis & Belize reinforces the fact that, notwithstanding any existing AML/CFT legislation in place in those jurisdictions, corporate formation, generally conducted by local attorneys, never involves inquiry into whether there is a legitimate business reason to form 5000 companies. 

Tuesday, September 9, 2014


The big drop in the value of the Pound (GBP) this week, due to uncertainty over the possible future independence of Scotland, definitely has an impact in organized crime, especially drug trafficking organizations. Many money launderers are required to keep a portion of their clients' illicit wealth, secure, but on hand in cash, to cover large narcotics purchases, and also potential attorneys' fees, should a clients be arrested, as well as cash to pay for a bond, where pretrial release is available.

Criminals are businessmen too, and they do not take kindly to a substantial drop in the value of their large ready cash stash, especially when they are concerned that there is a possibility of a further decline. In that case, a change to a more stable currency may be warranted, to preserve value.

If I was a "financial advisor" (money launderer) for a DTO in the UK, I would certainly consider exchanging my cash for US Dollars, at this time. Should you be approached, this week or next, to change a rather large amount of Pounds into Dollars, from an entity with an urgent request,  I suggest that you press the seller for details about Source of Funds. Is the response too vague for you ? Then decline the business.