Sunday, November 30, 2014


The trial judge in the Federal case, pending in the Southern District of New York, against Viktor Bout's co-defendant, partner and reputed money launderer, Richard Chichakli, has declined to recuse himself. Chichakli had filed an lengthy recusal motion, asking that the judge step down for a number of reasons.

The Court stated that the sentencing will go forward, as scheduled, on December 4, 2014.

Saturday, November 29, 2014


When a lawyer commits money laundering for his criminal client, is probation too light a sentence ? You be the judge. James Warner, a San Diego criminal defense attorney, was sentenced to;
(1) Probation for three years.
(2) One year of House Arrest (Home Detention).
(30 2000 hours of Community Service.

His crimes:
(A) He laundered $100,000 of client drug money.
(B) He was reportedly holding over $300,000, including $200,000 in cash.
(C) He was making structured deposits into his bank accounts.
(D) he used an offshore corporation.
(E) He told another client, arrested in a related case, not to cooperate, and his attorney's fees would be paid by the first client.

Warner has resigned from the California Bar, and it appears that he will not be practicing law again.

What do you think ? Sufficient punishment to deter other lawyers from committing money laundering crimes in the future ?


Ignacio Fábrega

The criminal investigation into Panama's former Superintendent of Securities, Ignacio Fábrega, who left government office, only to immediately accept employment at the brokerage house, Financial Pacific (FP), which he had been investigating for insider trading, has revealed a connection to David Helmut Murcia Guzmán, the Colombian Ponzi schemer, who stole billions from his victims.

Fábrega, prior to his government service, worked at Banco Universal, where he allegedly was involved in laundering Murcia's criminal profits. It has been established that much of the seed money employed by former Panamanian President Ricardo Martinelli, and his close associates, to purchase Petaquilla Mines Ltd. stock, using inside information, which was later sold at an obscene profit, was stolen from Murcia's billion dollar cash stash.

Did Fábrega pass along to Martinelli's co-conspirators some of the laundered Murcia money ? Did he divert some of this money to his own use, and does that explain his cash purchases of luxury real estate in Panama ? Anti-corruption investigators in Panama City are pursuing muliple leads in the FP case, and  the extent of Fábrega's relationship to Murcia will certainly be exposed.


The seized funds.
A drug interdiction task force in Mississippi stopped a California resident for a traffic violation on I-20, and subsequently found $375,000 secreted in the vehicle. The driver, Alexandra Arreola, 26 years old, of San Jose, was charged with money laundering. Interstate 20 ultimately end at I-10 in Kent, Texas, near the border with Mexico.

Note that the money seized was in small denomination bills, which is indicative of drug sales proceeds. Many cartel agents then swap out the twenty dollar bills in Texas for hundreds, before attempting to bulk cash smuggle them into Mexico.

The defendant.

Friday, November 28, 2014


Marco Antonio Delgado, the Prominent El Paso attorney who was convicted of money laundering conspiracy for a Mexican cartel, has had his law license suspended by the Texas Board of Disciplinary Appeals, while his criminal appeal is pending. Delgado is serving a 20-year sentence in Federal Prison. We have previously reported on the progress of this case.

The briefs are all filed with the 5th Circuit, and a fair reading of the issues and facts indicates that neither his conviction by a jury, nor his sentence, are likely to be reversed on appeal. His Guidelines sentence was actually life in prison, but it was later adjusted to 20 years. Delgado, after having been caught moving $1m in drug proceeds, became a Confidential Informant for US law enforcement, but during that time he continued to be involved in financial crime. He was also involved in the unlawful diversion of millions of dollars intended for a public works project in Mexico, and transfer of that money to accounts that he controlled in the Turks & Caicos Islands.

Thursday, November 27, 2014


News that Israel has foiled what was intended to be a series of Hamas terrorist attacks, within Israel proper, is not unusual, until you consider the base from where the attacks were planned, funded, and directed; The Hamas operating station in Turkey.

This is the second time this year that a potential terrorist attack, emanating from Hamas'  base in Turkey has been stopped. This past summer, a Hamas attack, designed to bring down the Palestinian Authority within the West Bank, originated in Turkey. Fortunately, Israeli security agencies were able to nip that operation before it could be launched. Hamas' aim this year seemed to be the end of Fatah, the dominant political party in the West Bank, and the PA, thereby allowing Hamas to take over.

These events confirm that, since the latest Gaza war, Hamas is directing its major operations from the safety of its secondary headquarters in Turkey, which increases the risk that transactions with Turkish nationals, companies, or even government entities, could actually be , in truth and in fact, providing material support to a terrorist organization. Turkey, in giving Hamas a safe haven to conduct terrorist actions from, has made all international commerce with Turkey more high risk than it has ever been in recent memory.

Hamas leader resident in Turkey, Saleh Al-Arouri
 It has also exposed itself to being the venue of any possible action against Hamas agents and facilities inside Turkey, which could originate in Israel, or any other country engaged in the global war against terrorism, or even covert action. A number of Hamas senior leaders have been assassinated outside Gaza, during the past decade; Does Turkey really want to be in that predicament ? The senior Hamas commander in Turkey is listed as Saleh Al-Arouri, who had previously been deported from the West bank by Israel. Turkey's opposition leaders have demanded that the government admit the Hamas presence. It was Hamas in Turkey that claimed responsibility for the killing of three Israeli teenagers in the West Bank, which precipitated the Gaza war this past summer.

Hamas agents, intent upon terrorist attacks, now in custody

Therefore, make your own educated decision, based solely upon the facts, but understand that risk factors involving transactions with, and sales to, Turkish companies and financial institutions, are now increased.



The Financial Crimes Enforcement Network, FinCEN, has imposed a $300,000 civil fine, upon a tiny Miami MSB that was facilitating a global network of overseas money service businesses in high-risk jurisdictions, but conducting literally no AML/CFT compliance. These foreign MSB were running a huge number of financial transactions through an MSB that had only five employees, only $4m in assets, and no compliance program in operation.

The company, North Dade Community Development Federal Credit Union, is located in, and is authorized to serve, only the residents of North Dade/Miami Gardens, which is a very low income area. The owners of the MSB reportedly earned 90% of the MSBs profits by allowing an MSB that had 56 foreign MSBs, in Latin America and the  Middle East, as its clients to hold sub-accounts at North Dade, and to allow those MSBs run all their US operations through those accounts.

Notwithstanding earlier regulatory efforts to encourage the MSB to operate an effective AML/CFT compliance program, including a 2013 C & D, and other suggestions by regulators on compliance program improvement, FinCEN found a dysfunctional, or completely inoperative,compliance program, with no designated compliance officer.

The funds that flowed through North Dade, totally unsupervised, included, in 2013 alone:

$1.1bn in outgoing wire transfers.
$984m in remote deposit captures.
$54m in cash orders.

Does this sound like a small inner-city credit union ? Not likely. it look like a clearing house for criminal proceeds, money of tax evaders, and possibly even terrorist financing programs. If there was ever a case where FinCEN and Florida MSB licenses should be the subject of revocation proceedings, this is certainly it. One wonders why FinCEN chose not to identify the MSB with the 56 MSB clients, and name the officers of North Dade. Otherwise, how will the financial services industry avoid hiring the individuals involved, when they seek employment ?

Readers who wish to review the complete text of the FinCEN action can find it here*.
*In the matter of North Dade Community Development Federal Credit Union

Wednesday, November 26, 2014


Imprisoned former banker/$7bn Ponzi schemer R Allen Stanford (Stanford International Bank) continues to have problems with the Fifth Circuit Court of Appeals, where he has brought a Pro Se appeal of his conviction and sentence. Whoever the jailhouse lawyers are who are assisting him need to follow the Federal Rules of Appellate Procedure, because his actions are not winning him any friends on the Court.

As you may recall, he has already butt heads with the Court more than once, over the size of his initial brief, and exhibits, and lost each time. Now, the problems are becoming more serious, and his tactics surely are not endearing him to court staff, and the same judges who will decide his fate.

After filing his ( reduced in size, to comply with rules) brief, he attempted an end run around the rules, by seeking, twice to supplement his brief. The US Attorney, of course, objected, and the Court  denied his motion. Then, things got worse.

The US Attorney obtained an extension from the Court, on its Brief of Appellee, and Stanford sought, unsuccessfully, to obtain an reversal of the ruling allowing the extension. Then, he had the gall to file a formal motion, which the Court actually not only denied, but pointedly refused to consider and accept for filing, apparently upon the grounds that it was moot. He followed neither the Appellate Rules, nor the 5th Circuit Local Rules, in his approach; no wonder he was not successful.

When Stanford objected to the US Attorney's motion for extension of time, he not only lost whatever future professional courtesy he might have received for his own requests, but obviously marked himself with the Court as a problem litigant. If I was doing 110 years on my sentence, I would be bending over backwards to make a good, professional impression with the the judges who will ultimately rule on how I am going to spend the rest of my life.

Considering that Allen Stanford was, in large part, due to his lobbying efforts, a major obstacle to the enactment of many AML/CFT legislative reforms, prior to 9/11, we should not be surprised at these antics, but he's only hurting himself. 

Monday, November 24, 2014


for those readers who have been wondering where Ricardo Martinelli and his Cabinet got the money to make all those large purchases of Petaqilla Minerals Ltd. stock, which they later sold for an obscene profit, trading on insider information, and stock price manipulation, wonder no longer. The Source of Funds was cash stolen from master Colombian Ponzi schemer David Eduardo Helmut Murcia Guzmán, who fleeced victims in Colombia, and throughout the Western Hemisphere, through his company, DMG.

Some of the money used to purchase the stock reportedly was brought into the Financial Pacific offices in cash, in sacks. Murcia smuggled his DMG Ponzi cash, from Colombia, into neighboring Panama, via speedboat, and several witnesses have reported that some of it was actually damp from being transported in open boats. Murcia was seeking to invest these funds in Panama.

A number of prominent Panamanian businessmen who accepted the illicit funds from Murcia, after his arrest and extradition, converted the money to their own personal use, and it ended up funding the massive insider trading scheme, where corrupt Panamanian PEPs, including several ministers, realized huge profits through the sale of their holdings in Petaquilla securities. Murcia, who was later extradited from Colombia, to the United States, to serve a long prison term, has never returned to Panama to claim their funds that he invested.


The scandal popularly known in the media as "Fast & Furious," where a US law enforcement agency permitted the sales of vast amounts of weapons, to Mexican Cartel agents, and then reportedly failed to track those purchases, some of which were later used against American law enforcement agents, has now resulted in the release, through an FOIA request, of some of the documents that detail the case.

Readers who wish to review them can access them here*; They are in pdf format.

Sunday, November 23, 2014


Is the Arab Bank case the shape of things to come ? There was a civil suit filed recently, in Federal Court, in the Eastern District of New York. It is styled Charlotte Freeman, et al, Plaintiff vs. HSBC Holdings PLC, HSBC Bank Middle East Limited, HSBC Bank USA, NA., Barclays, Standard Chartered Bank, Royal Bank of Scotland, NV, Credit Suisse, Bank Saderat PLC, et al, Defendants. It is an action, brought against five of Europe's largest financial institutions, pursuant to the Anti-Terrorism Act, alleging that the banks conspired with Iranian banks to alter and mask wire transfers, to evade American sanctions against Iran. It charges that the Iranian banks sent more than $100m to Iraq-based military and terrorist organizations, and that those groups killed and wounded American soldiers, using arms purchased with those funds. In essence, it sounds much like a conspiracy case; whether it will be successful is unknown, due to a lack of relevant case law; It could make new law in this field.

If you are able to review the entire 207-page complaint, you will learn that the defendant banks, all of whom have been sanctioned by US regulators, appear to have maintained a culture of deception, in that they maintained covert sanctions evasions programs that deliberately aimed to deceive, through a well-planned and executed, system of deletion of incriminating information. The goal of these illicit programs was clear: to push funds through the American financial structure, notwithstanding that it was illegal to do so.

The plaintiffs are seeking to make the biggest European banks responsible for the injuries and deaths of American soldiers, in a war zone, for the reason that the banks' conduct facilitated sanctioned activities, which ultimately financed IEDs that killed and maimed Americans.

I ask the question: must it take the American trial bar to do what US regulatory agencies cannot,  to once and for all, suppress the global Iran sanctions evasion programs that European banks are engaged in ? Here's the problem:

(1)  All the American regulators have done is levy heavy civil fines and penalties. That is chicken feed to the big banks; indeed many still can pay their shareholders a dividend after such fines.
(2) No bank director or global compliance officer has been indicted, notwithstanding their guilt. Read the complaint; I guarantee that you will be insulted by the absolute arrogance of these bankers.
(3) I see that, if anything, the Iran sanctions evasion programs have expanded, not decreased. The fines only drove the bankers to use more circuitous routes, through third-world countries in obscure places, and through new, creative techniques.

It is a sad situation, when our own regulators cannot stop widespread sanctions evasion; I imagine a British banker in the City, from one of the banks named as defendants, who has been laughing out loud at American regulatory ineffectiveness, getting into his Bentley Mulsanne this Christmas, off to a obscenely expensive holiday on the Continent. Perhaps now he might want to watch the American trial lawyers, because they work long and hard, and could ultimately do things to his bank that US regulators have been unable or unwilling to do; take effective punitive action to stop the sieve that is Iran sanctions evasion, in London and Geneva.


News about a law enforcement operation in Mexico, where a team from the US Marshals Service, dressed as Mexican Marines (Infantería de Marina), and appropriately armed, engaged a group of wanted Mexican criminals, where two Americans were wounded, reminds me that you should always be aware of what are known as false flag operations. This is especially true when it comes to contact between your bank staff, and individuals who display credentials of a US law enforcement agency, to obtain information or cooperation, even on a informal basis.

False flag operations occur when an individual, group of individuals, agency or organization, deceptively hold themselves out as some other identity, to accomplish a particular purpose. it may be for a legitimate governmental purpose, to commit criminal acts, or to cause a third party to respond in a specific way, to meet the aims and goals of the individual using such tactics.

When visited by Special Agents of the Federal Bureau of Investigation, most bankers accept at face value the qualifications of the individuals who sit before them. We tend to accept authority, especially Federal authority, at face value, and generally strive to cooperate, as we believe that we are facilitating a law enforcement purpose; That is how American bankers conduct themselves.

But, for the sake of argument, what if that Special Agent in front of you is not what he represents himself to be ? Let's look at two of the possibilities:

(1) Fraudsters have been victimizing account holders for decades with this scam: posing as law enforcement, they contact a wealthy individual, who is one of your bank customers, and, claiming that they are seeking to expose specific criminal activity, ask the victim to transfer some of his or her money into an account that they control. What would you do if your client comes in with this story, or what if he or she names an individual that they believe to be a law enforcement agent, who is running the matter ? What of the "agent" actually comes into the bank, with your client ? Can you independently verify that the person is who they process to be ?

(2) Individuals from America's intelligence community, in a post-9/11 world, may pose as law enforcement, in order to gain information about a target of their agency. I personally have seen people that I know to be with the CIA, bearing FBI identification, at conferences. Always independently verify the credentials of any person purporting to be from a government agency, on official business; you may choose to have your investigator perform this task.

I am not telling you to decline to cooperate with bona fide law enforcement, just to verify that you really are speaking to a law enforcement officer, and not a fraudster seeking to fleece your client, or an intelligence agent wanting to pick your brain about a client, before you open up to them. Still confused ? Ask your bank counsel.


The unfolding Financial Pacific insider trading securities scandal, in the Republic of Panama, is alleged to have resulted in millions of dollars in illicit profits, for former President Ricardo Martinelli, and several of the ministers in his Cabinet. Since it is reasonable to assume that the guilty parties have previously transferred their criminal proceeds out of Panama, and into accounts in banks located in North America, and in other jurisdictions, it is suggested that you run the names of the Martinelli ministers.

 Should any of these individuals happen to be current bank clients, you will want to take a hard look at their accounts. If there have ever been funds on deposit in excess of the known estimated income and assets of the client, you should consult bank counsel for advice forthwith, for you may have a duty to report to regulatory authorities, and where appropriate, exit account relationships. It is imperative that you have records that verify Source of Funds for any Panamanian PEPs that you are banking.

These are the ministers of state who were listed officeholders when Martinelli left office earlier this year:

(1)   Oscar Armando Osorio, Minister of Agriculture.
(2)   Romulo Alberto Roux Moses, Minister of Canal Affairs.
(3)   Ricardo Quijano Jimenez, Minister of Commerce.
(4)   Frank de Lima, Minister of Economy.
(5)   Lucinda Molinar, Minister of Education.
(6)   Franklin Vergara, Minister of Health.
(7)   Carlos Alberto Duboy Sierra, Minister of Housing.
(8)   Jorge Ricardo Fabrega, Minister of Government.
(9)   Demetrio Papadimitriu, Minister of the Presidency.
(10)  Jose Raul Mulino Quintero, Minister of Public Security.
(11)  Federico Jose Suarez, Minister of Public Works.
(12)  Giselle de Calcagno, Minister of Small & Medium Enterprises.
(13) Antonio Ferrufino Benitez. Minister of Social Development.
(14) Alma Lorena Cortes Aguilar, Minister of Labor.
(15)  Ana Isabel Belfon Vejas, Attorney General.
(16) Dario Berbey, Manager, National Bank of Panama.
(17)  Mario Jaramillo, Ambassador of Panama to the United States.
(18) Pablo Antonio Thalassinos, Permanent representative to UN.

You should also note that corrupt public officials in Panama often use corporations to hide their illicit wealth, and have been known to list close family members as corporate officers and directors.

Saturday, November 22, 2014


Aerial photographs show that China is not only dredging Fiery Cross Reef, a large island in the disputed Spratley chain, located in an area of the South China Sea that is far from the mainland, and any legitimate territorial claim, but the emerging island will contain a 3000 meter runway. This changes the equation in the region, when it comes to the calculation of risk.

The new runway, when completed will be able to accommodate Chinese fighter aircraft, and allow them to range throughout all areas of the South China Sea, including those areas extremely close to the territory of the Philippines,Vietnam, and Malaysia, where China continues to advance claims that are not only unsupported by history, but violate international maritime law. The Chinese arrogance about these colorable claims will now be supported by military might.

Do we really need the introduction of fighter jets into the region ? It increases the risk of an incident, of loss of life, and the threat of actual military engagements, between China and its nervous neighbors, all supported by the United States. All this could occur, when Chinese fighter pilots buzz aircraft or naval or coastal vessels of other countries in the region.  You may wish to consider raising Country Risk upon Vietnam, the Philippines, and Malaysia.


The news about the Private Client division of a major Swiss bank, opening what it proudly described as a New Markets effort, is disturbing. This new class of wealthy individuals, which is composed of minorities, and other groups not previously considered to be potential clients, because they did not previously have sufficient wealth to qualify, are being specifically targeted by a financial institution with a regulatory history, and one that pursued American wealth, holding out the carrot of tax evasion techniques to possible clients.

A good money launderer can often wash the proceeds of crime, find a suitable, and willing, front man, or woman, and build a credible cover story about him or her, sufficient to withstand a rudimentary background check, but rarely enough to survive an enhanced due diligence investigation. In their haste to enroll this new class of non-mainstream,  yet affluent, private client, wealth management teams may intentionally choose to ignore deep due diligence, in favor of easy new money coming into the bank.

Money launderers read the newspapers too, and I guarantee that some of the more accomplished ones are aware of this New Markets initiative, by private bankers, and are already on the way towards matching up laundered narco-profits, that have been repatriated into the United States, with cooperating front men, who happen to be from minority ethnic groups, or even those of different sexual orientation, who are also being targeted by private bankers, to place money into those blue-chip international financial institutions, from where wire transfers can often be accomplished, completely outside the American financial structure.

Remember what happened when a certain American bank expanded its clientele to foreign nationals from the newly-emerging non-Communist economy of Russia ? Literally billions of dollars of dirty Russian money went through the New York banking center. Let us hope that, in their eagerness to accept this New Money, bankers do not cut corners on compliance, and unwittingly, or intentionally, accept criminal proceeds for deposit.  


The US Attorney's Office in New York has filed its Sentencing Submission in the IEEPA/OFAC sanctions violation case against Richard Chichakli. The defendant, you may recall from his recent filing*, has asserted that a sentence of only 8-14 months is appropriate, and claimed that a large portion of the enhancements the the US Probation Office (USPO) added to their Guidelines calculation were incorrect or improper.

There were some surprises in the Government's filing. it seems that Chichakli was involved in two other ongoing business ventures, with US citizens, that violated his Specially Designated National (SDN) status, which made it illegal for him to conduct any business with Americans. It is been alleged that he used these ventures to support himself while he was living in Australia under an alias. Though on their surface legitimate, they were, under OFAC regulations, illegal.

(1) Chichakli operated what has been described as a company that sold silverware to Americans. The entity was known as "Essence of Nobility," but there is no further information about its legal status, so we do not know whether it was merely a ficticious name, or a corporation. It had 320 customers, and the US Attorney's filing stated that he was earning a six figure income from this activity.

(2) The defendant was purchasing used automobiles in the United States, and exporting them. Correspondence from an American shipping firm was attached, in support of this information.

The Sentencing Submission did, of course, cover, in detail, Chichakli and partner Viktor Bout's venture in Samar Airlines, specifically their organizational activities, and their attempted acquisition of  B727-200, a B737, and an MD83 airliners. This was the IEEPA/OFAC charge specified in the indictment, which was described as "flagrant and repeated violations of the law," in the sentencing filing.

Regarding the sentencing suggested by the US Attorney:

(A) The US Attorney's Office concluded that their own computation of the defendant's conduct came to a Level 29, which is 87-108 months' imprisonment (The Submission states that the USPO calculation was a Level 33, which results in a recommendation of 133-168 months).

(B) That, contrary to Chichakli's claims, no downward departure is warranted, for the lack of actual monetary losses, for the alleged failure to disclose Brady material (favorable to the defense), for the defendant's purported efforts to render Substantial Assistance, and for his alleged and unproven PTSD, which was as a result of his service in the US Military, in the Middle East.

(C) That there were no errors in the charge of IEEPA/OFAC violation.

(D) Restitution, in the amount of $70,000, to cover the attorneys' fees expended by the South Florida company where Chichakli attempted to illegally purchase an airliner, Aventura Aviation.

Sentencing is scheduled for December 4, and an appeal of whatever sentence is imposed is expected.
*Richard Chichakli contests his Guidelines Sentence Computation

Friday, November 21, 2014


A California Superior Court Judge has dismissed the civil action, brought by the imprisoned former Panamanian General and President, Manuel Noriega, against a prominent American video game maker. The suit charged that the portrayal of Noriega's likeness in the popular game, Call of Duty: Black Ops II, was unlawful, and damaged the former dictator's reputation.

The defendant corporation, whose attorneys included former New York City Mayor (and ex-Associate US Attorney General, and US Attorney) Rudolph Giuliani, had filed a Special Motion to Strike, asserting that "the video game at issue constitutes protected expression on matters of public interest, and that the plaintiff cannot establish a probability that he will prevail on any of his claims."

Oral argument was heard on the motion; the Court, after surveying extensive existing case law in California, regarding a public figure's rights to publicity, and the First Amendment right of free expression, held that:

 "In applying these standards to the evidence presented here, this Court concludes that Noriega's right of publicity is outweighed by defendant's First Amendment right to free expression. "(Opinion at 3)

"A brief survey of the defendants' uncontroverted evidence conclusively shows that Noriega is a notorious public figure, perhaps one of the more notable historical figures of the 1980s." (Opinion at 4)

"Noriega failed to provide any evidence of harm to his reputation." (Opinion at 4)

Readers who wish to review the complete text of the Court's decision, can access it here*.
*Noriega vs. Activision/Blizzard et al, BC551747

Wednesday, November 19, 2014


If you are a regular reader of the blog, you know that, during his tenure as Panama's president, Ricardo Martinelli once took an extended vacation, to Europe and Asia. We wrote* about his side-trip to the Republic of Azerbaijan, where our sources stated that he, and his sons, reportedly maintain large bank accounts. You may even remember that, on this trip, he took no less than 38 large suitcases, and we expressed the belief that he was, among other things, depositing some of his ill-gotten gains there.

Now, the protected witness who blew the whistle on the organized bribery scheme orchestrated by the government agency PAN*, perpetrated upon virtually all new construction projects, is talking about where the estimated $700m went. The whistle blower has advised Panamanian investigators that most of it was packed up in those very suitcases that Martinelli took with him to Azerbaijan, and that all the illicit cash, now controlled by Martinelli, was deposited into accounts in the Azeri capital of Baku.

The whistle blower has testified, under oath, of personally witnessing the loading of Martinelli's suitcases, with the bribe money, which was criminal proceeds that PAN collected from legitimate businesses seeking licenses and permits for new projects. This new evidence may make it impossible for the Government of Panama to delay filing formal criminal charges against the country's former president, during whose administration, rampant corruption, governmental mismanagement, and a complete failure to suppress financial crime, occurred. Martinelli is at the top of a long list of corrupt Panamanian PEPs who deserve long prison terms, for massive bribery and corruption activities.

It remains to be seen whether prosecutors will now take down the most senior offenders, but we will be watching.
** The National Social Assistance Program, whose receipts are supposed to be for the benefit of the people of Panama.

Note to reader: You may want to read yesterday's article, Panama Rocked by yet Another Major Corruption Schedule, which covers the PAN scandal in depth. 

Tuesday, November 18, 2014


Rafael Guardia Jaén

The former director of PAN, Panama's National Social Assistance Program, Rafael Guardia Jaén, has been arrested, and charged with illicit enrichment and corruption, by the First Anti-Corruption Prosecutor's Office. The local Panama press has crucified him, after the authorities seized $9m in bank accounts that he controlled, and a residence valued at more than $1m, all acquired on a monthly salary of $7000.

Guardia, who was taken into custody by the Directorate of Judicial Investigation (DIJ), was Director of PAN between 2012 and 2014, appointed to that position by then President Ricardo Martinelli. Panamanian law enforcement has reportedly also found five additional estates, farms and ranches owned or controlled by Guardia.

There are reports that the Government of Panama has a protected witness, whose identity has not been disclosed, who alerted the authorities to the massive program of organized bribery in operation at PAN, whereby all major builders and developers were required to donate large sums to PAN, in order to be properly licensed to proceed with their real estate projects. It is claimed at $600m-$700m was illegally obtained in this manner, and all that money is missing from PAN accounts. Former President Martinelli is said to be closely linked to the illicit PAN bribery program. Whether he will also be charged remains a question, but he is alleged to have been the recipient of a large portion of the bribe money.


The criminal investigations into rampant corruption in Panama's last (Martinelli) government, which is resulting in the filing of charges, and the seizure of assets illegally obtained, has caused many of Martinelli's former ministers to avoid being seen in public. Will these Politically Exposed Persons (PEPs) now relocate out of Panama, to avoid arrest, and where will they place their criminal proceeds ?

Please note that, though many of Martinelli's former government officials, at the ministerial level, have had their Visas to visit the United States cancelled, they are still regular visitors to Canada, where several of them are believed to be heavily invested in real estate, and also substantial liquid assets there. Therefore, given that their flight to avoid prosecution is probable, Canadian bank compliance officers should be alert for any attempts to make large US Dollar or Euro cash deposits, or wire transfers from Panamanian or Caymanian bank accounts.

In addition to the ministers and mid, criminal charges against judges from the Supreme Court of Justice of Panama are either filed, or under active investigation. While most banks treat members of the judiciary from any country with respect, allegations of rampant corruption at Panama's Supreme Court have rendered those judges unacceptable risks as bank clients. In short, any Panamanian PEP who presents himself or herself at your bank means that enhanced due diligence is a necessity, and you may decide not reject them, as a group, for valid risk management purposes.

Monday, November 17, 2014


If you have not been following the unfolding case in Italy, a number of Italians have been arrested for  shipping restricted military equipment, via Romania, to Iran, in clear violation of EU and international sanctions. There is a related Swiss case: one of the conspirators purchased 50 high-tech sniper scopes in Germany, and shipped them to Iran, without any sort of export permit or license. Some of these scopes were later used by the Taliban against German troops serving with NATO in Afghanistan. The serial numbers on seized scopes were traced back to the purchaser.

Some of the scopes were found to be defective, and were returned to Switzerland by Iran, at which point they were confiscated by Swiss customs authorities. The individual, who was charged administratively, and not with a crime, was fined 600 Swiss Francs, and given the right to appeal the sentence.  He could have been sentenced to three years in a Swiss prison, under their penal code. As you can see, the Government of Switzerland , which is neither a member of NATO, nor the European Union, is not a bona fide partner in the global sanctions efforts against Iran.


An announcement today, by Belgian authorities, regarding their formal investigation into tax evasion and money laundering, allegedly conducted by  HSBC Private Bank (Suisse) SA, for their wealthy precious gem clients from Antwerp, verifies that shell companies from Panama remain the money launderer's vehicle of choice. Included in the news release was the allegation that HSBC obtained Panamanian corporations, which contain bearer shares, for the purpose of assisting their Belgian clients evade income taxes, and to hide their funds abroad.

The Panama companies, employed by HSBC Switzerland for its clients, had no legitimate business function, and were formed solely for tax evasion reasons. The lack of a named owner of the shares of stock protected the identities of the affluent Belgian nationals, who were said to be in the diamond industry.

There is also a parallel ongoing French investigation of the Swiss branch of HSBC, regarding a number of its wealthy nationals. You may recall that a list of EU tax cheats who used Swiss banks, popularly known as the Lagarde List, has circulated among several countries in Europe. That is believed to be the source of the initial targets of the French investigation. Panama companies figure prominently in the French case as well.

At the risk of profiling, given the propensity of financial criminals, money launderers, and, as seen here, even private bankers breaking the law, to employ Panama corporations for their customers, one should consider whether all Panama corporations, used outside the Republic of Panama for financial transactions, are to be always regarded at high-risk, requiring an enhanced due diligence inquiry. This means that the company's lines of business, source of funds, and actual owners/controllers of the company are to be examined in depth. The Belgian and French HSBC investigations simply prove my point.


Brigadier Alzate
The peace negotiations between the Government of Colombia and the Revolutionary Armed Forces of Colombia, the FARC, have been abruptly suspended by Colombia, after a general officer, Ruben Dario Alzate, was kidnapped by FARC soldiers, in Choco State. Brigadier General Alzate, who is the commander of the Titan Army Task Force, which operates in Choco, is the first Colombian general detained by the FARC since it began military operations in 1964.

The two-year peace process has now ground to a halt. Though there has been no formal cease-fire between the parties, while it has been in process, the FARC did affirm that it would no longer kidnap civilians for ransom. The general was reportedly in civilian clothes when taken, and with only a token escort. Was he seeking to negotiate with the local commanders ?

Whether this signals a new phase in the 50-year war is not known; the FARC has long been engaged in the lucrative narcotics trade, and some observers fear that some of its leadership oppose demobilization, as they are individually amassing individual fortunes, which are being banked outside the country, notably in Panama, and the remaining Caribbean tax havens.

Progress in the peace talks has been slow, and without any meaningful success, from an objective view. The FARC may be abandoning a good faith effort to brong peace to Colombia.

Sunday, November 16, 2014


Eyewitnesses in the Kurdish-controlled region of Iraq (KRG) report that the conflict with ISIS has resulted in a total lack of governmental control mechanisms in place. Arms trafficking, human smuggling, corruption, smuggling into Turkey, of ISIS oil, by middlemen, and money laundering, have all expanded exponentially.

It is suggested that you reject any and all large wire transfers originating in the KRG region, until the situation stabilizes. Otherwise, you may be transferring either criminal proceeds, or terrorist funds. 


Richard Chichakli, facing his sentencing in December, has filed what he has captioned Memorandum in Aid of Sentencing, and contested the Guidelines computation, filed by the US Probation Office, in the Pre-Sentence Investigation Report (PSI or PSIR). The defendant was convicted of:

(1) Conspiracy to Commit Money Laundering.
(2) Conspiracy to commit Wire Fraud.
(3) Conspiracy to Violate the IEPA.
(4) Wire Fraud.

 While we cannot gain access to the PSI, as its distribution is strictly limited to the parties, we can see what the results are, from the defendant's comments. Chichakli objects to the listed 46-57 months Guideline range, and argues that he is not a Level 23, but a level 7, which results in a suggested sentence of only 8-14 months. Elsewhere, he argues that he is a Level 11; His memorandum is at times rambling, but we must remember that it is Pro Se, and not drafted by counsel.

 He disputes all the enhancements, which appear to amount to a 16-point increase. His objections:

(A)  The enhancement for Obstruction of Justice is incorrect. He did not obstruct justice.
(B) The enhancement for OFAC violations is wrong, on technical or procedural grounds.
(C) The enhancement for a potential monetary loss of $1.7m; There was no actual loss suffered.
(D) The enhancement for sophisticated money laundering; it is only bank information.

Chichakli is seeking a Downward Departure from his Guidelines sentence, and has presented a number of factors that he asserts support his argument. He also disputes much of the Government's argument and evidence. When the US Attorney responds, we will analyze it on this blog.


A report published by Forbes, and distributed in the Middle East, states that Hamas is the second richest global terrorist organization. Only ISIS has more wealth and income, according to the study, which estimates that the bulk of Hamas' wealth comes from funds diverted from international aid programs intended to aid the residents of the Territory of Gaza.

The fact that the Forbes report places Hamas above all the other international terrorist groups, save one, means that one must correspondingly raise estimates of the amount of money taken, for personal use, by the senior leadership of Hamas, and that even mid-level Hamas leaders are probably also in possession of some of this "diverted" cash, which is generally in US Dollars, though a lesser amount is in Euros.

Given that the vast majority of Hamas officials hold passports from the Hashemite Kingdom of Jordan, due to the fact that Jordan annexed what it named the West Bank (Judea & Samaria), which it occupied after the 1948 war, and many of the rest hold Egyptian passports, courtesy of the former Morsi government, you are looking for nationals of those two countries, especially those whose conversational Arabic contains slang native to Gaza. Your Arabic-speaking staff can assist you with this task.

In light of the Forbes report, which I cannot find in the US edition, it is recommended that you alert your new account staff to assign, for your secondary review, any prospective bank customers with Jordanian or Egyptian passports, intending to open substantial accounts, whose listed places or birth are now in present-day Israel, or the territories, or whose Arabic identifies them as possibly residents of Gaza. You must rule out any potential Hamas officers at account opening.   

Saturday, November 15, 2014


Coming to a bank near you ?

It may not qualify as a sovereign state, but ISIS/ISIL a/k/a the Islamic State, is reportedly issuing passports to residents of the areas of Syria and Iraq that it occupies. One report notes that ISIS is using a  former Iraqi government printing facility in Mosul, and that it also intends to mint gold and silver coinage for its residents.

I am sure that you understand that the regulatory push back, should your new accounts staff actually accept one as primary identification, would be powerful.  You should circulate the image that appears above, with a warning, to insure that some newly-minted new accounts officer, who doesn't follow current events, will sound the alarm, should one be presented to him.

Friday, November 14, 2014


The latest FinCEN request to banks*, to continue to serve the MSB industry, in the face of their AML/CFT obligations,  places the banks in the unenviable position of policing a sector of the non-bank  financial industry that has been the source of continual and sustained risk. Honestly, I do not blame any bank that decides to close all its existing accounts of foreign MSBs; Here's why.

Foreign money service businesses, especially in the countries of the developing world have many potentially serious issues:

(1) They are frequently used by both money launderers, and terrorist financiers. This is a sad fact of life; laundrymen know that many MSBs are storefront operations, poorly run, and who would consider  accepting dirty money, to earn a handsome profit.
(2) They exist in jurisdictions where regulatory agencies are either non-existent, or unable or unwilling to enforce AML/CFT laws. Therefore, the MSB has no reason to have an effective compliance program.
(3) They may be actually owned, or controlled by, criminal elements; Look at Mexico.
(4) They are not like licensed financial institutions, the licensing requirements are often minimal, and corrupt government agencies, once paid off, are usually eager to qualify individuals who are unacceptable as NBFI operators.
(5) If a client cannot go to a bank in his or her jurisdiction, to send larger amounts of funds, it is often because their dodgy business is not wanted at legitimate financial institutions.
(6) MSBs in many countries are known for dysfunctional AML programs. Can we really expect US banks, who are held to best practices standards, to risk accepting money from them ?

The FinCEN Statement, which asks American banks to use a risk-based approach on MSBs, and to avoid blanket account closings, is expecting far too much of them. How can you tell an American bank to incur repeated expenses, to send staff members to foreign MSBs that are bank clients, over and over again, to monitor and review their compliance effectiveness ? The costs, including the use of dedicated human resources, would be prohibitive. One would actually be forced to consider permanent posting, of bank staff, on site, to be an effective solution.

Is it wrong to cancel all foreign MSB accounts at your bank ? I respond that it is simply the exercise of the same risk-based program that FinCVEN suggests the banks follow. The risk levels presented by foreign MSBs range from high-medium, to totally unacceptable. You do not need the business so badly, that you should risk serious civil penalties for AML/CFT violations.

*FinCEN Statement on Providing Banking Services to Money Service Businesses

Thursday, November 13, 2014


The new Prime Minister of Iraq has stated that he has removed thirty-six military officers from positions of command, on the grounds of corruption. The names have not yet been publicly released, but it is known that they include field grade and general officers, at the highest levels. Some may wisely choose to retire, and there's the compliance problem for international banks in the Middle East and the EU.

You can expect some of these new "civilians" will be seeking to open accounts at foreign banks, asking them to accept for deposit the ill-gotten gains they obtained during their recent commands. If your applicant is recently retired, it might be prudent to ascertain whether he was one of the 36 who were specifically cashiered for corruption, before accepting him as a valued client.  


If you had any doubts about the advisability of obtaining information that casts China, or its leadership, in an unfavorable or controversial light, the country's president, Xi Jinping, has laid down the law: there will be be consequences for those foolish enough to report it. Xi's cryptic, though easily understandable, statement, has confirmed that foreign journalists that expose China's flaws, or of those in command, will lose their visas, as will their colleagues at their media companies.

This official pronouncement, which came at the time of the visit of the President of the United States to a summit meeting in Beijing, reinforces our the fact that we have problems when conducting due diligence upon Chinese nationals; there may be a dearth of published truth about individuals we are looking at for risk management purposes at account opening. Given that we already take it for granted that negative information about Chinese PEPs, and powerful business leaders, does not see the light of day, in domestic media, due to censorship and threats of retaliation,  we are now presented with a future where foreign investigative journalists will be deterred from visiting China, especially if they have previously be critical of China, or published negative information of any kind about its leadership. There may be no negative business intelligence to troll through.

Sources of information from Hong Kong may end up as the only useful avenue for your due diligence inquiry, but even those trusted assets may now decline to conduct field investigations within the Peoples Republic, lest their quest for non-public information afield result in their arrest and conviction.

The ability of a compliance officer to obtain current, objective, and truthful, information about Chinese nationals has become extremely difficult for gatekeepers at Western financial institutions. Is he a PEP, masquerading as a private businessman ? Is he a military officer in civilian clothes ? You cannot answer those critical questions with any degree of certainty, I fear, when it comes to Chinese nationals; be careful when conducting Customer Identification Procedures for account opening.


Fiscal Ana Belfon

Ana Isabel Belfon Vejas, the Attorney General of Panama, has been asked to resign by President Varela. Belfon, whose current term expires on December 31, is at the center of several major scandals in Panama City:

(1) the Attorney General has been accused of deliberately blocking the progress of the original investigation into the Financial Pacific (FP) insider trading securities scandal. Former President Ricardo Martinelli, who is among the government officers who allegedly took illegal profits in Petaquilla Mines stock, based upon inside information, appointed Belfon to her present position, and there are allegations that she killed the FP investigation, on Martinelli's specific orders.

(2) Ethel González de Jerez, (the wife of Nicaraguan PEP Byron Jerez) who was acquitted in a money laundering case, has demanded Belfon's resignation, and filed criminal Abuse of Authority charges, after Belfon failed to return $4.2m she seized in that case, after the acquittal was handed down.

(3) Additionally, Belfon's complete lack of enforcement of Panama's money laundering laws during the past several years, where a number of prominent Panamanians, as well as local banks, were never charged with criminal activity, despite overwhelming evidence, has created a well-founded fear that there were instances of corruption in her office, and that she and other prosecutors illegally benefitted from declining to pursue criminal charges for money laundering.

Whether the Attorney General will also be charged in the Financial Pacific case is still unknown, but charges in the United States may be coming in the future; a former senior American government official, now a consultant and investigator in the private sector, has been seen in Panama; Is the Securities & Exchange Commission contemplating action, and against whom ? We cannot say, but we will be watching.


A senior American government official stated this week that Suspicious Activity Reports, more commonly known as SARs, would soon be required of an expanded group of money service businesses. The types of MSBs that are expected to be named are believed to include;

(1) Credit card companies.
(2) Investment advisers, including hedge funds.
(3) Check cashing firms.

Inasmuch as the creation of an effective compliance program, that includes training in the recognition of possible suspicious activities, and the prompt filing of SARs, takes some time to build, it should should now be a priority in the above industries, and elsewhere in the MSB world, lest they be forced to construct a compliance program on a deadline.

Tuesday, November 11, 2014


The latest from the Office of Foreign Assets Control may mean that vendors, suppliers, servicers and other companies providing indirect services must have effective compliance programs in place, as they cannot even indirectly support sanctioned individuals or entities.

OFAC has fined a third party provider of services for  an insurance company $128,000, as it provided support services, such as:

(1) Premium processing
(2) Underwriting
(3) Claims processing
(4) Claims payments
(5) Customer service
(6) Retention of agents
(7)Reimbursement payments

The support services assisted sanctioned individuals.

In an overabundance of caution, you should now advise your bank clients, who are third party processors who service any industry with foreign clients, to immediately create an effective compliance program that screens for OFAC sanctions.


When looking at the risk of unwittingly banking funds of a sanctioned terrorist organization, one must be aware that Turkey has become, in truth and in fact, a secondary headquarters for Hamas, which is a Specially Designated Global Terrorist (SDGT) organization by OFAC. When it came time for Hamas to admit responsibility for the deaths of three Israeli students last summer, the event which is considered the trigger for the recent Gaza conflict, that acknowledgement came from a senior Hamas leader based in Turkey. This is relevant to the threat level you face, when accepting wire transfers from Turkey.

Recently, allegations surfaced identifying $12m, reportedly under the control of Hamas leader Khaled Meshaal (a/k/a Abu Walid), and held by his brother-in-law, that was smuggled from Syria, and into Turkey, by a Hamas associate identified as Jabril Janid, though this may be a nomme de guerre. The funds, which were believed to be donation to Hamas, were later claimed to have been "lost" in the fog of the Syrian Civil War. Most likely, they were deposited in Turkish banks, and thereafter transferred to other financial institutions, at least some of which are in the EU, under the names of front companies or front men.

I bring this up because it has become increasing clear that Turkey has become a jurisdiction where Hamas funds are being held, as well as the personal accounts of corrupt Hamas leaders who have helped themselves to funds of the organization. Inasmuch as these are going to be substantial sums, your compliance staff should be alert to any unusual or unexplained transfers from Turkish banks, and obtain documented proof of Source of Funds, and Beneficial Ownership of the transferor, and transferee, companies involved. You do not want to be named as Hamas' banker in the media. 


Monday, November 10, 2014


The Nigerian military is losing most of its battles with Boko Haram, including a recent one only 2 km from the frontier with Niger. More ominously, soldiers are fleeing the battlefield, rather than engage the enemy; we have seen a number of incidents where Nigerian troops choose to cross international borders, and avoid contact with BH, by relocating to adjacent countries.

The latest mass desertion, which involved approximately 2000 from the Nigerian Army, ended up with the troops in the Republic of Niger. Nigerian news media, quoting army sources, falsely claimed that they had been defeated in combat, but eyewitnesses in Niger have reported that the magazines clipped to the Nigerian soldiers' rifles were full; they had not fired upon Boko Haram troops, and had shamefully fled.

Boko Haram is, candidly, winning in Northern Nigeria, and there does not appear to be sufficient leadership in the Government of Nigeria, or its military, to stand up to them. Remember, BH enjoys serious financial support from a number of treasonous  Nigerian PEPs who obviously see the handwriting on the wall, and are funding their arms purchases; BH also has a number of other criminal, as well as legitimate, means of raising money.

The West, save the incident where the schoolgirls were kidnapped by BH, and taken as wives, is far too busy with other emergencies to pay sufficient attention to the threat of BH, let alone formulate any aid that woulds tip the balance in favor of the Government of Nigeria.

The objective assessment is that Boko Haram will eventually take over all of Nigeria, and there does not seem to be any Nigerian military unit able to beat it. For that reason, while there is time now to trim any financial exposure,  repatriate or move assets out of Nigeria, and make plans to close bank branches or representative offices, before suicide bombers target your offices there, you need to move on this.

I believe that one should substantially raise Country Risk on Nigeria at this time, and keep it at very elevated levels, until and unless the Government of Nigeria can field an army that will defeat it in the field. Otherwise, I fear that Boko Haram will be the ultimate victor.


Gibraltar Private Bank & Trust Co., the Miami financial institution who once listed attorney/Ponzi schemer Rothstein as a prominent client, as well as minority shareholder, has announced that it is the subject of a Consent Order, issued by the Office of Comptroller of the Currency (OCC). The regulatory action, which replaces an earlier, and similar, 2010 Cease & Desist handed down by the former Office of Thrift Supervision (OTS), reportedly relates to violations of anti-money laundering regulations, and the Bank Secrecy Act (BSA).

Here's my concern: if you search the OCC website, you find that the Consent Order has not yet been made public, notwithstanding that the target, the bank, has already indicated that it exists. The report said that it will not be issued until later in November ? What is going on here ?

Listen, I understand that the bank wants bad news to be issued quietly, and hopefully, to be ignored by the media, but Gibraltar was one of the principal banks that was used by Scott Rothstein to perpetrate his massive Ponzi scheme. Should the public not be informed as soon as possible, as any possible bank compliance failures could impact the actions of the victims, including, but not limited to, litigation against the bank, should negligent acts come to light, from reading the order ?

Even the most junior compliance officer at Gibraltar should have known to check the court dockets in the three South Florida counties, to verify that RRA, Rothstein's firm, was handling the amount of litigation appropriate to the huge amounts of money coming into the firm's accounts, and exiting them forthwith. Just how many red flags does one need to form an opinion that something is wrong with a bank customer ?

The end of November, which is a four day weekend wrapped around the observance of Thanksgiving, means that nobody will be at work to read the Consent Order. My request to OCC, please do not wait to release the order, for the details are needed now. There's no good reason to time it for the convenience of the bank's spin masters. The victims of Scott Rothstein's Ponzi scheme have the right to know about all developments on a timely basis.