Saturday, April 25, 2015


Stanford's booking photograph.
Clients purchasing investment products are generally driven by the prospects of a handsome return, but in their eagerness to get on board an enticing investment, they forget to practice KYB: Know Your Bank(and) Banker. While bank compliance officers perform due diligence on new clients, how many clients/investors do the same on the bank, and the bankers involved ? In truth and in fact; very few.

Bank clients contemplating any type of substantial investment where a bank is involved, even indirectly, would do well to have due diligence performed upon it.Why ?

(1) Most regulatory fines and penalties are not always the subject of newspaper and Internet article, and since most banks would prefer not to alert their customers to the fact that they have problems, it never appears in bank press releases; so much for full disclosure. Do you know where to find such material on the websites of various Federal regulatory agencies ?

(2) What about civil litigation; do you have access to PACER, Public Access to Court Electronic Records, the Federal Government's site for Federal civil, criminal, appellate and bankruptcy cases. A suggestion: it is always necessary to check out any bank with which you intend to conduct major business on PACER.

(3) The senior bank staff, as well as the ownership, also deserve a check, before you disburse to them.. case in Point: Allen Stanford, the owner of Stanford International Bank (SIB), had a prior bankruptcy in Texas, and owned a bank in Montserrat, Guardian International Bank Limited, whose license was revoked, amid allegations that it was taking in millions of dollars in Colombian narcotics profits. Stanford was assisting the Central Intelligence Agency, as an informant, and the CIA was banking at Guardian.*  Would any of the investors in SIBs certificate of Deposit, have done business with him if they knew about his sleazy background ? Most clients didn't even know that his first name was Robert.

(4) The accuracy of representations and warranties, given to you to induce a large investment, also needs to be verified. Case in Point: A TD Bank officer confirmed that billion dollar Ponzi schemer  had substantial "locked" funds on deposit at the bank. This was a complete fabrication; had any of the investors sought to confirm this information, they would have learned that no such account existed. Rothstein had withdrawn all the funds for his own use. The investors never would have placed their money with Rothstein had they known that the collateral did not exist.

Investors, who routinely perform due diligence on counter-parties and prospective partners, seem to neglect to check out banks; is it because they have a misplaced faith in the Bank's government license ? We cannot say, but it is good business to practice due diligence on all banks, and the bankers therein, if you want to reduce risk.
*Stanford's long-term relationship with the CIA, when he was in Montserrat, was verified by source The Dragon, from first-hand knowledge. He worked with Reeve John Whitson, of the Quarry, an Agency unit. If you remember that the original SEC investigation was terminated prematurely, upon the order of an unnamed Federal agency, you should ask yourself: Did the CIA protect Stanford from Federal regulators, and thereby allow him to perpetuate his Ponzi scheme for an additional decade ? The SEC started looking into Stanford as far back as 1997, but no action was taken until 2006; all prior investigations were discouraged by SEC leadership.

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