Tuesday, May 31, 2016


We have been waiting, since December 2015, for Panama to actually process the extradition papers signed by the Supreme Court of Justice. Martinelli's "dream team," consisting of some of of Panama's best lawyers, continue to throw roadblocks in the way of the process, but there's much more here, below the waterline, than meets the eye.

In truth and in fact, most Panamanians know that Ricardo Martinelli will probably never see the inside of a Panama City courtroom, because of the wealth of damaging information the former president possesses, with regard to his successor, as will as other prominent members of the present "reform" government. He knows far too much to be allowed to testify.

Perhaps the most serious item in Martinelli's bag of tricks is information that will most certainly quickly result in the resignation of President Varela, so let's preempt him, and get it out in the public domain. The major reason that Varela is not enthusiastic about seeing Martinelli in the dock is the fact that Varela took illegal campaign contributions from the Colombian Pyramid/Ponzi schemer, David Murcia Guzmán.

Martinelli, whose role in laundering criminal proceeds for Murcia, also benefitted greatly from Murcia's billion dollar money laundering scheme, but Varela, who is currently in office, is at great risk, should this story become public knowledge. If Martinelli confirms it in sworn testimony, Varela's political career is over.

Now you know why nobody in the Varela administration is jumping up and down, demanding Martinelli's extradition from Miami. Don't hold your breath.


Monday, May 30, 2016


Tomorrow, Israel will swear in its newest Defense Minister, Avigdor Lieberman, a hardliner whose appointment disturbs many Middle East observers, who fear a new conflict, in 2016, between Hezbollah and Israel. Last year, Lieberman has predicted that another war in Lebanon was inevitable, given Hezbollah's increased assertive nature, its need to rebuild its image in the Arab world, due to its Syrian intervention on behalf of Assad*, and its fiery anti-Israeli rhetoric.

Add that to a statement that Lieberman once said about how, in a future war, started by its enemies, Israel should bomb the opposing country's banking centers. Think about how this would then play out in Downtown Beirut's financial district. If it was destroyed, along with Lebanese infrastructure,  which was another recent threat leveled at it by a retired Israeli general, the economy would crash and burn, and repayment of foreign obligations, indeed ordinary banking itself, would be impossible for a substantial period of time.

Finally, Hezbollah's recent boasting, about the construction of military tunnels, into Israel, from southern Lebanon, increases the risk that new armed conflict could occur, based upon something as minor as an attempt at kidnapping Israeli soldiers again, and taking them  through the tunnels, into Hezbollah-controlled territory.

The bottom line is that there is a clear and present threat of war on the Lebanese-Israel frontier this year, and compliance officers whose clients trade with Lebanese companies, or have financial exposure there, should prudently seek to minimize the exposure of their bank, and their clients.
* Another potentially aggravating issue to consider is Israel's recent declaration that, in any future settlement of the Syrian question, it will not relinquish the Golan Heights. Under international law, the Golan, which was taken in a war of self-defense, is legally Israeli territory. Historically, it was part of ancient, biblical Israel, as proven by recent archeological digs, which have turned up synagogues, and other evidence of biblical Hebrew inhabitants.

Furthermore, under the 1916 Sykes-Picot Agreement, it was originally part of the League of Nations Mandate of Palestine, but it was improperly traded away by the British, in exchange for the oil field region around Mosul. Technically, it is part of the National Jewish Homeland awarded by the San Remo Treaty, and ratified by the United Nations after 1945; Israel has the superior claim.


If you are looking for an example of Panama's broken judicial system, read this. When the Office of the Colombian General prosecutor, in 2007, asked for information about the Waked* Money Laundering Organization (criminal history of the Wakeds, their companies, and the illicit flow of money between Colombia and Panama), the Supreme Court of Justice did not respond for four long years.

Who is to blame ? Both José Ayu Prado, then the Attorney General, and the Court's former Chief Justice, Alejandro Moncada Luna. Both men have since been implicated in massive bribe cases. Taking money to delay cases is par for the course in Panama's dysfunctional court system, and the corruption goes all the way to the Supreme Court of Justice, where an illegal gratuity will generally result in a ruling contrary to the rule of law.

José Ayú Prado
Anyone who seeks justice in the Panamanian court system, be it in the civil or criminal sphere, will not only fail to receive it, he will be charged a clearly excessive fee, by the lawyers he engages, for the injustice that results.

Alejandro Moncada Luna
*A final note: for those who are following the Waked case, a statement made by one of the participants in the organization's massive money laundering organization has been corrected. The amount of money laundered each month in Panama, by the Waked syndicate was not $2m, it was between $2m and $4m.




David Murcia on US$100 note

The universal publicity surrounding  the sketchy companies created by the outlaw law firm of Mossack and Fonseca, and appearing in the Panama Papers, may have spawned new interest in recovering the missing money from the massive DMG scandal.

A lawyer involved in the long-running efforts to recover funds for victims of the DMG pyramid scheme, operated by David Helmut Eduardo Murcia Guzmán, has stated that Murcia created over 200 additional corporations, located in Panama, to hide the proceeds of crime. Reliable sources have alleged that the Panama City law firm of Garrido and Garrido formed many of the corporations for Murcia. Several months after the fraudster's deportation, an unsuccessful assassination attempt was carried out against one of the Garrido partners, and Murcia's associates are believed to have been involved.

The DMG fraud, which started in Colombia, soon expanded to Panama, where there are reportedly over 1500 victims, who lost an estimated $15m. Two of the Panamanian DMG companies have been identified:
(1)  Grupo DMG Inversiones Inteligentes SA.
(2)  Grupo DMG Intelligent Cards Corp.

DMG is alleged to have earned $28m, between 2006 and 2008; he is also believed to have hidden billions of dollars of Cartel narcotics profits within DMG receipts, and moved them into Panama, for the purposes of money laundering. Much of that money was said to be laundered by the fugitive former President of Panama, Ricardo Martinelli, through his Super 99 Market chain, and by Gary James Lundgren, the barred American securities trader, who purchased vast amounts of real estate with Murcia cash, and both later stole the fraudster's assets, both cash and real estate, when he was swiftly deported to Colombia, to face justice.

Gary Lundgren

We shall be monitoring the renewed investigation into locating the missing DMG assets.

Ricardo Martinelli

Saturday, May 28, 2016


Terence Pinder's SUV

While we always focus upon Politically Exposed Persons (PEPs) from foreign countries, domestic PEPs also pose a threat. Terence Pinder was a Commissioner in one of Miami's municipalities, and he reportedly intentionally drove his city-owned vehicle, at over one hundred miles an hour, into a tree, in what authorities have now classified a suicide.

Commissioner Pinder was slated to surrender, the next day, in a corruption charge that would have not only effectively ended his political career, it would have meant prison time, as Pinder was, amazingly, a repeat offender. He had previously been convicted of corruption, but an artful lawyer had obtained a reduction in the charges, to a paid of misdemeanors, meaning not only Probation (no jail time) bu nio felony conviction barring him from running again.

After serving his probationary period, Pinder was returned to office, showing that voters allow themselves to continue to be exploited. This time, he was caught on tape, demanding bribes and kickbacks, in an extremely arrogant manner, such that any jury would be incensed at his conduct, and most likely swiftly see that justice was done.

This case demonstrates the following:

(1) Domestic PEPs can be just as dangerous as those from overseas. Access the level of corruption at your PEP's agency, by examining recent events.
(2) Your PEP bank client may have large skeletons in his closet; Please check his background thoroughly before accepting him as a customer.
(3) Monitor the account, and media coverage, of all domestic PEPs, who are bank customers. You will want to close it, and spare yourself negative publicity, early on, if your client is accused of corruption. Unfortunately, even on the local level, corruption of government officials is more widespread than you think.


The Waked Money Laundering Organization. which, conservatively, moved over a billion dollars of drug profits into Panama, has demonstrated, again, that the country's banking industry has no existing anti-money laundering system. The US Drug Enforcement Administration (DEA) disclosed this week that it first began to investigate Waked in 2006, after a large seizure of cash, inbound from Mexico, was interdicted upon arrival in Panama.

DEA statements, that the Wakeds laundered $2m in dirty cash, each week, in the Republic of Panama, confirms that drug profits are not only welcomed in Panama City, it is the lifeblood of the banking industry. Waked's operation was an open secret for several years, yet the Government practices its own version of Willful Blindness. You cannot tell me that it did not know the truth about Waked's immense cash flow*.

Apparently the only people in Panama who are upset about the Waked scandal are those who blame the US for the potential loss of 5000 Waked front company jobs, and who say that the case is an attack upon the Panamanian financial system; it is all a poor attempt at spin control.

Given that Panama refuses to implement effective reforms, should we now listen to those who believe that Panama's dollarized economy, which facilitates its massive money laundering industry, should now be forced, by the United States, to totally abandon its use of US currency, and issue the Balboa ? That would, some say, fatally contract its banks' ability to clean narco-profits. It would also shut down Panama as the prime offshore financial center of Central America, but given the rampant financial crime,  it is a comparatively small price to pay.
Remember, former Superintendent of Banking, Alberto Diamond R, openly bragged that more than $15bn in "flight capital" entered his country's banking system from Venezuela.


Friday, May 27, 2016


The Hezbollah International Financing Prevention Act of 2015, which was passed last December, provides severe potential penalties for Lebanese financial institutions that bank Hezbollah. The problem is that Hezbollah has taken the position that only the approximately one hundred Hezbollah individuals, and entities, actually designated by OFAC are affected, and it has objected to closing any other accounts on  HIFPA grounds.

Some accounts of clients not specifically sanctioned have already been closed, and Hezbollah has strongly protested. Given the terrorist group's dominant position in Lebanon, bank retreat from account closings could result in US actions which would effectively force the bank to eventually close.

The Central Bank of Lebanon, fearful that some commercial banks will be sanctioned, with disastrous results, and Lebanon effectively isolated from the American financial system, has made the case for actual account closure, and offered up a review process, whereby its Special Investigations Committee would review the bank's evidence. Unfortunately, without any uniform standard, and given Hezbollah's power to influence, bank retreat from threats to close an account could very well occur.

Compliance officers at Western banks that routinely deal with Beirut's financial institutions should therefore be alert to the possibility that Hezbollah agents, and officials, whose accounts end up remaining open, in violation of HIFPA, and move terrorist financing funds through your bank, exposing your institution to the risk a charge of Providing Material Support to a Designated Terrorist  Organization. Transactions with Lebanese banks therefore remain at elevated risk levels.

Thursday, May 26, 2016


Coat of Arms, Isle of Man

The Panama law firm of Mossack and Fonseca, under attack from both the media, as well as a global public that is incensed over the firm's facilitation of tax evasion, and money laundering, has announced that it is closing* some of its overseas branch offices. Many of these far-flung entities, which employ misleading names, so as to confuse inquiries, are, in truth and in fact, wholly-owned subsidiaries, that act as rainmakers and business development agents for MF.

In the Crown Dependencies of the United Kingdom, the Mossack Fonseca branch offices in the Isle of Man, and the one located in the Bailiwick of Jersey, in the Channel Islands, will close shortly. The grounds cited in press releases translate to the disclosures of the Panama Papers. which showed an inordinate number of shell companies had been formed in these two island financial centers, which lie outside the European Union.

Coat of Arms of Jersey

The Mossack office located in the British Overseas Territory of Gibraltar has also notified the local financial community that it is also being closed. It would appear that the Mossack Fonscea brand has become indigestible for the world's financial professionals. Whether the firm will survive remains an open question, but repeated foreign office closures indicate that it is a distinct possibility.

Coat of Arms, Gibraltar
*Update: Unconfirmed reports now indicate that MF has closed its offices in the states of Nevada and Wyoming.


The furor over the information disclosed in the Panama Papers has translated in the launching of major governmental investigations over tax haven company formation. Yesterday, BNP Paribas advised that it is closing all its Cayman Islands branch facilities. This announcement came in the aftermath of some very public statements, made by the Government of France, regarding its inquiries into the abuse of tax haven corporations, by French citizens.

BNP Paribas has been the subject of multiple law enforcement and regulatory inquiries in the past,  especially concerning suspected money laundering, in a number of countries, including the United States, where there are still unresolved questions about the bank's business with certain of its Venezuelan clients, transactions involving Iran, and Nigerian PEPs.

 We have previously covered a number of its compliance deficiencies, and other relevant issues in prior articles, which readers may be accessed through the search box at the top of the page. Some observers have questioned the adequacy of its compliance culture, and opined that, in many instances, the demands of officers in the bank's most profitable divisions appear to have trumped valid AML compliance concerns.

Wednesday, May 25, 2016


The former British Colombian lawyer, Frederick Langford Sharp, who was Mossack Fonseca's principal player in Canada, employed the techniques and strategies of career money launderers, frankly, because he was one. Sharp's company, Corporate House (now reportedly known as Lake House Group), registered over one thousand companies through the Mossack law firm.

His tradecraft was simple:

(1) He used an offshore entity, Bond & Co. in Belize, but employed Companies House, an onshore company, as an intermediary; no references were ever made to Bond and Co. with clients.
(2) He ordered that no annual invoices, or statements of account were ever to be sent to the clients, via email, fax, or post.
(3) Printed statements of account and annual invoices were to be destroyed.
(4) He had a computer server set up in Panama, which was outside the reach of Canadian law enforcement subpoenas and warrants.
(5)  His staff were never to include a reference, or anything else in the attention line or heading, on correspondence and transmittals.
(6)  he offered to set up representative offices for clients, and to structure business, so that no taxable income resulted from the arrangement.
(7) He used an international courier service for all documents, and instructed staff to neither bill the clients for the courier, nor to place any name in the reference.
(8) Many of the Canadian clients had companies formed for them in Hong Kong, making document retrieval, and information access, problematic, for any regulator or law enforcement agency not located in Asia.

These are not the methods of a financial services professional; they are the acts and deeds of a financial criminal,  specifically a money launderer. Unfortunately, it took several years for the Law Society of British Colombia, to suspend attorney Sharp from the practice of law. Once he was no longer subject to its jurisdiction, he simply failed to ask for reinstatement, after his suspension term had expired.

As more details emerge, in the Panama Papers, we shall analyze them, and report back to our readers, on their significance and meaning.


The Bank of Palestine, the Territories' largest local financial institution, has opened an agency in Dubai, United Arab Emirates. The new office, located in the Dubai International Financial Center (DIFC), is the bank's first foreign facility, and its stated purpose is to service the estimated 250,000 Palestinians who live and work in the UAE. The bank has also announced that plans are underway to open an additional agency in Santiago de Chile; Chile reportedly has more than 500,000 Palestinians.

Given that the bank has branches and an alternate headquarters in Gaza, the expansion raises a significant issue: will terrorist financing of Hamas, a designated terrorist organization, be facilitated ? while wire transfers leave a public paper trail, will internal bank transfers, which can often be artfully accomplished without any external record, could give Hamas a quiet new route through which to bring in profits it has earned through criminal activities overseas, especially from Latin America.

We recognize that the bank has long been thought of as the future central bank, in an eventual Palestinian state, but Hamas, and indeed any sanctioned Palestinian terrorist group, could exploit the bank, with the participation of only a small number of cooperating bank staff. Until we can verify that the new Dubai agency is not engaging in some activities that support Hamas, the prudent action is to engage in enhanced due diligence, in any matters involving the new Dubai facility.


Tuesday, May 24, 2016


Several years ago, this blog* covered then-President Ricardo Martinelli's trip to Italy, which included a quiet side trip to Lugano, not covered in the official itinerary. The Swiss destination was Martinelli's bank, Banca della Svizzera Italiana, known to most as BSI, which is in the news today, due to its liquidation, by Swiss authorities and FINMA, because of its role in $4bn of funds movement, reportedly misappropriated from state-owned companies in Malaysia, where the bank maintains a branch. There are multiple criminal proceedings in process against the bank, and a reported $13.3m civil penalty in Malaysia; Money laundering allegations abound.

What was Ricardo Martinelli's plane doing that day in Lugano, you ask ? Those who know say he was depositing a portion of the $3bn that the Colombian fraudster, David Murcia Guzmán, entrusted to him to invest, and which he allegedly laster appropriated to his own use, after he arranged Murcia's hasty deportation, into the waiting arms of Colombian law enforcement.

Additionally, he was banking some of the cash he collected, as bribes and kickbacks, during his term as Panama's most glutinous president. Martinelli had awarded lucrative government contracts, and taken more than his share of illicit compensation.

Ricardo Martinelli " Did they find my cash?"

With BSI now in involuntary liquidation, and another Swiss financial institution now taking over its deposits, we wonder whether, in light of the dozen criminal charges pending against him in Panama City,  whether a government agency or two will seek to seize those dirty millions. After all, it is obvious that Panama will never extradite Martinelli from Miami; perhaps Panama will go after his illicit wealth instead.
Are Panamanian PEPs Moving their Swiss cash ? 


Caracas, Fall 2016 ?
Things have gone from bad to worse in the "Bolivarian Republic" of Venezuela, which can no longer feed its people. Now, not only did the brewer of the country's famous Polar Beer stop producing, due to its inability to obtain the necessary ingredients, the Coca-Cola distributor has shut down production, as it  can no longer get sufficient sugar to turn out its soft drinks.

Given the dire economic situation, any extension of credit by foreign banks, and even a single instance of financial exposure, is  fraught with a high risk of default. Many foreign creditors cannot recover their funds, due to the inability of local businesses to obtain dollars. The Bolivar is well on its way to becoming virtually worthless against the dollar.

The Venezuelan military will not intervene, to remove the failed socialist government of Nicolas Maduro, because its leaders are making millions from drug trafficking. Many Venezuelans have voted with their feet, and are now living in Miami's city of Doral.  For Country Risk purposes,  the prudent move is to avoid any and all transactions with Venezuelan businesses, for you will either be stiffed, or you may later learn that your wealthy bank client is really a corrupt government official, or a narcotics trafficker.

What is next, US Army helicopters rescuing Venezuelans from Caracas rooftops, while a bloody civil war rages below ? Many observers actually fear that this is coming, and soon.

Monday, May 23, 2016


Media representatives who have reviewed the documents and data we call the Panama Papers have reported that, of the approximately 25,000 offshore corporations found, at least 13,000 are traced to Hong Kong, where Mossack Fonseca ran a thriving business, for tax evaders, corrupt PEPs, criminal organizations, and all the other usual suspects.

Many relatives of senior Chinese leaders, themselves Politically Exposed persons, have been found as Mossack clients, but Chinese readers have reported that the online ICIJ database is totally blocked in China, as well as articles and commentary analyzing the entries. If you doubt this, go to the website where we test accessibility of websites within China, www.GreatFire.org

One Hong Kong Newspaper reports that it located more than 33,000 Chinese names in the data, including those of prominent Chinese government officials. No wonder Chinese censors fear the truth; they do not want the names of Politburo members who have offshore accounts, which spells corruption and/or tax evasion, disclosed to the public.

I would not want to be a bank compliance officer in China today, for those poor blokes have been denied critical knowledge about their high-risk customers, just so that some corrupt, fat-cat Chinese Communist Party official can continue to take bribes, kickbacks, and gifts from companies that want government business; Hiding the truth is what China is all about. No wonder their economy is suffering.


You may have seen a reference, in a number of recent articles, to the World Bank article, Withdraw from Correspondent Banking: Where, Why, and What to Do About It. That article details the specific reasons onshore banks are using, when conducting their decision process about terminating correspondent banking relationships, with prejudice. Readers who wish to review the complete text, may do so here. See "Complete Report in English, " on the right-hand side of the page, and download the pdf document.

Sunday, May 22, 2016


Details about the misdeeds of Mossack Fonseca in Pacific tax havens have further shown that the law firm deserves to be dismantled, and the partners all indicted, for money laundering, and other serious financial crimes. Apparently, the firm dealt with the Pacific island nations with a heavy hand.

Some of the improper acts:

(1) Coercing one Pacific island tax haven to delay entering into an information sharing agreement with Australia. The goal was most likely to allow MF to form dozens of anonymous companies in that jurisdiction, so that it would have a fistful of them available in the future.

(2) Obtaining a monopoly, in one tax haven, allowing it to be the only financial services provider, in the country. This was allegedly done to lower prices, due to a lack of competition among companies, but it resulted in a fiefdom, prime for abuse.

(3) Placing the daughter of a country's president in its local offices in that country, as an executive.

Is there any dirty stunt that Mossack and Fonseca will NOT do ? Unfortunately, Panamanian law enforcement, knowing very well how corporate formation is a large cash cow for the country,  will not kill the golden goose.


Atty. General Porcell

Kenia Porcell, the Attorney General of the Republic of Panama, has reportedly ordered the law firm of Mossack and Fonseca to shutter its "wealth management" (read; money laundering) subsidiaries and affiliates. The firestorm that has flared over the Panama Papers disclosures threatens to consume the credibility of country's lucrative offshore financial center, and this may be an attempt at damage control. Longtime Panama businessmen cynically believe that the law firm partners will never be indicted, but that moves will be made, by Panama, to make it appear that corrective measures are being taken.

This news, about the actions of the Attorney General, has not appeared in mainstream Panama City media, due to the fact there is a strict unofficial blackout on negative news, ordered by Government officials, and now scrupulously followed by the principal newspapers in the capital.

Saturday, May 21, 2016


The Panama law firm of Mossack Fonseca, whose methods and tactics more closely resemble those of an international money laundering operation, rather than a team of attorneys providing legitimate legal services, used its captive foundation to hold title to companies that it formed for clients; in this case, it was a Canadian national, though lawyers in that country now involved with him insist that they are winding down all offshore matters, and following Canada's tax laws, to the letter.

What Mossack did:

(1) Form a British Virgin Islands corporation for the client. BVI companies have bearer shares, so it si impossible to identify Beneficial Owners.

(2) Charge the client $9000 for that service. Under ordinary circumstances, this would be considered a clearly excessive fee. Ask your own lawyer what he charges to form a corporation in your jurisdiction.

(3) List "MF Foundation" as the shareholder of the BVI company. Foundations, under Panamanian law, have no shareholders, and the beneficiary can be changed at will. This is a classic money laundering technique, and it has no place in legitimate legal practice.

(4) A bank account was thereafter set up at Winterbotham Trust Company, Limited, in Nassau, Bahamas, and an initial deposit of $9000 was made. Such "under-ten" deposits are expressly designed to avoid any reporting requirements that might alert law enforcement, or tax authorities, to potential tax evasion, or criminal activity. Winterbotham also has offices in Uruguay and Hong Kong.

The above is a template for precisely how Mossack Fonseca, and indeed many other Panamanian law firms, move money for wealthy clients. Issues about whether the money is evading taxes, or is the proceeds of crime, are never brought up, as Panama is attractive, not for legitimate international commerce, but for dodgy clients, and dirty money.

Friday, May 20, 2016


With Lebanese Bankers associations hastening to warn that the US Anti-Hezbollah financing law, now in force, is to be obeyed, notwithstanding that designated terrorist organization's domination of the country, Country Risk may now have finally reached the point of no return. In essence, the risk levels are now so high, that investments in Lebanon, and transaction with Beirut banks, represent an unacceptable level of danger.

Hezbollah, bloodied in Syria, and needing to still show the Arab street that it is relevant*, could initiate yet another conflict with Israel, which that country has bluntly warned will result in destruction of heretofore segments of the Lebanese economy that escaped damage in the last war, a decade ago. if the downtown Beirut business district is destroyed, so will be the Lebanese financial center. The anticipated loss of life could even exceed the nightmare of the Lebanese Civil War.

Would the Islamic State, or one of the radical Sunni Opposition groups fighting in Syria then threaten a weakened Lebanon ? We cannot say, but geography is not on the side of Lebanon, given the threats already posed by these insurgents, some of who have already fought with the country's small army in border towns. With Hezbollah engaged, Lebanon would be vulnerable.

Taking all this into account, the prudent move for any compliance officer, tasked with the calculation of Country Risk, will be to raise it so high on Lebanon, so as to deter any client investment, or extension of credit or other financial exposure.

* The Shebaa Farms territorial dispute, which is a bogus Hezbollah claim, made ostensibly on behalf of Lebanon, to justify military action against Israel, has no basis in fact, as the territory was always on the Syrian side of the frontier; This is supported by French historical records. Hezbollah has always had a reckless disregard for the truth, when it serves its interests.


The Panamanian law firm of Mossack and Fonseca, roasted in global media, for its illegal activities, as revealed in the Panama Papers, went to great lengths to disguise its illicit overseas subsidiaries. The use of corporate names that cannot be identified with a parent, and the use of deceptive  names, are the hallmarks of money launderers.

We already know that the law firm used "MF" in the names of subs, to conceal their relationship with the parent, but the firm resorted to even more confusing methods, to insure that the public would not connect it with its secretive formation, in other tax haven jurisdictions. For example:

(1) in the opaque British Virgin Islands, where Mossack formed the majority of its corporations for dodgy clients(and where the local regulator, the FSC, allowed it to operate with impunity*) it employed "Mossack Fonseca & Co." as its local subsidiary. law firms do NOT use the word company in their name; its use was clearly intended to deceive the non-lawyer public, who would assume that the firm was a commercial business.

(2) In the Republic of Cuba, Mossack used "Pan American Corporation," which obviously was a scheme to rely upon the fact that many companies use the phrase 'Pan American' in their title, and it was an effort to link it with other, totally unaffiliated entities. it also connotes such former old-line companies as Pan American Airways, and Pan American Bank, which seemingly provides a level of legitimacy. Again, this is classic money laundering trade craft.

A number of corrupt Cuban Communist Party officials have recently been unmasked, for having MF forming offshore companies for them, directly, or through Swiss intermediaries. Most senior Cuban officials are believed to hold large Swiss accounts, containing criminal proceeds, and some of those accounts are in the names of tax haven companies formed by Mossack Fonseca.

The more details that emerge, about the financial crime which Mossack and Fonseca engaged in, the louder the clamor will be, to shut down the firm, and charge all the partners, not just the duo whose names appear, with money laundering, in multiple jurisdictions, including the United States and Canada. If Panama  does not act in a timely manner, you can expect its reputation to sink even lower, in the eyes of the world, and it will cease to be a destination for legitimate international business.
* See Regulator Allowed Mossack and Fonseca to Run Amuck in BVI, Kenneth Rijock's Financial Crime Blog, may 17, 2016.

Thursday, May 19, 2016


As more damning details emerge, the unauthorized, improper and illegal, use of the names of the world's most prominent charitable organizations and NGOs, by Mossack Fonseca, appears to be far more widespread than earlier indicated. More than 700 Mossack clients received such bogus charities.

An internal Mossack memorandum has been unveiled, which boldly reportedly advised prospective clients that the World Wildlife Fund, the International Red Cross, UNICEF, and others, were to be used, though non of the named charities ever received donations from these bogus entities. The Mossack memo told the clients that the beneficiaries, meaning the tax cheats and sundry other criminal clients, would ultimately be named as beneficiaries at a later date, the charities then dissolved, and the money disbursed to them, which is an admission that the method to be used was totally bogus.

The Mossack law firm, which hid behind the fact that it merely provided "secretarial services" to the clients, in connection with the charities, offered candid, and obviously criminal, legal advice, when it detailed how no client's name would appear, only those of Mossack staff members, on the filings. One wonder how long it will take for these charities to file civil suits, seeking damages, against all the partners at Mossack and Fonseca, and whether criminal charges will follow.

Wednesday, May 18, 2016


Panama's most prolific fraudster, the American expat, Gary James Lundgren, continues to give the finger to the Financial Industry Regulatory Authority (FINRA), from the safety of his offshore base in the Republic of Panama. Is it because he has the proverbial "get-out-of-jail free card," by virtue of a longstanding Confidential Informant status with a US law enforcement agency, we wonder ?

 Banned by FINRA, from any association in the securities industry, Lundgren continues to sell unregistered securities to US residents, employing a Panama corporation that he formed last year, Interpacific Investors SA, which has the same name as his former, and now closed, securities firm in the State of Washington. He is still using the same website, www.interpacificinvestors.com , as his shuttered US brokerage firm, but now visitors as sent directly to Interpacific Investors SA. He is obviously targeting investors who are US residents.

 Lundgren is offering "bonds," which are, in truth and in fact, unregistered securities,  and which he markets, in the United States, through a covert network of stock salesmen who funnel capital to him. Currently, Lindgren's two sons, and a front man are handling transactions.

The so-called bonds are fractional interests in Panama real estate projects; as they are an investment scheme, the profits of which are solely to come through the efforts of others, they fit the classic definition of what constitutes a security. So why isn't this an SEC case yet ? The Securities & Exchange Commission has jurisdiction over the sale of unregistered securities in the United States.


The Colombian Ministry of Finance, after a visit to the Bogotá offices of Mossack and Fonseca, has declared that Mossack, and other Panamanian offshore specialists, assisted Colombian nationals in evading taxes upon approximately $20bn. It has estimated that 400-500 Colombian taxpayers evaded taxes, with Panamanian help. A team of 50 auditors will be engaged to identify the tax evaders, who also reportedly violated Colombian currency exchange controls.

The methods  Mossack used, for its Colombian clients, included:

(1) The sale of real estate, often for cash, was artfully concealed, when the sellers elected to receive the payment in Panama, and not report it to Colombian tax authorities. Panama does not tax offshore transactions.

(2) The use of inflated invoices, sent from Panamanian companies, which resulted in zero profits for the Colombian corporation, and no tax bill.

(3) Exporting goods to Panamanian companies, affiliated with the Colombian taxpayer, but not disclosing that arrangement to tax authorities. The net result is that there are no reported profits in Colombia.

Colombian authorities will exact a 160% penalty, plus accrued interest, on all tax evaders that it identifies, as the result of the Panama Papers disclosures.

Tuesday, May 17, 2016


The Financial Services Commission of the British Virgin Islands let the law firm of Mossack and Fonseca ignore due diligence and customer identification procedures in the BVI, for years, and apparently only cracked down when the widespread negative publicity generated by the release of the Panama Papers forced it to act.

The FSC recently prohibited MF from any new corporate formation, and fined the law firm $31,500, for its failure to minimum standards on due diligence, and on controls on its information systems. Unfortunately, prior FSC actions were limited to the levy of fines and penalties, without the implementation of any sanctions or actions against the firm's operation. In 2012, the FSC fined Mossack $20,500, and in 2013, it was fined $37,500, all for defective compliance procedures. In none of these years were sanctions of any kind imposed by the regulatory authority.

 Panama Papers documents indicate that for years, massive numbers of BVI companies were formed by Mossack, for dodgy clients, without either any due diligence, or adequate customer identification procedures. Complex schemes were created for Mossack clients, where the anonymous BVI corporation was the central tool for hiding Beneficial Ownership from view, and other offshore entities were created to further confuse any potential inquiries, by building layers of opacity.

Local BVI autonomy from the United Kingdom means that the lucrative filing fees collected by BVI Government go straight into local treasury coffers, which is a disincentive for regulators exercising any meaningful control over foreign financial service providers, such as Mossack & Fonseca. Until and unless effective legislation is passed in the BVI, its companies will continue to be the drug of choice for money launderers, tax evaders, and corrupt foreign government officials. 

Monday, May 16, 2016


A United States District Judge, in the State of Delaware, has dismissed a civil suit, brought by the Central Bank of Venezuela, against Dolar Today*, a website that reports on the unofficial value of the Bolivar, as against the US Dollar. The website, which is considered an important indictor of Country Risk by compliance officers in North America and the EU, has been tracking the fall of the Bolivar, versus the US Dollar and the Euro. Publication of the black market rate is illegal under current Venezuelan law, and its government engages in efforts to block the website from being seen inside the country, by its citizens.

The suit, filed by the Banco Central de Venezuela, alleges that Dolar Today published false currency rates, which were posted with the intent of destabilizing the Venezuelan economy, and profiting upon the exchange. The case was previously dismissed in February, but the Court gave the plaintiff leave to amend, and an Amended complaint was later filed, which alleged that the injury was the manipulation  of the value of Venezuelan currency. The Court found that the plaintiff had failed to allege a concrete harm, which the Court could redress.

The Court, on May 11, 2016, granted the defense motion to dismiss, with prejudice, and denied the plaintiff's request for Oral Argument, directing the Clerk of Court to close the case. The Court held that the plaintiff lacks standing, and that it has no subject matter jurisdiction.


The Panama-based Waked Money Laundering Organization, which owned a large group of legitimate companies, and through them, engaged in criminal activities, was owned and led by a family of Lebanese origin, whose members maintain Lebanese, Colombian or Panamanian citizenship.

The individuals, who were indicted in US District Court, with money laundering and bank fraud, were also engaged in providing material support to a Specially Designated Terrorist organization, namely Hezbollah, and with terrorist financing, though they have not, as yet, been indicted on those charges. The Waked organization funneled millions of dollars annually, to Hezbollah, employing its diversified holdings of legitimate corporations, as well as shell companies, formed by their Panamanian attorneys, to disguise and move criminal profits, to Hezbollah in Beirut.

The terrorist financing activities of the Waked Organization were disapproved by other Panamanian organized crime syndicates, but  local law enforcement always failed to take any action against it. It is believed that the Waked family had such powerful influence in government circles, obtained through a combination of bribes, and threats, that it openly operated in Panama, with impunity. The American indictments, and OFAC sanctions, which include prohibitions on US residents doing business with the Waked empire, are intended to collapse its operations, save perhaps those limited legitimate companies that are receiving licenses from US Treasury, and which employ thousands of Panamanians.


Donald Trump is angry, and with good reason
Attorneys for the American Presidential Candidate Donald Trump are reported to have arrived in Panama this weekend; their client is mad as a hatter at the fact that the Panama Papers disclosures have revealed that the law firm of Mossack and Fonseca formed offshore companies, using the Trump name, without his permission and consent.

The Mossack firm, which has previously been identified for illegally using the names of legitimates NGOs, and international banks, in forming companies, in faraway tax havens, is accused of using Donald Trump's formidable brand for its clients, which is a violation of trademark and intellectual property laws. It is not known which offshore jurisdictions Mossack and Fonseca used, but it has focused on the most obscure Asian, and Indian Ocean, tax havens, in using, and abusing, the names of legitimate entities.

While there has been no identification of precisely which client the Mossack firm formed the imposter companies for, Panama observers have already pointed to the American fraudster,  disbarred stock trader Gary James Lundgren, as the most likely suspect. Lundgren has made a career out of using the names of legitimate, and powerful, people, to hide his criminal conduct. Panamanian regulators have steered away from prosecuting him for years, due to the fact that he has posed as a partner of Ricardo Martinelli, and formed companies with names that appear to be linked to the former president.
Gary James Lundgren
Lundgren actually posed as a partner of a financial institution partially owned by Martinelli and his family, in order to defraud Canadian and American expats, who became some of his victims. Also, one must consider that Trump is suing Lundgren for $75m, and understand that Gary Lundgren has a history of perpetrating dirty tricks upon individuals that he has defrauded in business.


Six months after it should have referred an Order of Extradition for former president Ricardo Martinelli, to the Foreign Ministry, Panama's Supreme Court of Justice continues to sit on the matter. The Court, most of whose justices were appointed by Martinelli, and against whom evidence continues to pile up for taking money to fix cases before it, remains in power, and Panama allows it.

Until the corrupt members of the Supreme Court of Justice are dismissed, and arrested, there will not be any true reform in the Republic of Panama. Martinelli, who has a dozen cases pending against him, is laughing out loud from Miami. The so-called reform plan of President Varela has failed.

Sunday, May 15, 2016


As more documents in the Panama Papers scandal are made available to the media, we are learning that there was nothing sacred at Mossack, when it came to forming companies, which were then used to hide money for its dirty clients. Reports from Panama indicate that the law firm of Mossack and Fonseca not only illegally appropriated the names of well-known international NGOs and non-profits, when forming offshore companies in obscure tax haven jurisdictions, it actually formed companies with the names of prominent international banks, without their consent and knowledge.

The Mossack firm also used the tried-and-true technique of classic money laundering: filing companies having the names of banks that have been ever so slightly altered. We called that deceptively similar, making a very minor change in the spelling of the name. Most readers assume, incorrectly, that it is one and the same as the real bank, but, in truth and in fact, it is a shell company unaffiliated with the real one. That's how money launderers and financial criminals get over on the legitimate financial world.

You can expect to see more of these "dirty tricks" from Mossack and Fonseca, as more information is released to media outlets. They demonstrate a complete and total lack of business ethics, a corporate culture bereft of any morality, and a reckless disregard for trademarks, service marks, and intellectual property. 


Yasser Ali, A spokesman for the designated Palestinian terrorist organization Hamas, this week, in a public statement, remarked that Hamas has "never forgiven" the United Kingdom, for its role in the creation of the State of Israel. Last year, another Hamas spokesman, Essam Adwan, called upon the UK to pay reparations to it, for some alleged perceived injustice that Britain allegedly inflicted upon the Palestinians, seventy years ago.

Neither of these two individuals was paying attention in history class; It was the United Nations that proposed a partition of the British Mandate, which was not only rejected by the Arab world, but resulted in a failed attempt, by several armies of Arab countries, to destroy the new State of Israel. The legal basis for a national home for the Jewish people goes back to the rulings of the League of Nations, which were carried forth by the UN after its formation.

The United Kingdom may have been responsible for the Balfour Declaration, which proposed a National Jewish Home, but it was the world community that adopted its principles.

Nevertheless, on a risk management basis, UK entities should take these threats seriously, especially when Hamas, and its regime in Gaza, is involved. Given Hamas' SDGT status with OFAC, as well as its UK designation, dealing with any Middle Eastern financial institutions located with the Gaza Strip, or which have established a branch there,  represents a high degree of risk for UK banks and NBFIs. There is nothing to stop the Hamas leadership from seizing funds from banks located in Gaza, where these is a dictatorship that ignores the Rule of Law. Try getting your money out through access to a Palestinian court. It's worse than Panama, if that was possible.

Let us also hope that these statements are taken seriously by the Labour Party, whose love affair with the Palestinians appears to also disregard history, as well as counter-terrorism experts in the UK Government.


Nicolas Maduro, the President of the Bolivarian Republic of Venezuela, has declared a national State of Emergency, which effectively places the risk levels of any commerce, or any financial exposure, so high that the nation should now be considered off limits, for the purposes of Country Risk. The ability of any foreign creditor, vendor, or claimant, to obtain justice, or any effective redress, for any reason, is now effectively zero. The country's corrupt court system, that routinely follows government orders, and not the rule of law, may now note even be available to foreign plaintiff, due to the State of Emergency.

Maduro has threatened to nationalize any manufacturing facility that has closed up, notwithstanding the fact that most factory closures are generally for their inability to obtain raw materials from abroad. Polar, one of the country's largest companies, has stopped brewing its trademark beer, due to a lack of barley, which is imported.

The Opposition continues to seek the recall of the country's president, whose administration has been accused of responsibility for Venezuela's economic chaos, a situation where many are forced to wait ion long lines daily to purchase staples, when they can be had at all. Prudence dictates that you Redline Venezuela at this time.

Saturday, May 14, 2016


My recent article, detailing the imminent loss of correspondent accounts in he US, by Panamanian financial institutions, appears to have hit a nerve. Panamanian regulators have disputed its accuracy, notwithstanding that customers of Banco General have been told, by their BG account representatives, that there will be problems with the processing of inbound wire transfers, and on checks they deposit, when drawn on foreign banks. Some of those readers commenting have even threatened to bring civil and criminal action.

Let's look for a minute at why an American or Canadian bank would choose to close BGs correspondent account. I can think of several reasons, and they all spell money laundering:

(1) Banco General accepted deposits of funds corruptly obtained from Panama's National Assistance program, commonly known as PAN. We have previously written in details abut this matter, and the criminal charges filed therein.

(2) Banco General is under investigation, by the Organized Crime Prosecutor, for laundering the proceeds of corruption obtained by the administration of the former president, Ricardo Martinelli, who faces multiple criminal charges, and a number of his close associates, and former government officials.

(3) Convicted former Supreme Court of Justice President, Judge Alejandro Moncada Luna, moved criminal proceeds through Banco General. The bank's failure to interdict large payments, made to or on behalf of senior, yet underpaid, government officials, amount to gross negligence. This case is also under investigation by the Organized Crime Prosecutor. Moncada Luna is serving a 5-year sentence, for accepting bribes and kickbacks.

(4) Links between Banco General and the Financial Pacific/Petaquilla Mine insider trading scandal, have been established, and this connection is now part of the pending investigation, being conducted by a foreign law enforcement agency.

Any one of these is enough of a reason for any North American bank to terminate a correspondent relationship with Banco General; taken as a group, even though these matters as pending, any risk-based compliance program would prudently act to reduce its risk level, by closing correspondent accounts forthwith. One money laundering investigation is sufficient to consider the termination of ties, several constitutes grounds for immediate closure of correspondent accounts.

Friday, May 13, 2016


An attorney spokesman for the law firm of Mossack and Fonseca, the source of the Panama Papers documents, has stated that eight former employees are under investigation, by government prosecutors, in an effort to identify who stole eleven million documents, which name tax cheats and corrupt officials, from its corporate files. The names have not been released to the public.

The Mossack firm continues to assert that hackers, working outside Panama are responsible for the theft of documents, though investigators are focusing upon former employees. The spokesman, who was interviewed by La Estrella, the Panama newspaper known for investigative journalism, admitted that the law firm routinely terminates, and "rotates" staff members, and that all those let go last year are under suspicion.

Many observers in Panama City have reported, for several years, that the minimum wage scale paid to them, and periodic termination ( to keep staff from learning too much about the clients), including of compliance staff, has resulted in dissatisfaction among the firm's employees. There has been no response to allegations that the leaks started a decade ago, initiated by a spurned mistress of firm name partner, Ramon Fonseca, and by a fired compliance officer, also known to have offered and sold information to US law enforcement agencies seeking evidence on money laundering of narcotics profits.

Whether the lawyers at Mossack and Fonseca will now be charged with money laundering, in  jurisdictions outside Panama, appears to be the primary issue among observers who have reviewed the documents released.

Thursday, May 12, 2016


Reliable sources in Panama City have disclosed that the real reason that the former American securities trader, Gary James Lundgren, refused to open his brokerage books of account to FINRA investigators, because he could not satisfactorily account for the source of funds he used to reportedly purchase approximately $33m in construction bonds, the proceeds of which were originally used to build the Trump Ocean Club.

The bonds, which were issued by the developer, Newland International Properties Corp., were for  a total of $220m, and Lundgren, as the 15% owner, was the largest bondholder.

The bonds, which were held by the now-defunct Bear Stearns Companies,Inc., whose assets were purchased, as a deep discount, by JP Morgan Chase, were later sold to Lundgren for an undisclosed price.  Lundgren is a longtime client of JP Morgan, and it has long been rumored that he often tendered payment in cash, when purchasing securities for clients.  

It has been rumored that the sale, which was reportedly many millions, was also made for cash. Lundgren has been seen, in Panama's banks, toting large sacks of US Dollars, which were reportedly drug profits of the Medellín Cartel that he was charged with laundering, through securities purchases. He reportedly purchased many units, in the Trump Ocean Club, for clients.

Therefore,  Gary Lundgren could not very well produce accounts and ledgers that showed cash purchases, without any Source of Funds information, to substantiate their origin. The Financial Industry Regulatory Agency, or FINRA, requested his records no less than five times, in connection with an investigation, and banned him, for life, from any securities matters, when he refused to comply. He would have further incriminated himself as a money launderer, had he released the bank account records of his companies.