Tuesday, February 28, 2023


It may be a white collar crime, but money laundering can be hazardous to your health if you are the laundryman, when something goes horribly wrong with your operation, and funds either disappear, or are seized by an alert law enforcement agency. Several years ago, I was leaving the stage after speaking about my experiences as a laundryman, when a DEA agent came up to me, and asked me if I knew a certain Miami attorney who had recently passed away.

When I answered in the affirmative, he advised me that his watery death was no accident, but that it was a homicide. From that fact, and given his participation in laundering the proceeds of crime, it was easy to figure out the reason for his untoward demise. A sad story, but when you realize who the clients are, you wonder why anyone not addicted to risk-taking would get involved in the first place. As you can guess, I foolishly relished taking such chances at that point in my life, a pathology I acquired due to my Vietnam War experience.

Sometimes, the laundryman is terminated with prejudice in error, when he was actually innocent of the loss of client funds. Regular readers of my blog have read about the late William Herbert, the first Foreign Minister of St. Kitts & Nevis, who was laundering funds for the IRA. When money went missing, he and his entire group of guests on board his yacht one day, disappeared forever. US law enforcement has unofficially advised that they are all buried underneath a swimming pool in Basseterre, the capital of St. Kitts. The sad part of the story; it was MI-6 that seized the money; Herbert was innocent of the theft allegations.

Clients can also intentionally incriminate their laundryman in a number of ways which can expose them. One of my clients, unhappy with check clearance times on laundered funds, inserted my name as owner of an aircraft engaged in drug smuggling. When the plane was burned in Jamaica by a mob, with the pilot inside, the records with my name caused me a bit of a problem later on.

Bottom line, money laundering is not for those willing to accept that there may be an unhappy ending for you down the road. I wonder how many laundrymen actually consider this when they start moving money for narcotics traffickers.

Sunday, February 26, 2023


All of this loose talk about the shortcomings of artificial intelligence programs may be confusing, but many of these articles panning AI are missing the point. Artificial intelligence-powered programs are not designed to replace the human element, especially in the field of anti-money laundering compliance. They cannot, and do not, perform enhanced due diligence, to the exclusion of the human factor; Here's why.

AI is designed to find the most obscure and esoteric data for the compliance officer, which then must then be analyzed and interpreted. AI locates information that might otherwise never be found by legacy compliance research, even if one had an infinite amount of time available to round it up, and had access to each and every resource known to compliance, and even those not known in the industry. AI retrieves, and with that data, using machine learning, searches for additional information.

Then, seasoned compliance officers, who sent the query in the first place, synthesize, summarize and solve the EDD problem. It's truly a team effort. The pairing of effective information gathering with a critical thinker to weave it into a cohesive answer results in the EDD solution. AI is the tool; and and a highly effective one, which is information power wielded by the expert compliance officer, getting results. Ignore that popular nonsense about AI's weaknesses; when used as it was intended to be deployed, it works eminently well. It's not the standalone, it's the partner with the compliance officer that gets the job done.


Given that the United States has now declassified information which suggests that that there is a very good chance China will soon decide to sell arms and ammunition to Russia, which means the swift imposition of international sanctions against the PRC, this is the appropriate time to start planning which customers you will choose to closely monitor, to prevent sanctions evasion through your bank.

Compliance offices at North American and EU Member banks should examine their customer lists for:

(1) Customers who have substantial international trade with China in goods and services. (Manufacturing and distribution)
(2) Customers whose corporations appear to be owned by Chinese nationals, both expats and those residing within the PRC. ( trading companies)
(3) Any new accounts opened in the last 60 days, that are conducting financial transactions with Chinese banks. (import-export, financial services)

You have to accept that sanctions evasion pipelines, moving through countries that are on record as neutral in the Russia-Ukraine, or nations that currently assist Iran & Syria evade global sanctions, will now adapt to the enactment of sanctions, by moving their new Chinese operations through a combination of the use of existing routes, and creating & opening new avenues, to avoid detection and exposure.

You will have to ramp up transaction monitoring on your high-risk customers that fall into the three categories listed above, lest they use third parties, and your bank, to evade new sanctions on China. Insure that you are prepared.


Policy Sets National U.S. Attorney Office Standard for Circumstances Under Which Companies May Receive Credit for Voluntarily Self-Disclosing Criminal Conduct, and Benefits of Self-Disclosure

Tampa, Florida - United States Attorney Roger B. Handberg announced that the U.S. Attorney’s Office for the Middle District of Florida has implemented the new United States Attorney’s Offices’ Voluntary Self-Disclosure Policy released earlier this week. The policy, which is effective immediately, details the circumstances under which a company will be considered to have made a voluntary self-disclosure (VSD) of misconduct to a United States Attorney’s Office (USAO-MDFL), and provides transparency and predictability to companies and the defense bar concerning the concrete benefits and potential outcomes in cases where companies voluntarily self-disclose misconduct, fully cooperate and timely and appropriately remediate.

The goal of the policy is to standardize how VSDs are defined and credited by USAOs nationwide, and to incentivize companies to maintain effective compliance programs capable of identifying misconduct, to expeditiously and voluntarily disclose and remediate misconduct, and to cooperate fully with the government in corporate criminal investigations. The policy was developed pursuant to the Deputy Attorney General’s September 15, 2022 memorandum, “Further Revisions to Corporate Criminal Enforcement Policies Following Discussions with Corporate Crime Advisory Group” (Monaco Memo), which directed each Department of Justice (DOJ) component that prosecutes corporate crime to review its policies on corporate voluntary self-disclosure and, if there was no formal written policy to incentivize self-disclosure, draft and publicly share such a policy.

“Transparency and accountability are integral to establish public and private trust,” said U.S. Attorney Handberg. “The new Voluntary Self-Disclosure Policy is an important step in encouraging corporate governance. This policy incentivizes corporations to do the right thing by reporting wrongdoing before detected by regulators and law enforcement. We hope that it will have a transformative effect in promoting positive, corporate practices within our district and nationwide.”

Under the new VSD policy, a company is considered to have made a VSD if it becomes aware of misconduct by employees or agents before that misconduct is publicly reported or otherwise known to the DOJ, and discloses all relevant facts known to the company about the misconduct to a USAO in a timely fashion prior to an imminent threat of disclosure or government investigation. A company that voluntarily self-discloses as defined in the policy and fully meets the other requirements of the policy, by—in the absence of any aggravating factor—fully cooperating and timely and appropriately remediating the criminal conduct (including agreeing to pay all disgorgement, forfeiture, and restitution resulting from the misconduct), will receive significant benefits, including that the USAO will not seek a guilty plea; may choose not to impose any criminal penalty, and in any event will not impose a criminal penalty that is greater than 50% below the low end of the United States Sentencing Guidelines (USSG) fine range; and will not seek the imposition of an independent compliance monitor if the company demonstrates that it has implemented and tested an effective compliance program.

The policy identifies three aggravating factors that may warrant a USAO seeking a guilty plea even if the other requirements of the VSD policy are met: (1) if the misconduct poses a grave threat to national security, public health, or the environment; (2) if the misconduct is deeply pervasive throughout the company; or (3) if the misconduct involved current executive management of the company. The presence of an aggravating factor does not necessarily mean that a guilty plea will be required; instead, the USAO will assess the relevant facts and circumstances to determine the appropriate resolution. If a guilty plea is ultimately required, the company will still receive the other benefits under the VSD policy, including that the USAO will recommend a criminal penalty of at least a 50% and up to a 75% reduction off the low end of the USSG fine range, and that the USAO will not require the appointment of a monitor if the company has implemented and tested an effective compliance program.

In cases where a company is being jointly prosecuted by a USAO and another DOJ component, or where the misconduct reported by the company falls within the scope of conduct covered by VSD policies administered by other DOJ components, the USAO will coordinate with, or, if necessary, obtain approval from, the DOJ component responsible for the VSD policy specific to the reported misconduct when considering a potential resolution. Consistent with relevant provisions of the Justice Manual and as allowable under alternate VSD policies, the USAO may choose to apply any provision of an alternate VSD policy in addition to, or in place of, any provision of its policy.

The Attorney General’s Advisory Committee (AGAC), under the leadership of United States Attorney for the Southern District of New York Damian Williams, requested that the White Collar Fraud Subcommittee of the AGAC, under the leadership of United States Attorney for the Eastern District of New York Breon Peace, develop policies in response to the Deputy AG’s memo. The policy announced today was prepared by a Corporate Criminal Enforcement Policy Working Group comprised of U.S. Attorneys from geographically diverse districts, including U.S. Attorney Peace, as well as U.S. Attorney for the Eastern District of Virginia Jessica Aber, U.S. Attorney for the District of Connecticut Vanessa Avery, U.S. Attorney for the District of Hawaii Clare Connors, U.S. Attorney for the Eastern District of North Carolina Michael F. Easley, Jr., U.S. Attorney for the Northern District of California Stephanie Hinds, U.S. Attorney for the Western District of Virginia Christopher Kavanaugh, and U.S. Attorney for the District of New Jersey Philip Sellinger. Assistant U.S. Attorney Amanda Riedel, White Collar Crimes Coordinator for the Executive Office for U.S. Attorneys, also participated in the development of the policy.


Updated February 23, 2023

Saturday, February 25, 2023


Although many of the sentences handed down in Federal Court for money laundering, which could result in a 20-year sentence, are often significantly less, here's an instance where the punishment actually fit the crime; five to 15 years. The defendants were part of an international narcotics trafficking ring that sold cocaine in the US, and laundered the profits through New York, and into Mexico. In this case, justice definitely prevailed. (1:19-cr-334 Eastern District Virginia) One defendant was later extradited from Peru.




Xizhi Li

Counts 1-3 (drug trafficking and money laundering

Money laundering, 180 months

Jiayu Chen

Counts 1-3 (drug trafficking and money laundering

Money laundering, 60 months

Eric Yong Woo

Count 3 (money laundering)

Money laundering, 18 months

Jingyuan Li

Counts 1-3 (drug trafficking and money laundering)

Money laundering, 84 months

Tao Liu

Counts 1-14 (drug trafficking, money laundering, attempted identity fraud, bribery

Money laundering, bribery, 84 months


                                                       ( Chart from USAO ED VA press release)

Friday, February 24, 2023


Joseph Muscat, looking more and more tired and stressed

A Maltese judge today annulled the contract privatising three hospitals, holding the the transaction was fraudulent, and ordering that they are to be returned to government ownership and control. The Court, in a 140-page ruling, in a case brought by a former Opposition party leader, voided the largest public contract in Maltese history, leading to immediate demands that a number of government leaders who arranged what amounted to a fraudulent deal be promptly indicted. Public outrage boiled over today outside the courtroom, seeking immediate redress against those deemed responsible.

Central to the decision was the involvement of former PM, Joseph Muscat, and two other senior government officials, Christian Cardona and Konrad Mizzi. We have previously discussed allegations of their receipt of substantial bribes, and Foreign Corrupt Practises Act (FCPA) violations of the American businessmen who supplied them. See "WHEN WILL THE UNITED STATES CRIMINAL JUSTICE SYSTEM TAKE DOWN JOSEPH MUSCAT AND THE MALTA MONEY LAUNDERING MACHINE", and our other articles, beginning in 2018. We were the first to discuss and analyze the issue, in depth, and we trust that Mr. Muscat starts believing what we are writing now.

Our sources advise that a US law enforcement agency, which has been investigating the allegations, has been awaiting the outcome of this case, before proceeding further towards a criminal prosecution. The current American policy of zero tolerance to FCPA violations tells us we probably won't have long to wait.


A Nigerian national, FATADE OLAMILEKAN, was sentenced to five years in Federal Prison, for fraudulently obtaining millions of dollars in medical equipment and other merchandise. The defendant posed as US Government and state & local government purchasing agents. He used emails that were deceptively similar to those of authentic officials, and using a Lithuanian web hosting company to defraud suppliers, and shipped the goods stolen in this manner abroad.

He made small alterations to the email addresses of known government procurement officers, and opened many accounts in American banks, whose compliance officers failed to spot his operation. Neither the suppliers nor the bank compliance officers caught the tiny changes in the addresses, and the fraudster employed changes which rendered the addresses different, but which to the untrained eye appeared to be absolutely legitimate known addresses of purchasing agents known to the suppliers, using different alphabets and other tricks that totally fooled the recipients.

If the bank's compliance departments had employed platforms powered by advanced artificial intelligence, the extremely small discrepancies would most likely have been identified and rejected by the AI system. If there ever was a case that demonstrated the usefulness of artificial intelligence for busy and overloaded compliance officers, this is it.
Activate to view larger im

Thursday, February 23, 2023


(Note the Dubai telephone number)

Sam Bayat's excellent article, detailing how British border authorities are looking for Russians masquerading as Caribbeans, thanks to their CBI passports, courtesy of Antigua, St. Kitts, Dominica, etc., and how Russians can no longer secure such valuable forms of identity, fails to alert the reader about all those hundreds of thousands of existing passports, which pose a clear and present danger in the developing world. Britain is taking care to exclude sanctioned Russians, but what about everyone else?

Customs and immigrations officers in Latin America, Africa and Asia generally accept those East Caribbean CBI passports, as well as Malta's CBI products, without so much as a by your leave, allowing Russian criminals, intelligence officers, and money launderers for Moscow Oligarchs to enter without a visa, and to commit financial crimes that ultimately impact the EU and North American financial markets.

If I was a compliance officer at a bank located in the developing world, I would not accept any new clients holding East Caribbean passports that did not speak Caribbean-accented English, or Malta passport holders who did not speak Maltese. CBI passports. Although only a very small percentage of the CBI passport holders are Russian financial criminals, the global damage that they do justifies you making sure to exclude them as the gatekeeper of your bank.

Wednesday, February 22, 2023


Sometimes, being an effective compliance officer means that when you observe something that seems just a little bit out of the ordinary, you immediately take the time to make it your business to examine it, to rule out whether a financial crime is being facilitated through your bank, or to your bank. That's what compliance is all about, cutting through what you later determine is intentional camouflage, to get to the truth, which can often mean criminal activity, cleverly disguised as legitimate business. It's the little things that you spot.

In a recent South Florida case, JONATHAN GHERTLER, a known fraudster, was able to pull off a significant fraud against a company, by employing impersonation skills to trick corporate executives into paying hundreds of thousands of dollars for a bogus investigation purportedly inquiring into whether certain senior corporate executives had illicit relationships with the late pedophile Jeffrey Epstein.The fraudster even successfully impersonated the company's general counsel through emails, using the commonly used fraudster trick of sending emails with a slightly altered name spelling. He also impersonated the billionaire founder of the company. He even tried to trick investigating law enforcement agents,which I consider the height of arrogance. A career criminal, with a dark past,his technique was highly successful at first.

What bothers me about the case is that a sharp compliance officer should have realized that, under most circumstances, hefty payments to individuals supposed to be professionals do not go to credit union accounts, but to accounts at commercial banks. That red flag should have tripped a compliance officer's internal alarm to check out the payees on all this money, where he or she would have immediately questioned the bona fides of the recipients.Other not so obvious red flags of fraud existed in the transactions, but they were missed.

Of course, if platforms employing artificial intelligence had been in service, the inconsistencies would have been picked up early on, and more than a million dollars in fraudulent expenses caught in the act.We know compliance officers are overworked and often far too busy in spot something minor, but the lesson here is that AI programs, if in operation, can catch the small things that go right over the heads of compliance officers each and every day, and which can really make the difference between stopping financial crime, and missing it totally.

Monday, February 20, 2023


Some of my drug trafficking clients, back in the day, did not launder all their profits through me; they used accountants who had connections to legitimate businesses that primarily received payments for their goods and services in cash, and who were willing, for one reason or another, to cooperate in a money laundering operation, for mutual benefit. Sometimes, businesses falling upon hard times lose track of their moral compass and agree to be used as laundromats; others simply have avarice. Either way, these businesses served their purpose well.

Such companies usually are in wholesale or retail sales, anything where they sell from inventory, and where traditionally only cash, and not plastic, nor credit, debit cards or any other form of payment, is king. Money launderers will seek out such businesses, even going so far as to outright purchase them, to fulfill their needs.

The technique is simple; dump large amounts of criminal proceeds into the system, recording it in the records as sales, spread out over a period of time. If they are retail sales, create receipts and book them, for accounting purposes, as incoming cash flow. They will vastly increase annual profits, and duly pay all taxes as they come due. The net profits you end up with are cleaned cash.

A supplemental way to take additional profits out is to engage your people as commission salesmen on the income, and show them having a banner year, giving them fat commission checks each pay period, which they pay personal income tax on, after taking all lawful deductions, and coming away with seed money for legitimate investment, personal use, or opening a new, legitimate business where they can start the cycle all over again.

Traditionally, identifying cash-intensive businesses as laundromats has been extremely difficult, because where does an investigator or a compliance officer even start looking, assuming he has a suspicion that it is ongoing, such as linking a known carer criminal to a specific business.

The weak link is the inventory; you must prove that the company failed to purchase sufficient inventory to justify sales, and this requires an analysis of the company's payments for the goods they sold from wholesalers or manufacturers. It also demands that the investigator have sufficient knowledge of the profit margin of this type of company, as well as a good idea of their business plan.

Ordinarily, such calculations are beyond the capability of most compliance officers digging into their customers' bank statements, but things have changed with the advent of platforms powered by artificial intelligence, and employing machine learning. Such systems can extract the data, and advise whether there is a telltale gap between listed wholesale purchases, and retail sales reported. These tools will expose money laundering through cash businesses, and foil the laundrymen who have always been able to clean their clients' small denomination drug cash sales in this manner for decades.