Wednesday, May 31, 2023



There are multiple reports from Germany regarding fraudulent efforts by individuals concerning the recovery of German External Loan 1924 (Reichmacher) Bonds, which were stolen by Hungarian Arrow Cross (Nazi) officials in 1944 and 1945, when the true owners, Hungarian Jews, were sent to Dachau concentration camp and killed during the Holocaust. Most of Hungary's Jewish population was exterminated at the end of the war, and their assets looted from the two Jewish-owned banks, including bonds originally purchased to aid post-World War One German reconstruction. Many were killed and thrown into the Danube River, and are commemorated by the Shoes Memorial shown below. They were required to remove their shoes before their execution, to be taken by their killers due to wartime shortages.

The government of Germany is now redeeming these bonds for the descendants of the victims of the Holocaust, for a three year period, under the authority of the International Holocaust Recovery Agency, but there have been claims made by individuals who are believed to be descended from the Iron Cross members who took them nearly eighty years ago. These claims have no legal basis, but a number of companies, which exist to assist victims' heirs in application for redemption, have been attempting to cash in bonds for unqualified individuals linked to the Hungarian Nazis that obtained them during World War Two, by sending the owners to their death, either in Dachau or by execution in Hungary.

There is a significant amount of neo-Nazi membership in Hungary, which is reportedly supported by elements of the country's far right government, at the highest level, and members of the Cabinet are alleged to be involved in the fraudulent efforts to cash in millions of dollars in securities, which were underwritten by Bankers Trust Company of the United States. The successor to Bankers Trust is Deutsche Bank.

There are allegations regarding the involvement of INFORMACIOS HIVATAL, Hungary's intelligence agency, and of several sitting ministers of the government, in the efforts to collect on bonds, whose very possession for 80 years may incriminate the holders, as the theft of the bonds occurred in connection with War Crimes and Crimes Against Humanity. We shall be covering this matter in detail in subsequent articles, including the identification of individuals who we have found to be directly involved in fraudulent application for redemption, and their supporters and facilitators in Hungarian financial institutions, which willingly stored boxes of these stolen bonds for the war criminals who took them, and their descendants.  

The Bronze Shoes memorial on the Danube, Budapest

Tuesday, May 30, 2023



In today's risk-based compliance environment, with regulatory pressures increasing every year, isn't it time to consider ALL BVI corporations sufficient high-risk to redline (block) them? As a young associate handling Florida real estate transactions wealthy Latin American clients I was constantly faced with orders to facilitate the clients' purchases through British Virgin Islands companies. There was no way i could verify who was the beneficial owners of those companies, and whether the affluent clients were fronting for narcotics traffickers, arms dealers, or other transnational career criminals, but orders are orders.

I didn't for a moment buy their stories about wanting to hide their purchases from potential kidnappers in their home countries. I understood that they were, at best, tax cheats at home, but I feared that the ultimate beneficial owner of the luxury Miami property was either a career criminal, or someone sanctioned by OFAC, or under criminal indictment in the United States.

Above you can see just one more bit of evidence to support the proposition that to allow BVI companies to be part of any of your transactions is like shooting yourself in the foot. Taken from a recent New York Times article, "The Mystery of the Disappearing Van Gogh," it was part of a story showing that nobody really could determine who the true owner was of this Van Gogh masterpiece, but the transaction was approved nevertheless. Just where is the painting now? 

One of my forthcoming articles in the Tradecraft 101 series I am publishing here deal with money laundering through fine art and antiques, which was favored technique for moving wealth by my former narcotics trafficking clients, who religiously send representatives to Sotheby's and Christie's auctions each year in New York. Although some of the loopholes have since been closed, a sufficient number of them remain wide open enough for laundrymen to drive a truck through.

Getting back to the subject of BVI companies, any jurisdiction that literally runs arriving investigative journalists out of town, deserves to be blacklisted, irrespective of any weak regulatory action from abroad. I propose that any and all real estate transactions, and wire transfers, which are done in the name of an (anonymous) BVI corporation be blocked in advance. Return the money from whence it came, as you will never truly know who the beneficial owners are. If you have any doubts, look at the document above, and read the Times article.

 Given the statement made to undercover officers in the ANDREW FAHIE case, to the effect that there is major drug trafficking occurring in the BVI, with local facilitation by government officials, and that the UK Government came close to Direct Rule, due to rampant corruption there, the system is flawed, and it requires tough love to reform it from within. Let the word get out that you will no longer accept BVI corporations for any purpose, and let the major law firms that use that tool know it.

Monday, May 29, 2023


Tradecraft 101, my current series of articles that is attempting to raise the level of awareness among frontline compliance officers, has generated reader responses that confirm many of the advanced or esoteric money laundering techniques are unknown to the vast majority of individuals who are charged with recognizing bank customer financial crime in progress. During Transaction Monitoring, when the indicia of specific methods are present, a trained observer who has been properly briefed and trained will spot them in progress. A lack of such a knowledge base results in the individual glossing over, and thereby ignoring, the Red Flags of specific methods. It is a recipe for failure.

Is this why money launderers are successful 95% of the time? There simply has to be a reason for the historic failure of the compliance profession to ferret out money laundering in real-time. When I was tasked with full-time enhanced due diligence duties, at an investment firm which was the largest of its type in the world, I had no trouble spotting the laundrymen, because I worked from the perspective of knowing how they operate, and which methods they employed, as I had utilized many of them myself in the past, and was familiar with others that have since been created, and deployed, with a high degree of success.

Unless and until advanced tradecraft training classes, using realistic fact patterns as teaching aids, compliance officers will remain in the dark, when what is required is exposing them to the methods they can expect to see each day, so that they can identify them, and interdict those operations, before they are completed. I suggest using the Socratic method, which will stimulate critical thinking, through probing questions that cause the student to fully understand the material, as they must themselves reach out for the knowledge. It's time to properly educate our frontline compliance officers; give them the tools to succeed.

Sunday, May 28, 2023


If you read our recent article, Warning; Lawyers using Chat GPT unwittingly cited Non-existent Cases to Judge in Federal Court  (May 27, 2023), you know that at least one lawyer, if not more, and their law firm, face not only Rule 11 sanctions, but possible disciplinary action, which could affect their license to practice law. Yes, it's that serious, but let's peel back the onion a bit to ascertain the depth of the fault, and what should have been done in the first place to avoid it.

I well recall one of the first things we learned as new first-year law students in Legal Research and Writing class was the reference to West Publishing Company, under the topic "Attorney Key Number 44(2), ATTORNEY'S FAILURE TO RESEARCH AUTHORITIES CONSTITUTES GROSS NEGLIGENCE.That was enough to scare me, and many others similarly situated in that classroom, I am sure. 

One of the first things we learned in that class was how to Shephardize a case, meaning to use Shepard's Citator as a reference tool to determine whether a court decision we wished to use in advocacy had been upheld on appeal, and treated by other courts in subsequent cases, meaning was it still good law, and could it be relied upon to cite to a judge in support of a legal position advanced on behalf of a client.

This was before the age of the personal computer; back then, we manually searched for the relevant decision in the citator volumes, updating it as necessary with softcover supplementary monthly editions. This was a required task, because if a case had been criticized subsequently to being handed down, or worse, the principle it stood for overruled, or reversed and remanded on appeal, you did not want your opponent to educate the judge at a hearing to that fact, destroying not only your legal argument, but probably your credibility with that judge for a long time afterward. This would present a problem, as you would most likely be before that judge again in other matters. Now of course, modern online databases containing that information are readily available, BUT you still have an obligation to Shepardize (the term survives) the decisions you are relying upon.

The lawyer on the hot seat. in his affidavit, admitted using Chat GPT to supplement his legal research, claiming it was common practice:

"6. As the use of generative artificial intelligence has evolved within law firms, your affiant consulted the artificial intelligence website Chat GPT in order to supplement the legal research performed.

7. It was in consultation with the generative intelligence website Chat GPT, that your affiant did locate and cite the following cases, in the affirmation in opposition submitted, which this Court has found to be nonexistent:" Affidavit of Steven A. Schwartz, Roberto Mata vs. Avianca, Inc., Case No.: 22-civ-1461-  PKC (SDNY 2023).

If you rely upon a platform that employs artificial intelligence, it is necessary that you verify that the information is accurate, true and correct, if you plan to use that information for any purpose. Not only is it common sense, for professionals of any kind, consider it prudent as well as mandatory. what apparently happened here is that Chat GPT, when presented with a legal research problem, took the data available on the subject, as actually created court decisions favorable to the lawyer's position. The fact that these citations to authority were fictional was not a concern to the program, creating the legal and professional nightmare for the lawyer, who failed to check (Shepardize) the accuracy of the Chat GPT research, at which point he would have learned that the cases it gave him do not exist. I fear for his future, as Federal District Court judges can be harsh with Rule 11 violations.

Today's lesson: whether you are a lawyer, compliance officer, or simply researcher looking to use AI to  provide a solution to your issue, check the results carefully, before deploying them anywhere. Artificial Intelligence is an amazing tool to access data and information not otherwise accessible or available, but in its zeal to assist you, it might also provide you with something not entirely accurate. Trust but verify, please. It will help you avoid sleepless nights, like those that attorney Schwartz is most certainly enduring now, in anticipation of that upcoming hearing in Federal Court. 


Saturday, May 27, 2023


If you thought that money launderers seeking to transfer their clients' criminal profits abroad might consider the use of Hawala, the alternative transfer method that uses networks of cooperating individuals at both ends of a transaction to effectuate movement outside the financial system, think again. Money launderers know that, should Hawala participants be interrogated by law enforcement agents, they will give up each and every detail of transactions, to avoid being charged with money laundering conspiracy. it's judged to be too risky for large sums of client money.

A second consideration is that laundrymen instinctively do not trust anyone outside their organization, and that of their most important clients. Their circle of active business associates is generally small, and limited to others in illicit occupations, that they feel they can trust. Call it paranoia, but their culture discourages exposing themselves outside their trusted circle.

So, how do they take advantage of alternative  means of international transfers? For want of a better term, I call it the Swap. Money launderers often clean the proceeds of crime for several unrelated organizations, and these groups are often are at different stages in their operation. Some have been at it for years successfully, yet others are just now earning substantial amounts, as they develop and expand.

Experienced criminal organizations often have many millions of dollars already in multiple bearer share corporation accounts in the offshore tax havens. On the other hand, newer organizations have not yet had their cash cleaned and exported abroad. Sometimes, experienced criminals find that they need immediate access to a portion of their laundered money on deposit abroad, but do not want to risk seizure and exposure in repatriating it. At the same time, newer groups want to move their cash abroad.

Money launderers who work for both groups are often presented with the different needs of both the older  established organizations in recovering some of their money, and the new groups who want to move it offshore into safety. The laundryman then acts as an intermediary. He passes the cash from the newer client to the older client, and gives the newer client credit overseas at a tax haven for the same amount, withdrawing it from the older client's account, or giving him an account fully funded.

No money transits the global banking system; no cash is smuggled onshore or abroad. There are no records or other evidence to incriminate either organization. Call it the money launderers' version of Hawala, but with a twist. No outside intermediary is employed, and thus risk is kept to an absolute minimum. I can tell you from personal experience that all parties are quite satisfied with the outcome, and since no funds enter the global banking system, investigating this type of transaction us rarely successful.


Note to compliance officers, NEVER assume that any legal material, especially citations or extracts from court decisions, that you find through CHAT GPT, or any other similar product, are real, unless you actually find the cases, citations and quotes, using traditional Westlaw or  Lexis through conventional legal research techniques. If you cite or quote to a source that turns out to be bogus or fiction created by the program, there will be personal consequences, if the facts show that the cases do not exist.

Read this Order to Show Cause below, and imagine what is most likely going to happen to the lawyer who took a shortcut by depending upon Chat GPT for his legal research, when the scheduled hearing occurs. He may also be liable to his client for professional negligence, also known as malpractice. The case is a personal injury action, filed by an individual who alleges he was hurt during an Avianca flight. What if the lawyer's negligence contribute to the dismissal of the case?

You will note that, more often than not, I actually place the relevant portions of court cases i am reporting at the end of my articles. Compliance officers who are not attorneys may wonder why I do that. It is to provide the reader with proof that what I am reporting on consists of accurate information. Under no circumstances are you to rely upon Chat GPT for any material that you have not personally verified and vetted, if you want to keep your job, and avoid being a defendant in expensive civil litigation.



A court in the Republic of Malta has set aside a €373.000 fine imposed by the FIAU, the country's financial regulator, against INSIGNIA CARDS LIMITED, which was for serious AML deficiencies, on what appears to be debatable due process grounds. That is just one of the many ways that entities, including financial institutions, escape accountability for their sins, on the orders of corrupt leaders who wish to protect their own, and to encourage illicit flight capital to continue to migrate to Malta.

A quick examination of Insignia, a card issuer which catered to high net worth clients, showed that the company never verified either Source of Funds, or Source of Income. It also issued cards to known PEPs, even those with corruption histories, and did business with clients from countries designated as State Supporters of Terrorism. You may access the FIAU Administration Measure Publication Notice here. 

When cases are actually filed on financial crime, and money laundering, charges, the Prime Minister-appointed Attorney General sees to it that procedural errors, or technical pleading mistakes, or missed deadlines, all insure that the guilty will be acquitted, if not the case be dismissed before trial. When both prosecutors and the judiciary owe their jobs to the ruling Labour Party (PL), nobody dares allow a conviction of PL supporters or allies to occur. 

If you are considering accepting a substantial wire transfer from Malta, insist upon a sworn statement, executed before a consular officer at your embassy, NOT a local notary, detailing Source of Funds and Source of Wealth/Income, to insure that you later don't get named as a co-conspirator in a criminal case abroad. To do any less is a mistake; it can be a fatal error.



One of my sources in Dominica notified me this week of the unexpected arrival at Douglas-Charles Airport of what appears to be an entourage including  Saudi prince on a Bombardier Global 7500, owned by the Maltese business jet company, VistaJet. The visit was deemed unusual because, unlike the 2022 visit of Ahmed Al Khateeb, the Saudi Minister of Tourism, and other officials, there was neither advance publicity, nor was a press conference called during the limited period that these individuals were in Dominica. The agenda that day was reportedly confined to a meeting with Dominica's Prime Minister, Roosevelt Skerrit, referred to by many in the global compliance community as the Joseph Muscat of the Caribbean, due to his alleged corruption. It does not appear to be a trip with a diplomatic theme.

A Challenger 7500

The curious aspect of this visit, and the probable reason that he and his team arrived without warning at 1400 local time, on May 24th, according to another source is that he first landed in Barbados, with the reported reason of obtaining a private meeting with Prime Minister, Mia Mottley. According to the source, whatever his business reason for the trip, he was referred to Roosevelt Skerrit, hence his late arrival in Dominica, and lack of proper advance notice protocol.

Although details are not available, both Malta and Dominica operate Citizenship by Investment (CBI) passport sales programs, offer tax haven advantages on corporate tax rates, and quietly sold diplomatic passports to foreign nationals not engaged in diplomacy; Barbados does not have a CBI program. When additional information on this matter becomes available, we shall update our readers accordingly.


If there ever was a reason for compliance officers to jump feet first onto the Artificial Intelligence bandwagon, it is the adaption of AI-powered platforms by career money launderers to create new methods and techniques, to explore and exploit in places where they are not known to have gone before. While compliance is using AI as a shield, in both client onboarding and transaction monitoring, laundrymen will be employing it to expand their horizon into previously uncharted territory.

 Such actions must be taken as already a reality, given their long history of early use of emerging technology. Remember, law enforcement and the intelligence services have been using AI for some time, so you can expect that enterprising money launderers, who are extremely attentive to, reflexively respond in kind to new techniques employed by their government opponents. In short, they adopt law enforcement techniques as their own, as a matter of survival, to avoid detection and arrest.

While the different ways in which launderers can use AI, two specific subjects come immediately to mind:

(1) The penetration of new types of legitimate industries, going where they have never been before, to piggyback on them like parasites, employing them to move and clean the proceeds of crime. AI inquiries can reveal the little-known "tricks of the trade," characteristics of a specific industry or field that can be exploited to move dirty money. Such facts, which are known only to insiders in that type of business, can provide a loophole which laundrymen can drive their operation into, and through, successfully. Both law enforcement and the compliance community will be blissfully aware of the use of those types of businesses or industries.

(2) The use of obscure and generally unknown facilities and jurisdictions abroad which can be accessed with a high degree of  success, as nobody has tumbled to them in the past. Opaque tax haven, bearer share or confidentiality provisions hidden in otherwise stable places, or newly-emerging possibilities that have recently appeared, and are not known. Look for AI to find new jurisdictions abroad to operate in, as its information-seeking ability will find "opportunities" for criminal conduct in new places.

Therefore, inasmuch as you must assume that laundrymen are hard at work breaking new ground, and assuming that you are not already where they are, it is required that expanding the compliance horizon with Artificial Intelligence, so that you can not only recognize new trends, but can suppress them in real-time. To do any less places you behind the eight ball, which will probably be considered, sooner or later, as compliance malpractice. Find those new roads before the money launderers use them against you, please.

Friday, May 26, 2023


As a Vietnam veteran, I have noticed that most people use the Memorial Day holiday for fun & sun, often participating in barbecues and visits to the beach. When I have attended observances of the day, I find very few people in the audience. Usually, it's only the veterans themselves who show up. Everybody else is AWOL. 

Let's remember why this is a national holiday. Soldiers, sailors and airmen gave their lives so that we can have the freedom to enjoy the day. They will never be able to go to the beach, and be with family, ever again, and their absence is especially noted on this holiday. Do not forget their sacrifice; remember them this day.

Thursday, May 25, 2023


Most compliance officers are, we hope, familiar with garden variety trade-based money laundering techniques, where laundrymen piggy-back dirty money on board legitimate international trade payments,using a variety of schemes, betting correctly that nobody will tumble to what they are doing. Generally, they are successful, as the huge volume of payments for international trade makes it doubtful that compliance officers, or law enforcement agencies, will discover their activity, and freeze the funds.

However, in the event that law enforcement does decide to closely examine specific transactions, it often is able to quickly determine that something inconsistent or suspicious is occurring, and is able to penetrate the scheme, whether through analysis of the transactions, interviewing persons who are wittingly or unwittingly facilitating the TBML technique, or just diligent investigation of front companies and shells.

Money launderers are nothing if not adaptive; they quickly react to law enforcement methods and techniques, and there is an advanced variation on TBML that they are known to create, which is quite difficult to decipher. Rather than rely upon the facilitation of legitimate co-conspirators, or totally bogus or phantom real-life shipments, it involves setting up a real brick-and-mortar business, through which to move millions of dollars each month, as needed.

The laundrymen set up two small factories or distributor facilities, one in the US and another in the country where they need to move the proceeds of crime. Shipments of goods, in either direction, occurs, with all the supporting evidence, up to and including the payment of duty. The products imported into the US are worthless, or close to it, but listed as quite valuable, justifying the wire transfers of large sums monthly, for so long as the laundrymen wish to operate the technique. Neither Customs nor any other agency can find any defects in the method, due to its real life aspects. A visit to the "factory" confirms its real life existence and operation. Think of the movie The Sting. It survives the smell and sniff test, when a banker conducts a visit, or law enforcement does a drive-by.

Alternatively, valuable goods are exported abroad BUT listed as having nominal worth; they are sold off upon arrival abroad, putting the proceeds in the hands of the laudnrymen's clients.Unless the goods exported are actually intercepted and opened, and appraised for their true value, the method escapes detection.

There are other varieties of this version, and the laundrymen often resort to changing the game to them, to fool law enforcement, and bank compliance officers, who believe these are legitimate transactions. After a short period, the entire scheme is dismantled, and the laundrymen go on to another advanced scheme. Meanwhile, they have successfully sent millions to their narcotics trafficking clients without incident.

Wednesday, May 24, 2023


KADEEM STEPHAN MAYNARD, alleged to be a BVI drug trafficker, and a co-defendant of former BVI Premier ANDREW FAHIE, has notified the US District Court in Miami of his intention to change his plea to guilty, which is most likely bad news for Fahie, as Maynard has previously disclosed that he has incriminating information and evidence against Fahie, who is looking at what will effectively be a life sentence for drug trafficking and money laundering, if he is convicted at trial.

Maynard, alias Blacka, who was charged with one count of drug trafficking and two of money laundering, most likely has arrived at a favorable plea agreement with the US Attorney's Office. Claiming to be "self-employed," the defendant owns both an aircraft and a boat, and is believed to be a career criminal engaged in drug smuggling into and through the British Virgin Islands, as well as narcotics trafficking. His mother, OLEANVINE PICKERING MAYNARD, the BVI Port director, remains in custody, and will be going to trial with Fahie.

While rumors persist that Fahie is negotiating a plea deal with prosecutors, this new development means that Maynard will most likely be a major witness against him at trial, and the audio and videotape evidence, plus testimony by an undercover US law enforcement agent, as well as a Confidential Informant, gives the government a very strong case. 

Why he hasn't pled guilty to date remains a mystery; should he do so, he will be required to implicate all those other corrupt BVI officials with whom he has engaged in the facilitation of drug trafficking. The United Kingdom, which narrowly avoided instituting Direct Rule over the BVI last year, due to rampant corruption, might then proceed to sack all local officials after learning who is dirty in Roadtown, so that may be an issue with Fahie, preventing him from cooperating. If he goes to trial, his sentence could be longer than his life expectancy.



Regarding the advanced and esoteric techniques used by career money launderers, I have more than fifty in my bag of tricks, acquired during my decade in the business, or picked up from a number of sources as current operational methods. Unfortunately, time does not permit me to detail all of them here. The only way that would be possible would be to drop everything else for a month or more, so I will cover as many as l believe frontline compliance officers are most likely to encounter, time permitting.

There is just do much content that is either generally unknown, or never shared by law enforcement with the private sector, as most law enforcement agencies are content to just monitor these advanced operations, in the hope that it will lead them to kingpins and significant pipelines.

If just one of these articles results in the real-time identification of a sophisticated money laundering network operating through your bank, then they have served their purpose.

Tuesday, May 23, 2023


Register Number: 03151-104
Age: 52
Race: White
Sex: Male
Located at: Miami RRM
Release Date: 09/21/2023

A decade ago, we briefly covered the case of a fraudster who had exploited many victims from his base in Miami, in our article entitled HSI Shuts down Ponzi Scheme in Miami (May 10, 2013) We see that the defendant had the audacity to seek Compassionate Release from custody, due to his many medical issues, and display below the Court's response to his motion. Note the Court's reasoning; he fled to Venezuela for two years, demonstrating an abject lack of remorse. 

As you can see above, he is somewhere in Miami at a halfway house, and is due to be released in September, having served all of his sentence. We are publishing this for the benefit of his victims, whom we hope will derive some satisfaction from the Order on Compassionate Release. 


The advent of effective AI platforms, with machine learning capability, has been a game-changer regarding the ability of compliance officers to uncover information heretofore unavailable to them, regarding unusual and complex money laundering typologies. One of these methods, which has been extremely difficult to expose, is laundering through the secondary market in life insurance, more commonly known as Life Settlements. having served as an outside compliance officer for companies in  this industry, I can personally confirm this dilemma, but AI programs, which can cut through the interference that always defeated compliance officers in the past, and identify the bad actors, are making a difference.

To explain this method, I am reprinting in full, below, my original 2019 article, for the benefit of those compliance officers unfamiliar with the subject.

Due to a question received, concerning our article discussing the recent decision of the New Jersey Supreme Court, holding that Life Settlements are void under state law, for lack of an Insurable Interest*, we will discuss how money launderers use that type of investment to clean the proceeds of crime.
Life Settlements are investments in high value life insurance policies of elderly insureds who generally have chronic health problems, and are selling policies they no longer need or can afford. The investors usually purchase a policy from a broker, at a substantial discount, and receive the payment, as beneficiaries, when the insured passes away, and the policy matures. They are responsible for paying the premiums during the remainder of the insured's lifetime, and companies handling the sale of life settlements to investors escrow sufficient funds to cover that expense, based upon the assessed life expectancy of the insured.

Since many insured pass away, due to illness, in advance of their estimated life expectancy, the profit can be substantial, and far above what are regarded as normal Returns on Investment. Many large German banks and American billionaires are known to have large numbers of life settlements, mainly in the multi-million dollar range. The highest return that I ever saw was 75%.

When US law enforcement boarded a drug-laden vessel in the Pacific Ocean, intercepted before it could reach the United States, they found evidence in the pilot house that the traffickers had purchased a substantial number of life settlements from a Colombia-based broker.

If you were wondering how dodgy individuals seeking to launder the proceeds of can collect from America's largest insurance companies, here how it is done. Most of the high value insurance policies are, for tax, financial planning, or privacy purposes, owned and held in the name of trusts and corporations, who are also the beneficiaries. Money launderers buying the policies for clients simply substitute themselves, or their customers, as beneficiaries of the trusts, or shareholders of the corporations owning the policies. There is no change of ownership of the policies themselves with the insurance companies. Nobody at the insurance company has reason to learn about the sale of the policies.

When the policies mature, the insurance companies pay out to the entity that owns the policies, not knowing that the ultimate beneficiaries are criminal elements, or their nominees. Given the fact that most banks trust that any life insurance benefits check they receive was issued to a beneficiary long ago vetted and approved by the insuror, they never question it. After all, would any insurance company make payment to a beneficiary if there was a question of any sort ?

Of course, the laundryman has already set up an account to receive the insurance proceeds payment. Given its legitimate origin, the money is now clean, and available to be invested in the legitimate economy. Bankers need to look closely at life insurance policy payments, for things are not always what they seem to be.

* New Jersey Supreme Court holds Life Settlements violate State Law

Monday, May 22, 2023


This is the first part of a new series detailing advanced and obscure money laundering techniques that are generally unknown to frontline compliance officers, and are a major reason why money launderers are successful 95% of the time, if not more. We have noted that most compliance departments have failed to train their staff adequately in the techniques (Tradecraft) they will encounter. Hopefully, this series will fill some of the gaps in their education on an advanced level. 

Most bankers are are aware of domestic product diversion, where produce being shipped from Florida to Arkansas is diverted to New York or Los Angeles where it will command a higher price, or where luxury goods that are supposed to be sold only in premium shops are diverted, and sold, at a price below the customary retail price, in big box stores.

International product diversion is another matter, and in many instances, it constitutes criminal activity. A Fortune 500 company, anxious to develop a new foreign market for its product, will export it to a local wholesaler, at a bargain level price, stripped of all marketing, and advertising costs, just to create demand for the product in a new region. Also, products that are close to their listed expiration date may be quickly shipped overseas at a greatly reduced price, just so the manufacturer can recover its costs, before the product is no longer eligible for retail sale to consumers.

Criminals are aware of this practice; they set up shell companies, charities, bogus educational entities, all to entice large manufacturers to sell them their products at extremely low versions of the price they go for in the United States. Then, they perform one of these operations.

(1) They arrange for the goods, already shipped abroad, to be returned to the US, by diverting them at an intermediate port, and quietly sell them here for the full domestic rate. The interesting thing about this maneuver is that they come in as "Returned US goods" free of duty. Some call this a U-Turn.

(2) They totally fail to export the goods, covertly substituting a worthless item of similar weight at the US port, and keeping and selling the goods here.This, of course requires the assistance of either corrupt warehouse staff or other co-conspirators to divers and/or relabel the packages containing the rewal goods, in order to to spirit away for domestic sale.

(3) They sell only a small portion of the goods abroad, and return the vast majority of the product to the US, where it commands a premium price.

Some US-manufactured goods use foreign raw materials, and Customs rewards manufacturers who export finished US products using them by granting rebates on duties paid for the raw materials; these are called Drawbacks, and when criminal elements illegally return goods where Customs has paid Drawbacks, they are guilty of defrauding the United States, in addition to all the false statements and false record keeping offenses that they have committed by altering the shipping documents.

Money launderers, who need to repatriate criminal profits earned outside the United States, and in the process render them clean, have been known to participate in international product diversion, in order cleanly move their money inbound. Unfortunately, most compliance officers, unless their bank clients are engaged in international trade, are unfamiliar with international product diversion, and even those are  generally not aware that laundrymen are using those methods, sending payment for those good in from overseas, without arousing suspicion, and then actually earning a handsome profit on their "investment" when they resell the goods inside the Continental United States.

Along with trade-based money laundering, the education of compliance staff about international product diversion should be a priority. Here is a portion of a landmark federal case on the subject; note that the AUSA artfully educated the Court in the method employed by the laundrymen running their international product diversion.

For further information on money laundering tradecraft:


If you are a director of compliance who is considering sending frontline compliance staff to any of the AML/CFT conferences in South Florida this fall, you need to think again. The state's far-right anti-immigration and minority governor and legislature have enacted a law that greatly increases not only the risks to your staff, but to you as well. Do you have Latino staff members? Please read on.

First of all,you must, immediately, secure written evidence from anyone you might consider sending to a Florida conference of their legal status. That means a copy of their enhanced due diligence driver's license, if you live in a state where one must be a citizen to hold a license. If not, a copy of the staff members' legal residency ID. This is because there are now serious restrictions upon individuals who are undocumented regarding travel. Their out-of-state driver's licenses are no longer valid, meaning they are subject to arrest and detention. do you really want a call at 3 AM from some local jail, begging you to assist in obtaining a bond? we doubt it. A Latino advocacy is publicly warning of the consequences of being in Florida as an undocumented person; take this seriously, please.

Next, you personally can be liable in Florida if you facilitate travel of an undocumented (illegal) alien. While it is not yet clear what you might be subject to, this kind of exposure to risk must be avoided at all costs. Finally, due to new policies in Florida, the NAACP has warned African-Americans not to travel to Florida, under any circumstances.

Therefore, secure proof of citizenship or legal residency from ALL your staff members now, no matter what they appear to be. Then, conduct a risk assessment on anyone who might be going to Florida, make sure they have (1) proof in hand on their person, and (2) information regarding a bail bondsman you have made available to them to contact, in case they are detained anyway.

You are advised to consult with legal counsel on this issue, so make that individual aware of the potential risk to your staff, and possible preparation in the event there is trouble. You may also want to consider avoiding those Florida conferences altogether. Protect your staff, because jail and possible deportation is no joke.