RED STAR OVER THE CARIBBEAN MEANS INCREASED RISK FOR AMERICAN BANKS

 

When you see a significant sign, pay attention and heed its message. I remember encountering such a sign once; I saw it coming up ahead on the right. Crudely painted, it declared: SHORTCUT TO COSVN HEADQUARTERS, COURTESY 544 ENGINEERS. Behind it was a burned-out armored cavalry assault vehicle, just like the one I was riding on at that moment. If you are not familiar with that acronym, it stands for the Central Office for South Vietnam, meaning the headquarters of the North Vietnamese Army in Cambodia, where there were an estimated ten thousand enemy soldiers.

The sign indicated to me that we were now at the threshold of the international frontier between Vietnam and Cambodia, a redline which was being crossed due to Richard Nixon's declared intention to widen the war, and take it into the heart of the enemy's Cambodian sanctuary. That sign had an impact upon everyone on board, because we knew not everyone would be coming back from our destination. Fifty four years later, I still remember that moment.

I have the same feeling about the allegations contained in MSR Media SKN Ltd. vs. Les Khan, the RICO Complaint asserting that a Chinese-controlled company that has been awarded thousands of St. Kitts and St. Lucia Citizenship by Investment (CBI), or economic citizenship, passports, has been selling them abroad at ilegal discounts & knowingly accepting fraudulent identification from applicants, who are now using those valuable identity documents to commit financial crimes in the United States. The phrase "Clear and Present Danger" has often been abused, but in this case, it is spot on, regarding American financial institutions, and the risks that now threaten them, due to the existence of these passports, which have shown up repeatedly in the hands of bad actors. Some have been arrested here, but what about all the others? America is totally exposed.

Given the complete and total lack of cooperation, and even dilatory actions, by the elected leaders of these two East Caribbean states, American banks will be unable to identify the holders of these illegal identity documents, and are at serious risk of being targets for financial crime, sanctions evasion, terrorist financing, facilitators of industrial espionage, and even National Security threats.

Given that it will be impossible for frontline compliance officers at U.S. banks to combat this developing threat in real time, each must consider immediate measures to insure that their bank does not fall victim, due to the distinct possibility that they could be disciplined by American regulators, named & shamed publicly in the press for allowing Chinese criminals to exploit their financial institution with impunity, or even face criminal charges in a massive money laundering indictment.

Remedies under consideration should include:

(1) Giving serious thought to recommending to bank management to close all correspondent accounts with St. Kitts & Nevis and St. Lucia banks.

(2) Conducting a lookback on all accounts, and all recent transactions, involving those two countries.

(3) Blocking the opening of any and all new accounts from those two jurisdictions.

(4) Conducting comprehensive training of compliance staff to acquaint them with all possible methods through which these passports might be used to commit financial crimes through the bank.

These are, I agreem radical steps, but given the fact that Chinese bad actors have been able to penetrate the American financial structure at will, and with the current strict US regulatory environment we live in, all risk-based compliance programs may have no choice to effectively counter these emerging threats.