HOW STRESS CHANGES THE APPEARANCES OF FINANCIAL CRIMINALS

Pilatus Bank officer Antoniella Gauci now

Take it from one who once had to fear the midnight knock on the door from law enforcement, being a target of a criminal investigation is high stress, and it quickly ages a person in such a situation, due to the constant nagging belief that arrest is imminent that they are under. You don't get very much uninterrupted sleep, and keep waking up in the middle of the night, in a cold sweat.

 Look above at the current photograph of Pilatus Bank officer ANTONIELLA GAUCI, and compare it to an earlier photo of her, which appears below.

Antonella Gauci then

Now look at a recent photo of former Malta Prime Minister JOSEPH MUSCAT, and then him before his resignation in disgrace:

JM  now (terrified of what is coming straight at him)

JM then

Both of these individuals have  definitely aged, due to the ordeal that they are presently enduring. From my perspective, the sooner they submit to justice, and pay their debts to society, even if it means years of imprisonment, the better for their mental health. They need to pay for their crimes, to remove the burden from their shoulders, to be able to move forward with their lives, with consciences cleared. Confession cleanses the soul. 

 This is the message we have heard from him and proclaim to you, that God is light, and in him is no darkness at all.  If we say we have fellowship with him while we walk in darkness, we lie and do not practice the truth.  But if we walk in the light, as he is in the light, we have fellowship with one another, and the blood of Jesus his Son cleanses us from all sin.  If we say we have no sin, we deceive ourselves, and the truth is not in us.  If we confess our sins, he is faithful and just to forgive us our sins and to cleanse us from all unrighteousness.  If we say we have not sinned, we make him a liar, and his word is not in us. 1 John 1:4 

THE USE OF AI AND MACHINE LEARNING TO IDENTIFY MONEY LAUNDERING AT CASH-INTENSIVE BUSINESSES

 

When most bankers think of money launderers, they generally envision sophisticated international operations, complete with secretive offshore banks located in dodgy, corrupt foreign tax havens. While this certainly is one of the principal activities that money launderer engage in for their clients, many of the operations are also conducted locally, closer to home, and they are far from glamorous. I am talking about domestic money laundering. through cash-intensive businesses.

Here's how it works:
1. You find a cooperating (meaning greedy) business owner of a company that accepts a large percentage of their sales in cash for one reason or another; such as tradition, corporate culture, issues specific to that industry. Companies with serious cash flow issues are also good targets.

2. The company then is funneled, periodically and consistently, your criminal cash, which is added to the daily receipts and booked just like the real sales. The corrupt company owners receive cash for their participation. 

3. You dummy up sales records to match the additional payments. You might even work out something with a supplier to create false deliveries from your wholesaler to support those new "sales' or you falsify document purchases, so that incoming products are sufficient to back up outgoing sales.

4. A representative of the criminal client signs on as sales rep, on straight commission, and receives substantial income, which is all duly reported to the IRS, and taxes paid, legitimizing his income.

5. Alternatively, You designate a criminal client to be a partner in the venture, and he takes out substantial profits quarterly, pays his taxes, and has clean money at the end.

6. Run the operation for a number of years, and then have the business shut down, after both the legitimate owner and your criminal clients have accomplished their financial goals. You might even have a fire, or a theft or destruction of business records to conceal the evidence from future investigations.

Now, however, using an Artificial Intelligence platform, with machine learning, a review of what previously are confusing and disjointed records can result in the display of a pattern that will alert investigators or compliance staff to evidence that that they have tumbled upon a laundering enterprise embedded within an operating, legitimate cash-intensive business. 

The machine learning feature will cobble together what to the untrained eye is normal unconnected data, and develop patterns from the data that are not recognizable to an investigator, or will uncover data that show activities inconsistent with that type of trade or business. A result will be extracted and synthesized from the data by the program, indicating money laundering.

                                             For further information

DID YOUR NEW CHINESE CLIENT FUND HIS ACCOUNT WITH LAUNDERED COCAINE PROFITS FROM AMERICA?

If you have been following the news, you know that US law enforcement has focused upon what I can only describe as the Chinese Black Market Peso Exchange. Mexican cartels, needing to convert cocaine sales profits earned in America, have turned to a Chinese money laundering pipeline that can solve their problem. Pay attention, please; The devil is in the details.

1. Cocaine profits earned by the Cartels on the streets of the United States are turned over to the Chinese laundrymen in any one of our country's densely populated Chinatowns.
2. The Mexican branch of the Chinese organization then disburses Pesos to the Cartel down South. Consider this operation the BMPE with Hawala characteristics, as funds transfers are conducted internally by the Chinese launderers off the banking grid, through alternative and unconventional techniques.
3. Wealthy Mainland Chinese who desperately want to move their funds abroad, face serious currency controls regarding US Dollars. They turn to the Chinese laundrymen, much as the Colombian businessmen, who need Dollars to purchase goods in the U.S, do.
4. the Mainland Chinese turn over their Chinese currency inside China to the laundrymen's rep there, and they later receive dollars within the Continental United States. It's merely a variation on the old BMPE, but without Panama. 
5. The Chinese organization, using their own version of Hawala, executes the appropriate transfers among their members in the USA, China, and Mexico.
6. When the Mainland Chinese clients arrive in the US, they receive the Dollars that they need to place wealth outside of the reach of China. Of course, they are receiving laundered criminal proceeds, cleaned drug profits.

WHY IS ALL THIS IMPORTANT?
If you are a compliance officer at a major US Financial institution, which accepts substantial cash deposits from Chinese nationals, as new clients, you need to know:

(A) What is the Source of Funds? Given that it is illegal to move large amounts of US Dollars abroad, exactly how did the new client acquire all those greenbacks? The answer may disqualify the individual then and there. Otherwise, can you say Willful Blindness three times?

(B) What is the Source of Wealth? Can the client give you details obit how he or she earned that money? Is it the proceeds of Corruption, white collar crime, or some other illegal enterprise? You need to be extremely careful, lest you accept dirty money. 

Unless the new clients cannot give you satisfactory answers to the above two questions, do not accept him or his money. I don't care what the people in New Accounts want, it's your neck if it turns out you facilitated the Chinese Variation of the BMPE.

THE GOVERNMENT FILES ITS BRIEF BEFORE U.S.SUPREME COURT IN HALKBANK CASE

The Department of Justice has filed its Brief of Respondent in the Halkbank case presently pending before the U.S. Supreme Court, the justices having accepted the bank's Certiorari petition. Extremely thorough, it appears to cover all the issues and sub-issues that have been raised in the bank's brief, and in any of the Amicus briefs. 

The principal issue, as framed in the US brief is:

QUESTION PRESENTED

Whether petitioner, a commercial bank, is categorically exempt from criminal prosecution by the United States for violations of numerous federal criminal laws, on the ground that a majority of its shares are owned by the Turkish government.

For those readers who do not have the time to review the 62-page brief, here are the points it makes:

1. The US District Court had jurisdiction to review the case against Halkbank.

2. Federal law does not except the bank's offenses from criminal jurisdiction.

3.  There is no extraterritorial rule precluding US Courts from exercising jurisdiction over foreign government-owned corporations, for violations of US criminal law.

4. Foreign government-owned corporations have no immunity for commercial activities within the United States.

5. US Common Law does not recognize foreign sovereign immunity were the Executive Branch determines it unwarranted.

6.. The Foreign Sovereign Immunities Act (FSIA) does not immunize the bank from criminal prosecution.

7. The FSIA does not apply to criminal cases. Its text, structure and history demonstrates that it is exclusively applicable to civil actions.

8.The FSIA was not designed to address criminal cases.

9. Neither precedent nor policy supports the bank's readings of the FSIA as implicitly barring criminal prosecutions.

10. the Commercial Activity exception applies in any case in which the FSIA itself applies and the exception's terms are met.

11. The prosecution in this case falls within the Commercial Activity exception.

We are following all developments in this case of great public interest, and shall update our readers accordingly.

SENTENCING SCHEDULED FOR FORMER VENEZUELAN MINISTER CLAUDIA DIAZ GUILLEN

 

The Court has set the senencing for ClAUDIA DIAZ GUILLEN for February 21,2023, in Miami (SDFL).

TRIAL JUDGE ORDERS CLASSIFIED INFORMATION DELETED FROM DISCOVERY IN ALEX SAAB MORAN CASE

The judge in the ALEX SAAB MORAN case has granted an ex parte, sealed and in camera Government motion, and authorized the deletion of classified information that "is not relevant and helpful to the defendant" from the Discovery which must be produced to the Defense.

SSSSSSS

THE USE OF EMERGING TECHNOLOGY TO END DERISKING

One of the most pressing problems in international banking, from the perspective of financial institutions located in the developing world, is Derisking. The ongoing cancellation and termination of vitally important correspondent banking relationships in North America and Europe held by banks in the Caribbean and elsewhere abroad, due to decisions made onshore pursuant to risk-based compliance programs, directly threatens the actual existence of banks whose customers depend on access to the mainstream financial structure of the developed countries, for international trade and commerce.

 Without direct access to American and European banks, the purchase of imported goods through access to the Dollar, Pound and Euro for trade becomes not only more expensive, it approaches the point where the cost is prohibitive. Imagine how you would feel, as an importer abroad, or any individual or company with financial intercourse with firms in the United States or the United Kingdom, if you could not do business? You would certainly desert your local bank in an instant, for a nearby branch of a New York or London bank in our jurisdiction. The result might be that your local bank, being unable to compete, would fail.

While we totally understand the reasons behind Derisking, ultimately it is bad for business. Local markets abroad can be negatively affected if the increased costs of indirect access to the onshore financial structure make goods too expensive for consumers in a market-driven economy. Clearly, something has to be done, before banks in the Caribbean and elsewhere lose all their correspondent relationships, as appears to be a distinct possibility in the not too distant future.

Enter AML/CFT compliance programs employing Artificial Intelligence and machine learning; banks abroad can employ such platforms, which will elevate the effectiveness of their abilities to interdict money laundering and financial crime to the point that there is sufficient assurance that those wire transfers from banks in dodgy jurisdictions can be declared safe by the world's major banks, which operate in a risk-based environment, and demand that their respondent banks do the same. 

Adopting compliance systems in those banks in the developing world that use AI and machine learning to identify, and interdict, on a real-time basis, financial crime, can supply sufficient protection to satisfy even the most demanding compliance department of a major international bank, as such a platform will not only be able to catch the money launderers, its evolving nature will uncover and discover any and all countermeasures devised by the laundrymen seeking to find flaws and opportunities, because machine learning will match their moves, and unmask them, and their transactions. 

When banks in New York or London need no longer worry about the quality of compliance in banks abroad in high-risk jurisdictions, Derisking will become a thing of the past. It is high time that bank executives that have been watching all their vital correspondent relationships in New York evaporate get on board with platforms that are powered by AI, and employ machine learning, to ferret out potential financial crime, so that they can keep those correspondent accounts operating, without fear that they will be terminated.

                                                                    For more information

JURY VERDICT AGAINST CLAUDIA DIAZ

 

$10m REWARD: SAIF AL-ADEL, AQ LEADER BEHIND ATTACKS ON U.S. EMBASSIES IN AFRICA

 

ALEX SAAB MORAN ATTEMPTS TO KEEP THE ALTERED DOCUMENT BEHIND HIS BOGUS DIPLOMATIC STATUS FROM BEING EXPOSED AS A FRAUD

If you have been following the unfolding events in the money laundering case of  ALEX SAAB MORAN, you know that the Government has asserted that the Government of Venezuela altered official records to make it appear that Saab Moran attained diplomatic status some years ago, and that duplicates of such records, which exist in our Library of Congress prove that Saab was definitely not appointed to be a diplomat at the time and date alleged by his attorneys. The US concluded that someone acting on Saab's behalf doctored Venezuelan records to backdate his purported diplomatic appointment, which is a fraud upon the court.

Saab's attorneys have filed a Motion in Limine, seeking to obtain a court order excluding the expert testimony of Government witness Samuel Marple. Mr. Marple will testify as a computer forensic expert regarding his examination of computer data, involving the information reportedly altered in the Venezuelan official government bulletin Gaceta, which Saab is using to prove he has been a diplomat for Venezuela for several years. Marple intends to prove that the evidence shows the records were altered recently, to favor Saab.

 They have made a purely procedural objection; namely that the defense didn't have sufficient prior notice of Marple's expected testimony before the hearing on diplomatic immunity, and that the subject of Marple's testimony is not relevant to the subject matter of the motion being argued. 

CLAUDIA DIAZ, VENEZUELA'S TREASURER UNDER HUGO CHAVEZ, FOUND GUILTY OF MONEY LAUNDERING IN FLORIDA FEDERAL COURT

CLAUDIA DIAZ-GUILLEN,  who went from being a Venezuelan Navy petty officer that treated an ailing Hugo Chavez for cancer, to being Venezuela's National Treasurer, has been convicted of money laundering by a jury in US District Court in South Florida. Only in an absolute dictatorship can a nurse who gains favor with a despot become a cabinet level government official, notwithstanding her total lack of qualifications. After Chavez' death, his successor, Nicolas Maduro removed Diaz from office. 

Convicted of two counts of money laundering, and one count of conspiracy to commit money laundering, Diaz, during her two year tenure in government, allegedly accepted $65m in bribes, to approve extremely favorable currency conversion transactions that allow only persons closely connected to the Venezuelan Government to earn extremely excessive US Dollar profits. This system, known as the PERMUTA  (Barter), utilized a loophole in Venezuelan foreign exchange law to make regime insiders millionaires many times over. We have discussed its ramifications elsewhere on this blog, in prior articles. 

The insider who allegedly benefitted from Diaz' corruption, and paid the bribes is current US fugitive and co-defendant RAUL GORRIN BELISARIO, known to be living in Venezuela, which will not extradite him. The Superseding Indictment also charges Gorrin with FCPA violations.

 The defendant's husband, ADRIAN VAZQUEZ FIGUEROA, a onetime Chavez security staff member, was also convicted on the same charges. Sentencing will be in February 2023. Both defendants were extradited from Spain and remain in US custody.

FUGITIVE BULGARIAN OWNER OF ONECOIN CRYPTOCURRENCY FRAUD CASE PLACED ON FBI TEN MOST WANTED LIST

If you are not familiar with this case, see our recent article Read Unsealed Superseding Indictment in Onecoin Cryptocurrency Fraud Case (December 11, 2022) on this blog.

INDICTMENT AGAINST SBF CONTAINS A MONEY LAUNDERING COUNT

We are awaiting the unsealing of the SDNY indictment filed against FTX owner/fraudster SAMUEL BANKMAN-FRIED, in new York this morning, as it is said to include a money laundering count. 

MALTA'S CASE AGAINST YORGEN FENECH IS HEADED IN A FAMILIAR DIRECTION

 

                                        YF + Mouthpiece + Corruption = Freedom by COSIMO

The recent ruling, by a judge in the Republic of Malta, excluding incriminating statements made by YORGEN FENECH, one of the primary defendants in case involving the assassination of investigative reporter Daphne Caruana Galizia, when he was seeking a Presidential Pardon for his testimony, appears to be taking the case down a path we are quite familiar with, when observing Malta's corrupt judiciary. 

The case, which has literally been pending for years, will continue on ad infinitum, until a prosecutorial error, deliberately and intentionally made to screw up the case, causes fatal damage to the Government's case, or the judge rules to dismiss, violating every legal principle in the process, or some other untoward event occurs to sabotage the case. One way or the other, he will eventually be freed.

Don't expect that Fenech will ever be convicted of the crime, let alone sentenced. The allegation that he paid over €500,000 to the contract killers who murdered Daphne in cold blood will never be admitted into  evidence, and justice will definitely not, as is normal in Malta's court system, ever be served. The Rule of Law is seldom observed in Malta, especially when the accused is connected to the country's ruling Labour Party, which runs the nation like a traditional Mafia racketeering organisation. Defendant Fenech will, sooner rather than later, frolicking in the surf in Miami, soon enough; you can make book on it,

"Anyone got change for a €500 note? I need party supplies."  by COSIMO

A TEACHABLE MOMENT IN ENHANCED DUE DILIGENCE; BE CAREFUL OUT THERE

Readers who have attended any of the lectures that I presented in more than one hundred countries and territories, while acting as Financial Crime Consultant for World-Check, may recall that one of my firm rules for compliance officers is that you never, never disclose to your bank's prospective client the actual reason why your enhanced due diligence investigation found him to be to be accepted and onboarded as a new client. It is one of my cardinal rules, and for good reason. Allow me to explain, and to illustrate its importance.

The target of your investigation may take offense to your conclusion, should he learn from you the actual grounds you gave to senior management for rejecting him. If he truly is a money launderer for organized crime, he may indeed then, in anger, tip off his client, who could arrange for you to have an "accident" so that the laundryman will then probably have another bank staff member he can approach when you become unavailable due to an unforeseen event that was actually intentional. 

You also might be concerned about the classic 'honey pot" trap, where you are approached in a bar or pub, when off duty, and then engage in a romantic interlude with an eager member of the opposite sex, only to learn later that you were photographed in the act, and you end up being blackmailed into approving a new account that you otherwise would not. This is not so far fetched as you might think; it is a classic ploy, and money launderers have been known to go to great lengths for their clients, to insure success, at any cost, for them. Please understand that failure is not an option for anyone who has drug trafficker clients.

Now, on to my personal story, taken from my time as a compliance officer, handling only high-risk cases. The new potential client was himself an experienced financial services professional, owning his own business, which was located in Montevideo, Uruguay, and he was making a very large investment with us, claiming it was his own money. He had great bank references, all duly verified. My initial inquiries revealed that he had no visible outside social, charitable or business interests, and it has been my experience that wealthy and extremely successful businessmen seeking large investments also have other things going on in their lives, whether they be commercial, sporting, nonprofit or even alternative endeavors. They are never uni-dimensional in their interests outside their principal business, but this person had absolutely nothing going on in the way of after-hours interests or dabbling in other fields, even those that are purely recreational, and which you expect to see. This constitutes a major Red Flag from my experience.   

 When I engage in Enhanced Due Diligence, and a profile inconsistent with that of most affluent investors presents itself, I then look outside normal resources for answers, because something generally surfaces if you look hard enough for a target's footprint. My routine negative news searches had not turned out anything, so I elected to check out the search services located on the websites of two dozen of the world's leading newspapers, for any mention of the target, in the past, in any context. Enhanced due diligence means you pull out all your sources and methods.

I found an entry in a Sydney newspaper, from several years ago; a major Mexican cartel leader, wanted in the United States for trafficking, was captured in Australian and seeking to bond out before his extradition hearing. His financial advisor offered a multi-million dollar estate in Australia as collateral to insure his appearance at all hearings. You guessed it, that person was the Uruguayan who wanted to open an account with us.

Of course, I blocked his investment. When you do make such a call, if the client demands to know the reason, make sure it's something vague, like a failure to comply with internal guidelines or some legalese that he cannot specifically object to. In this case, the client called up and demanded to speak with the officer who had rejected him. As you know, I am not shy, and I took the call.

The disappointed client asked how he could have been turned down with his excellent bank references. I told him that, since he was linked to a known high-risk individual, our policy was not to accept his business. He then asked me the one thing that I would have asked him, had it been me as the launderer, and he as the compliance officer. He asked  "Can I get my deposit back?" To which I replied that it has already been sent back to him. What I didn't tell him was that I had passed his name on to our outside counsel, for further forwarding to a certain agency that might find his name to be of interest. 

I don't advise any compliance officer to deal directly with someone who is the object of your due diligence investigation, because you never know how your findings, if negative, will be received.