IRAQ WARNS ABOUT BULK CASH SMUGGLING INTO THE WEST

The Government of Iraq has taken the unusual step of publicly warning Western financial institutions about the massive amount of US Dollars that are being illegally sent abroad. Conservative Iraqi estimates have placed the amount at $4bn per month, and it is fleeing the country in a number of ways:

(1) High-level governmental and party officials have been implicated by the Iraqi Government, though to date it has refused to disclose their identities.

(2) Influential businessmen, with ties to government, and the family members of these officials, are all listed as participants in this capital flight scheme.

(3) Illegal currency exchange operations, whose primary objective is the bulk cash smuggling of dollars out of Iraq.

(4) Forged international trade documents, in support of phantom purchases of goods overseas, are being used as a cover for the exit of dollars.

You can expect to see a number of extremely affluent Iraqi bankers, and corrupt PEPs, seeking to open accounts in Europe this year. They will be depositing cash, if you are foolish enough to accept it.

The dollars streaming out of Iraq, and a similar flood in Afghanistan, should cause you to red-flag all large cash transactions, where the client/customer is coming from a combat zone, whether in Asia, the Middle East, or Africa. This "war zone flight capital" is not clean, nor by any stretch of the imagination, or wishful thinking of a relationship manager, will it be clean. Do not accept it, and document your actions thoroughly, lest your bank be amongst those investigated by law enforcement or regulators, tracking the client that you were smart enough to reject.
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For Further Reading:
Are you Unwittingly Banking any of that Iraqi "Flight Capital ?"

SHOULD RICHARD MEDDINGS BE INDICTED FOR MONEY LAUNDERING ?

Richard Henry Meddings

For those of you who were curious, the Group Finance Director at Standard Chartered  who uttered the now infamous profanity at US regulators* has been identified by American media as Richard Meddings. Of all the greedy senior staff at the bank who pushed for an expansion of Iranian business, notwithstanding  the American sanctions that were in place to deter Iran's efforts to to develop an illegal nuclear weapon, and the ballistic missiles necessary to deliver them, it is submitted that Mr. Meddings deserves special mention. His arrogant statement says it all.

I am sure that Mr. Meddings, who has obviously lived a life of privilege, never had to deal with an incoming rocket attack from time to time, as was my experience in Vietnam, but I wonder how he will feel when Iran's missile programme acquires the ability to hit London with a nuclear weapon ? If it happens, it will be, in no small part, because of the absolute greed of Standard Chartered management, in taking on sanctioned Iranian banks as clients, when everyone knew that those banks were sanctioned due to support of the nuclear weapons programme. I cannot explain how strongly I feel about these sins and transgressions.

Let me suggest that some on in the US Department of Justice reach and touch Mr. Meddings, and those other "financial war criminals" who provided financial support to the regime in Iran, with Federal money laundering charges. That is a 20-year felony, for those of you not familiar with the American criminal justice system. As a wise man once said, let the punishment fit the crime.

Western Europe in 2014 ?

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*"You f____ing Americans, who are you to tell us, the rest of the world, that we're not going to deal with Iranians."DFS Order at 5.   http://www.dfs.ny.gov/banking/ea120806.pdf

DO WE NOW NEED TO GET ANTI-STRIPPING AFFIDAVITS FROM CORRESPONDENT BANKS ?

In light of the sordid actions of ING, HSBC, and Standard Chartered Bank, in admittedly "stripping" out all indicia of Iranian banks or companies, or those of other rogue nations, from their wire transactions coming into the USA, and substituting information specifically designed to evade OFAC alarms, must US banks now compel their correspondents to execute affidavits like this;

                                           



                                      S  A  M  P  L  E   A F F I D A V I T
                    (It is strongly suggested that this be prepared by your outside bank counsel)



(1) My name is __________, and I am the Managing Director of XYZ Bank (hereinafter "the Bank"), and this Affidavit is being made upon personal knowledge.

(2) XYZ Bank, as a matter of policy, does not engage in removing (stripping) out any information from wire transfers handled by the bank, nor does it accept transactions where information has been deleted, changed, disguised, or altered, in any way.

(3) XYZ Bank's staff, including, but not limited to, the Wire Department, the Operations Division, and the Compliance Department, all follow the above policies, which are included in the bank's Compliance Manual, relevant portions of which are attached hereto as Exhibit A.

(4) [Such additional details as your counsel deems relevant].

SWORN TO and subscribed before me, the undersigned Notary Public....

                                                                                            __/s/___________________

Should we start requiring this ? I welcome your opinions.
miamicompliance@gmail.com

ARE YOU UNWITTINGLY BANKING ANY OF THAT IRAQI "FLIGHT CAPITAL" ?

It is currently estimated that at least four billion dollars is leaving Iraq each month. Yesterday, the Central Bank of Iraq sold $307.6m in US Dollars; today it was $280m. Whilst I understand that most investors are hesitant about holding large quantities of the weak Iraqi Dinar, there's much more to this story.

The amount of dollars exiting Iraq is increasing, whilst at the same time, the volume of goods entering the country is actually decreasing. Would some economist kindly explain that to me ? Also, we are into Ramadan now; international trade transactions are not being conducted; only food sales are active. So where are all those greenbacks going ?

It is common knowledge that large amounts of US currency are entering the Iranian economy, courtesy of the banking system operating in the Kurdish Regional Government (KRG), but there is much more to the puzzle than the banks in the KRG. Obviously, Bagdhad banks are involved as well.

However, not all the US currency is destined for Iran; money obtained by PEPs through bribes, kickbacks, or other corrupt activities is certainly headed for the UAE, and to banks in the EU. You need to be extremely careful, because many Middle Eastern PEPs have successfully obtained dual citizenship, or  immigrant investor status. A proper Enhanced Due Diligence investigation will pick up and expose anyone who is concealing their Iraqi origin.

If you are a compliance officer at an EU bank, I would suggest that you perform a look-back, upon all your high net worth Arab clients, to en sure that you did not miss any Iraqi PEPs masquerading as something else. Of course, if you have Arabic speakers at your bank who are knowledgeable in identifying regional linguistic identifiers, and they have personal front-line contact with the high net-worth clients, they may be able to separate the legitimate clients from the posers.

$ 250bn "CATASTROPHIC REPUTATIONAL DAMAGE" AT STANDARD CHARTERED

If you have not yet read the complete text of the Order Pursuant to Banking Law §39, entered against Standard Chartered Bank by the New York State Department of Financial Services (DFS), you may access it here. The lengths to which the bank went, for a decade, to hide its Iranian transactions, are frankly, obscene; Read it for yourself.

On 15 August, the bank is due in the DFS offices, to demonstrate why its license to operate in the State of New York SHOULD NOT BE REVOKED. We will be closely following this case; Stay tuned.

PANAMANIAN COURT CONVICTS DUTCH FRAUDSTER

Readers have been following my reports on the efforts of Panamanian law enforcement to capture the elusive fugitive Dutch fraudster, Okke Ornstein, who has been evading arrest through constant movement, will be interested in learning that the Panamanian criminal justice system has obtained a conviction in Absentia. The Criminal Court, of the First Judicial Provincial Circuit, has ruled that Ornstein is guilty of multiple white collar crimes, and has issued its order accordingly.

Okke Ornstein

Though he declined to appear at the trial, Ornstein did have counsel present. Sentencing has been set for 3 October, in Panama City. Mr. Ornstein, who was the general manager of the massive Ponzi scheme operated in Panama by Marc Harris, received both immunity and a cash reward, for testifying against Harris, who is now serving a 17-year term of imprisonment in the United States, for money laundering and other federal crimes.

It has been rumoured that Panama's beleaguered President, Ricardo Martinelli, engaged Ornstein as a Public Relations spin-master recently. Subsequent reports say that Ornstein was later abruptly relieved of that position, for unknown reasons.

Ornstein and his partner, master Ponzi schemer Marc Harris

The Defendant, who claims that he is a journalist, has of late engaged in character assassination of yours truly online, after I detailed his long criminal career. Be aware that he may approach members of the financial industry in Panama, ostensibly as a reporter, but intent upon committing a serious fraud at the expense of your bank or business; Turn him away, and contact law enforcement. His alias is: Okke Van Ooijen.

Sentencing is scheduled for 3 October, and it appears that the long arm of justice is about to grasp Mr. Ornstein firmly about the neck, and apply firm pressure; He cannot evade capture indefinitely.

One final note: apparently he failed to appear at a hearing involving another criminal case in Panama today, and yet another warrant has been issued for his arrest.

"THE LAUNDRY MAN" SPANISH LANGUAGE EDITION EN ROUTE TO US BOOKSELLERS

Readers in the United States, who prefer to read The Laundry Man in Spanish, will be happy to know that  Lavado Dinero, the translated version, is being shipped this week to American booksellers specialising in Spanish-language publications. I suggest that you visit your local bookseller during the last week of August, to obtain your copy.

I have also seen Lavado Dinero for sale online. The publisher is Ediciones B, of Mexico City, should you wish to enquire further. Thank you for your interest in my work.

MEXICAN GOVERNOR WHO AIDED THE JUAREZ CARTEL PLEADS GUILTY IN US

Villanueva

 If you follow money laundering cases, you will remember this individual, who was a fugitive from justice for two years. Mario Ernesto Villanueva Madrid, the former governor of Mexico's Quintana Roo State, has entered a plea of guilty to a single count of Money Laundering Conspiracy in US District Court in New York. Villanueva, who has already served a six year sentence in Mexico for his crimes, was extradited in 2010.

The captured fugitive

The Defendant received payments of $400,000-500,000 for each multi-ton shipment of Juarez Cartel cocaine that Villanueva allowed to transit his state. He hid his criminal profits in a brokerage account in New York, owned by a British Virgin Islands corporation.

BVI flag

 His broker was later convicted for her role in laundering the proceeds of crime, but only drew three years' probation, later reduced to two, and one year of Home Confinement (House Arrest). Frankly, her methods of hiding Villanueva's money (bogus company account and fictional Mexican owners)  justified prison time. It is assumed that she rendered Substantial Assistance in the recovery of his criminal profits.

US seizure actions against Villanueva's assets later resulted in the forfeiture of a reported $19m. The maximum sentence permitted by law in his case is twenty years in Federal Prison; Sentencing has been scheduled for 26 October.
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* United States vs. Mario Ernesto Villanueva Madrid, Case No.: 01-cr-0021-vp (SD NY).

DID SUNK PANAMANIAN PRESIDENTIAL YACHT CONTAIN NARCOTICS ?

Photo said to be that of the vessel Aqua Bella, half submerged.

The personal yacht of Panamanian President Ricardo Martinelli. the Aqua Bella, was reported sunk yesterday in the Pineapple Bay (Baía de Piñas) by local media. The yacht, which allegedly hit rocks off the coast off Panama's Darién Province, was valued at USD$ 2.5m. It is said that the vessel was unevenly loaded with a large cargo, and this caused it to veer into shallow waters

Reports say that the three crew members were rescued unharmed, as well as a member of the team of bodyguards of one of Martinelli's sons. Unverified information places one of the President's sons on the yacht.  Questions have been raised in Panama about the cargo on board, and the circumstances of the last voyage of the vessel, which was rumoured to be carrying a load of cocaine. The Baía de Piñas is in Darién Province, one of Panama's most remote locations, and is very near the frontier with Colombia.

President Martinelli, who owns a chain of supermarkets in Panama, has long been linked by veteran observers of Panama to drug trafficking and money laundering. It is curious that a member of his personal bodyguard has been named as having been on board, with no family members publicly listed. Recovery efforts are said to be planned; perhaps then the truth will be known.

Panama City is rife with the rumour that President Martinelli has employed foreign IT professionals to block Internet access to local newspaper accounts of the sinking.

UPCOMING TRIAL OF GU KAILAI REMINDS US OF CHINESE PEP RISK

The announcement that the criminal trial of Bo Xilai's wife, Gu Kailai, will commence next Thursday, should serve to remind compliance officers at international banks with Chinese clients that they should check up on their ongoing efforts to weed out those customers who exhibit an unreasonable amount of risk:

(1) Are you still banking the "princelings," the children of senior Chinese leaders ? If so, what amount of business goes through the accounts of these "full-time students ?" If it is excessive, close the account forthwith.

(2) What about Enhanced Due Diligence on your Chinese PEPs clients has been completed to date ? Are they moving money in excess of their stated annual salary ?

(3) Are ALL large Chinese PEP accounts now off limits after the Bo Xilai disclosure of money laundering and bribe/kickback/sweetheart contract money that the wife was trying to move offshore ?

Are you banking his bribe & kickback money ?

Seriously, why take a risk with known Chinese PEPs. Is it really worth the risk ?

UNITED STATES IS CRITICAL OF CHINESE ACTIONS IN SOUTH CHINA SEA

It has become obvious that the United States supports Vietnam and the Philippines, in their dispute with China over its over aggressive actions in the South China Sea. Here is a portion of a public statement made on 3 August, by Patrick Ventrell, Acting Deputy Spokesperson, Office of Press Relations, US Department of State. The complete text can be found here.

" As a Pacific nation and resident power, the United States has a national interest in the maintenance of peace and stability, respect for international law, freedom of navigation, and unimpeded lawful commerce in the South China Sea. We do not take a position on competing territorial claims over land features and have no territorial ambitions in the South China Sea. however we believe the national of the region should work collaboratively and diplomatically to resolve disputes, without coercion, without intimidation, without threats, and without the use of force. "

" We are concerned by the increase in tensions ion the South China Sea and are monitoring the situation closely. Recent developments include ... China's upgrading of the administrative level of Sansha City and establishment of a new military garrison there covering disputed areas of the South China Sea run counter to collaborative diplomatic efforts to resolve differences and risk further tensions in the region."

Is the United States troubled by china's decision to militarise the South China Sea ? Obviously; will it respond, and will that response result in increased country risk in the region ? Look at the fact that the US just sanctioned a Chinese bank for trading with Iran. America never sanctions Chinese banks. Watch for additional regulatory sanctions and other responses, to send a signal to China, that its actions of late are crossing the line. Watch for it.

US Navy

CANADIAN BANK AND MIAMI LAW FIRM SLAMMED FOR HIDING AND ALTERING COMPLIANCE DOCUMENTS

When important compliance documents are withheld, or altered, in a lawsuit against a bank, there can be serious consequences.  A US District Judge in Miami, Florida, has awarded attorneys' fees and costs in favour of a plaintiff, and against Toronto-Dominion Bank (TD Bank), and the law firm of Greenberg Traurig, for the material alteration, and failure to produce, two key bank compliance documents. The 30-page opinion* concluded that the bank and law firm was guilty of a "pattern of Discovery abuses before, during and after trial."

The Plaintiff, Coquina Investments**, had recovered a $67m verdict against the bank, in connection with the billion dollar Scott Rothstein Ponzi scheme case. Rothstein's law firm had banked at TD, which had vouched for the safety of the non-existent investments, to the Plaintiff, and others. During the litigation, Greenberg Traurig, as counsel for the bank, in response to discovery requests of Coquina's counsel, had advised:

(1) A document called "Standard Investigative Protocol," did not exist. The bank's counsel indicated to the Court that it was simply a policy, not a document.  The document, an important element in TD compliance procedures, because it deals with suspicious activities, was later produced in unrelated litigation with Coquina's lawyers, who then brought this to the Court's attention, in one of the five Motions for Sanctions they filed.

(2) The bank's Customer Due Diligence Form, for Rothstein's firm, as delivered, was materially altered. A red "High Risk"warning was deleted before it was produced. Embedded notes, indicating who had saved, reviewed or edited the document, and when this occurred, were missing. In other words, the most damaging elements of the document were deleted. The guilty parties alleged that it was a "copying error."

Law firm partner/Ponzi schemer Scott Rothstein

The Court's ruling: that the law firm acted negligently, and the bank willfully, regarding the discovery violations. Both will be required to pay all the post-trial attorneys' fees and costs incurred by Coquina. It appears that the law firm partner who was responsible for the document production has left the firm.

The lesson here is that, when a bank, or their counsel, plays fast and loose with the truth, because it hurts a pending case, the consequences, when the misconduct is discovered, can be grave. In this case, a bank and major law firm's failures are exposed in a very public forum, and appear in the media, which seriously damages their public image, as well as their pocketbook.

Lawyers at large firms, when they represent the biggest clients. are often tempted to break the rules, in a world where winning is everything, but as you can see, such actions sometimes see the light of day, with disastrous results.



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*Omnibus order on Motions for Sanctions.
**Coquina Investments vs. TD Bank,  Case No.: 10-cv-60786 (SD FL).

VENEZUELANS USING 700 PANAMANIAN COMPANIES TO EVADE SANCTIONS ON IRAN

A governmental source in the Republic of Panama has confidentially disclosed to me that Venezuelan nationals have formed more than seven hundred companies there, and are using them for the sole purpose of trading with Iran, thereby efficiently evading international sanctions against Iran. All the corporate formation, and associated legal work, is being performed by the same lawyers each time.

 This is a major pipeline through which important industrial and commercial goods are purchased for Iran,  which is the end user not disclosed to sellers of goods, who are led to believe that they are destined for Latin America, specifically Venezuela and Panama.

 The companies then make deposits in two major Venezuelan banks, and obtain Letters of Credit in Panama from those banks' Panamanian subsidiaries. After all the goods are sold and delivered to solely Government-controlled Iranian entities and agencies, the funds are wired into Panama to pay off the Letter of Credit. Neither the original manufacturer or wholesaler is aware of the illegal final destination of their products, nor are any regulatory agencies, in any country where either is located, alerted to the violations.

If the Venezuelan and Panamanian banks involved will not now terminate their relationships with the sanctions evaders, and discharge the bankers who are involved in approving this business,  they will sustain major reputation damage, plus possible US criminal indictment of senior officers and owners, when they are identified in a public forum. Additionally, their US subsidiaries and/or correspondent relationships are at serious risk of revocation and termination, or even the loss of access to the American financial structure, pursuant to US Treasury Department regulations.

Assuming that you are a compliance officer at a Canadian or American bank with customers who engage in international trade:

(1) Do you have any bank clients who are selling goods to Panamanian companies ?
(2) Does your division have the necessary databases that allow you to identify, or rule out,  whether your customers' customers are Venezuelan nationals ?
(3) Do you have sufficient back-up information sources to verify the identities of all the parties?

If you cannot satisfactorily answer the above, then you could be unwittingly facilitating illegal Iranian Weapons of Mass Destruction or Ballistic Missile programmes. I will answer any specific questions that you may have about (2) and (3) upon request. (miamicompliance@gmail.com).

  

WHY ARE THERE 3m MASTERCARD HOLDERS IN IRAN ?

Whilst we are on the subject of banks like HSBC banking Iranians, in violation of international sanctions, we should also examine the role of American credit card issuers. I will cover the financial obscenity of vanilla [plain, unmarked] cards in a later article, but today it is time to expose the fact that major American credit card issuers, like MasterCard, are happy to do business with more than three million Iranian nationals.

Even the newest bank compliance officer knows that Politically Exposed Persons, or PEPs, from sanctioned countries like Iran, are off limits. So why are senior Iranian PEPs issued MasterCards ? I have seen some of the cardholder lists, and anyone with half a brain can determine, from both their occupations or professions, and email address categories, that a large number of the card-members appear to be PEPs, and in a country where many corporations are on the OFAC, EU, or UN sanctions lists, issuing them credit cards is compliance malpractise, plain and simple.

I am sure that MasterCard's management (and lawyers) will respond that some obscure tax haven subsidiary, and not the USA parent, is involved, and that banks that process the cards are conveniently not from countries that subscribe to sanctions against Iran, are actually involved in the transactions, but know this: MasterCard's American entities use proprietary software that shows each and every global transaction. They know damn well that their subsidiaries are dancing with the devil.

So, whilst the letter of the law is assuredly being followed, and there is no obvious OFAC violation under federal law, Iranian nationals apparently are free to use their MasterCards overseas. Who is charging the purchases of dual-purpose goods, that are thereafter used in Iran to advance the Weapons of Mass Destruction and Ballistic Missile programmes, I wonder.

It gets worse; If America attacks Iran, to destroy its illegal nuclear weapons programme, will some of the defensive systems employed by Iran to shoot down US warplanes have been obtained by Iranian purchasing officers, using their MasterCards ? This is where the pursuit of profit trumps patriotism; Some will call it Trading with the Enemy.

US SANCTIONS ELAF ISLAMIC BANK FOR IRAN SANCTIONS VIOLATIONS

The US Department of the Treasury has filed sanctions against Elaf Islamic Bank, of Baghdad, for significant transactions with the sanctioned Export Development Bank of Iran. The bank, formerly known as Barakaat Bank for Investment & Funding, is not to be confused with other Middle Eastern financial institutions of similar name.

Treasury's announcement, which was made pursuant to the Comprehensive Iran Sanctions, Accountability and  Divestment Act of 2010 (CISADA),  stated that the bank had "significant financial transactions and provided significant financial services for a designated Iranian bank." Export Development Bank was sanctioned by the US in 2008, and by the EU in 2010.

Elaf Islamic Bank's SWIFT/BIC is ELAF IQ BA. It is now denied access to the US financial system, and all banks that have corespondent or payable-through accounts for Elaf must close them by 10 August.

I humbly suggest that you take this regulatory action as a wake-up call regarding Iraqi banks.

(1)You really need to conduct an on-site inspection before engaging in any major relationship with a financial institution whose principal office is located in Iraq.

(2) Who are its correspondent banks, and are any of them in Iran, Syria or Cuba ?

(3) What are the backgrounds of its senior leadership ?

(4) Is is possible there are Iranian stockholders of the bank ? This is the case with some.

(5) Is the bank funneling US Dollar notes, in bulk, to any jurisdiction that would bother US regulators ?

(6) How was the initial capitalisation of the bank accomplished ? Source of Funds, please.

If you cannot get satisfactory answers to these questions, do not engage with the bank.