AIRLINE EMPLOYEE SENTENCED TO EIGHTEEN MONTHS FOR BULK CASH SMUGGLING

An aircraft mechanic working for US Airways was sentenced this week, in US District Court in Philadelphia*, to a term in Federal Prison of 18 months, plus a $1000 fine. Juan Adames who used his security pass to bypass the passenger security checkpoint, boarded a flight for Punta Cana, Dominican Republic, carrying $153,300.

The smuggled funds were seized by authorities upon Adames' arrival in the Dominican Republic. He claimed that he believed he was transporting only $50,000, and that he was to be paid $5000 for the journey. He was charged with three counts:

(1) Bulk Cash Smuggling. [ the act of taking the funds out of the Continental United States]

(2) Evading a Currency Reporting Requirement [failure to file FinCEN Form 105/Customs 4790]

(3) Entering, in violation of Security Regulations, an airport area that serves an air carrier. [using his employee card to enter the departure area, and thereby bypassing TSA departing passenger security]

The question is, of course, whether he was a regular bulk cash smuggler for narcotics traffickers in the Dominican Republic. Adames retained his own counsel, and did not require the Public Defender, and criminal defense attorneys in Federal Court can be costly. How was he able to afford this on a mechanic's salary, I wonder ?

His attorney, who has previously represented defendants accused of bulk cash smuggling, filed an extensive Sentencing Memorandum, requesting a short sentence, or even Probation; the Court did give him the bottom of the 18-24 months Guidelines. There is no information in the court file regarding the status of the smuggled currency.

It may have been his first offence, but I doubt that it was his first venture into bulk cash smuggling.
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* United States vs. Adames, Case No.: 11-00429-SD-ED PA).

NATURAL DISASTERS CAN TRIGGER MONEY LAUNDERING SPIKE

Earthquakes in Costa Rica, China, and yes, even in Beverly Hills, California, this week remind us to be vigilant for the subsequent efforts of money launderers and terrorist financiers to use the flood of charitable donations to obscure transfers of illicit funds in international wire transfers. Experienced money launderers love to see natural disasters that occur in jurisdictions where they need to send funds to, for the fog of charitable assistance often act as an effective cover for their activities.

When added to the fact that there is often little, if any, true compliance attention paid to outgoing relief, since time is often of the essence, and bankers, wishing to assist as rapidly as possible, will excuse missing information, believing it to be the result of haste. One wonders just how much terrorist support has been sent to the Middle East by well-meaning bankers, thinking that it represents natural disaster aid.

Remember your guidelines:

(1) Does the charity have a long track record ?

(2) Does it have a physical location ?

(3) Have you performed due diligence on the charity and its leadership ?

(4) Where it is going ? What about the recipient ?

This is not to say that you perform Enhanced Due Diligence on every entity, but take a hard look at the country where the funds are going before giving a blanket release on all aid payments, lest you be sending funds to a Specially Designated Global Terrorist (SDGT) organisation, or other OFAC-sanctioned individual or entity.

NOTE WELL THE CORRUPTION CHARGE AGAINST CHINESE POLICE CHIEF

Wang in full dress uniform

The Bo Xilai/Gu Kailai homicide scandal in China has given outside observers important information about the level of official corruption in the country, which is not only used to assess country risk for China, but is also valuable in determining the amount of widespread corruption in specific circumstances. Also, the level of attention given to criminal charges is a clue to how serious a threat the Government of China regards the offences. The level of outrage, expressed by the ordinary Chinese man-in-the-street, over what he perceives as systemic corruption by senior officials., has not gone unnoticed by those in power.

in the Bo Xilai case, the  charges levied against the former Chief of Police, Wang Lijun, include a count of accepting what are described as "massive" bribes. This may be a signal that the level of corruption amongst Chinese law enforcement is on a par with that of government officiala and senior Communist Party functionaries. I would also add internal security officers to that list, as the budget for their increasing numbers have been reportedly matching that of China's military.

Remember, a corrupt Chinese PEP is not going to disclose to you, at account opening in your Western bank, his true profession. He will allege that he is a senor officer at a Chinese company, which if true, will be a government-controlled entity that is his cover occupation for the purposes of placing bribe and kickback money in your bank.

Given the rampant nature of official corruption, universal tax evasion, and outright criminal activity in China today, any purportedly wealthy Chinese "businessman" who arrives at your bank require an Enhanced Due Diligence investigation, before he is allowed to place funds in an account. You do not want to see his or her picture in a newspaper six months later, in an official governmental capacity, in a group photo brought to your attention.

Gu Kailai at her trial

WATCH FOR IRANIAN FLIGHT CAPITAL LEAVING CANADA THIS WEEK

Last week, Canada suspended diplomatic relations with the Islamic Republic of Iran. It closed its embassy in Tehran, and ordered all Iranian diplomats in Ottawa the leave the country on short notice. Thereafter, it designated Iran as a State Sponsor of Terrorism, which will allow injured parties to bring civil actions in Canada's courts, under the State Sponsor of Terrorism Act.

Immigration from Iran, under the various provincial immigrant investor laws, has basically ceased until 2013, amidst controversy over a number of issues, including the admission of Iranians connected to the Iran Revolutionary Guard Corps (IRGC), the smuggling of substantial Iranian assets into Canada via Hawallah, and the admission of a reportedly corrupt Iranian bank president, later wanted in Iran on criminal charges.

Whatever the political reason for these diplomatic actions, Canada has now firmly aligned itself with the United States. Will accounts of Iranian nationals be seized by Canadian authorities, and under what circumstances ? It is too soon to tell, but rest assured that money managers of Iranian capital and assets, of dubious provenance, in Canada, that may not survive governmental or law enforcement scrutiny will be looking to move it forthwith.

Therefore, if you are a compliance officer at a financial institution that has correspondent relationships with Canadian banks, or foreign banks with branches in Canada, it would be prudent to alert your staff to any unusually large transfers leaving Canada, in the coming weeks, en route to traditional offshore financial centres. I know that, if I was charged with managing assets of Iranian nationals residing in Canada, who fear the consequences of a criminal investigation,  I would be moving that wealth elsewhere. Since a portion of it may be in US Dollars, or will be converted to that currency, it will probably be transiting American banks; Watch for it.

HEZBOLLAH MONEY LAUNDERING OPERATIONS IN THE WESTERN HEMISPHERE

The international media today discussed the reports of a Hezbollah terrorist training camp, located in Northern Nicaragua, near the frontier with Honduras, where 30 cadre are reportedly preparing trainees for attacks upon the United States, in the event that America, or Israel, attempts to destroy Iran's illegal nuclear programme. This is extremely disturbing; Hezbollah Venezuela has existed for several years, but an organised Hezbollah presence in Central America presents a clear & present danger to the Continental United States.

There is an even more ominous aspect to this camp: buried in the reports about the camp is the information that it is also being utilised for money laundering activities. We know that one of Hezbollah's principal methods of financing its operation is the sale of cocaine, but are they also laundering the criminal proceeds of others ?

Regular readers of the blog will recall the seizure of millions of dollars, in the general area recently, in the possession of a well-prepared group of Mexican bulk cash smugglers, posing as media employees arriving to cover a criminal trial*. If Hezbollah is laundering Mexican cartel, or Colombian trafficker profits, it will probably be using commercial banks in Central America to accept the dollars, which means they will later transit US banking centres.

If you are a compliance officer at a North American bank that has correspondent relationships with Nicaraguan commercial banks, casas de cambio, or non-bank financial institutions (NBFIs), you may want to determine whether volume from those correspondents has increased of late, and whether your correspondent's clients have legitimate lines of business to justify the additional funds.
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*Bulk Cash Smugglers posed as Journalists en route to cover Money Laundering Trial

WIFE OF PONZI SCHEMER SCOTT ROTHSTEIN, AND HER ATTORNEY, CHARGED WITH MONEY LAUNDERING

Kimberly Rothstein, the wife of convicted billion dollar Ponzi schemer Scott Rothstein, was charged* with Conspiracy to commit Money Laundering, Witness Tampering, and Obstruction of Justice. Her civil attorney was also charged with these offences, as well as others. It is alleged that she hid Rothstein's assets, including a 12k diamond ring, from the Internal Revenue Service, who was garnering assets in the Rothstein law firm bankruptcy.

The defendants are accused of causing Scott Rothstein to lie under oath about the existence of the secreted assets, which were worth millions of dollars. Mrs. Rothstein was also charged with Obstruction of Justice. The money laundering occurred when they sold some of the jewelry, which was criminal proceeds of the massive Ponzi scheme Rothstein perpetrated.  He sold interests in bogus out-of-court, and court settlements, in non-existent sexual harassment and employment discrimination cases.

A single count was filed against all defendants, employing a Criminal Information, meaning that the defendants are probably cooperating with Federal prosecutors.
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* United States vs. Rothstein, et al,  Case No.: 12-cr-60204-RSR (SD FL).

INEPT BULK CASH SMUGGLER ARRESTED IN CONNECTICUT

His name is Jovanny Rosario, and he may have won the prize for world's dumbest bulk cash smuggler. Mr Rosario was stopped on Interstate 84, by Connecticut State Police,  at one o'clock in the morning, because he was driving without headlights. This is not a particularly bright move, as he was in the United States illegally, having been previously been deported after a felony conviction.

His automobile, a 2001 Mitsubishi Montero, a sport utility vehicle, was found to contain 28 bags of cash, totally an amount in excess of $500,000. Mr. Rosario, and his bulk cash, was turned over to the Department of Homeland Security.

Why on earth would someone assign a bulk cash courier job to an individual who would not survive a routine traffic stop, I wonder, and who drives at night without headlights ?

STANFORD GROUP CHIEF COMPLIANCE OFFICER CHARGED BY SEC

Bernerd Young, the former NASD (now FINRA) regulator who became Stanford Group's Managing Director of Compliance and Chief Compliance officer,  has become the subject of an administrative action, filed by the Securities & Exchange Commission. Young, together with other Stanford executives, has been charged with a number of securities law violations.

It is alleged that Young, and the other respondents:

(1) Filed misleading and incomplete offering documents.

(2) Improperly incentivised Stanford sales staff to push the sale of Stanford International Bank's Certificates of Deposit.

(3) Failed to disclose that Stanford Group was financially dependent upon the CDs generated by Stanford International Bank.

"Bernie" Young

The offences charged include SEC Rule 10b-5 [fraud], and violations of the Securities Act, the Exchange Act, and the Advisors Act.

The relief requested:

(A) A Cease & Desist order, which we presume will permanently ban him from acting as an officer or director of any public-traded company in the United States.

(B) Paying Disgorgement of the funds he received from Stanford Group.

(C) Paying a Civil Penalty.

Readers who wish to review the complete text of the SEC proceeding can find it here.

If you are a compliance officer, the next time that someone in management asks you to rubber-stamp a matter that you know is improper, show him or her this article. (and post the image below at your desk as a reminder of the consequences of compliance malpractice).

Compliance officer who failed to say, "No means no." 

"GODMOTHER OF COCAINE" ASSASSINATED IN COLOMBIA

Griselda Blanco, the notorious fugitive Colombian drug kingpin, who was arrested in the United States after she went to an informant for the Drug Enforcement Administration to launder her money, was slain in Medelliín, Colombia yesterday. Blanco, who is believed to have invented the motorcyclist drive-by assassin technique, where the victim is shot by a passing cyclist, died after sustaining two bullets to her head. Apparently, someone chose to end her life the same way she had dozens of others dispatched. Every time we think that the old "Miami Vice" days of drug violence and death are over, we see events like this.

Blanco, dubbed the Godmother of Cocaine by the press, is believed responsible for the infamous 1979 Dadeland Massacre, where three gunmen in her employ, deployed from a van advertising party supplies, sprayed a Crown Liquor store in Miami's upscale Dadeland Mall with MAC-10 automatic weapons fire,  killing two rival drug traffickers, in the process destroying the store and killing innocent civilians in the store and mall.  She was incarcerated in the New York and Florida for two decades, for her many crimes, and deported to her native Colombia after her release.

She is alleged to have ordered the killing of dozens of competitors in the drugs trade,  subordinates who slighted or cheated her, and one of her three husbands, and is generally thought to have been the first kingpin to engage in narcotics smuggling, in large quantities, into the Continental United States.

CHINA IS BUILDING ON ISLAND CLAIMED BY THE PHILIPPINES

The Chinese military installation on Mischief Reef

According to the Philippine Department of Foreign Affairs, China is building new structures on Mischief Reef, which is a territory long claimed by the Philippines. China reportedly occupied the prized atoll in 1994, whilst Philippine naval vessels were absent, due to inclement weather. It has ignored the objections of the Government of the Philippines, and is in violation of the Declaration on the Conduct of Parties in the South China Sea (DOC).

Mischief Reef lies only 230 km. from Palawan, and therefore is well within the Exclusive Economic Zone of the Philippines. If any country has a historical and legal claim to Mischief Reef, it is the Philippines. This new Chinese action, adding to what is obviously a military fortification, will only increase tension with Manila, and also operate to raise Country Risk for the Philippines.

 

TURKEY SAYS KURDS IN SYRIA SUPPLIED BY IRAN AND SYRIA

The Government of Turkey has publicly stated that Kurdish elements in Northern Syria, who are now in control of most of the ethnically Kurdish region there, have been receiving arms and assistance from both the Syrian regime and Iran. Free Syrian Army spokesmen have even accused armed Kurds in the frontier villages with controlling this area, and excluding the Syrian Opposition by force.

This information poses a threat to any NGO or private entity that is supporting Kurds in Syria, for although the Kurdistan Workers' Party, the Turkish-based PKK, is a designated terrorist organisation, its Syrian affiliate, the PYD, is not recognised in the West as a terrorist group. It appears safe to support and supply the PYD; Unfortunately, this assumption is incorrect.

This means that well-intentioned donors from the EU and North America could become exposed to:

(1) Providing financial and materials support to a designated terrorist entity, should it be claimed that the  PKK is the end user of the support, which may include weapons.

(2) End up violating Syrian and/or Iranian sanctions, for the reason that the Kurds in Syria could be deemed to be acting in concert with the Assad Regime.

Either of the above would be catastrophic for the donor agencies or NGOs, and could result in serious reputation damage for the financial institutions involved. Therefore, any bank clients that are involved in providing financial or material support to Kurdish elements inside Syria must be thoroughly checked out forthwith, and in the absence of clear and convincing evidence that there is no cause for concern, those accounts should be closed, after consultation with bank counsel.

IRANIAN OIL BEING SOLD IN LATIN AMERICA AS VENEZUELAN

Brokers and traders in Venezuela have been acquiring Iranian oil, and vending it as Venezuelan origin, to buyers in Latin America, according to well-established sources inside Venezuela. Additionally,  a number of other Iranian products are being passed off as Venezuelan, and being openly sold to customers in Latin America.

These transactions expose every Latin American and European financial institution involved to major US sanctions, including, but not limited to, criminal indictment of senior staff who authorised payments, through Venezuelan third parties, to Iran. Given the "knowable" requirement that the United States attaches to Iran sanctions violations, have the Latin American payor banks failed that test ? It will be interesting to see which Venezuelan banks have been acting as pass-throughs, and sending the payments to Iran, since many of them have US branches, which are now at risk.

The problem with non-petroleum Iranian goods, sold in Latin American as Venezuelan, is worse: have the purchasers made diligent search and enquiry into whether there is the actual capacity, in Venezuela, to manufacture the goods at issue ? If not, the negligence of the purchasing entities, or countries, becomes an aggravating factor.

Whether the United States will broaden its sanctions evasion investigation, due to these sales is
unknown, but I would not want to be the managing director at any of the Latin American companies that are buying these "Venezuelan" products, made in Iran.

RAISE COUNTRY RISK FOR LEBANON

Events in an increasingly unstable Lebanon are driving the country straight towards high risk status, which is a level that represents a clear and present danger when calculating Country Risk .

(1) Al-Qaeda's Syrian leadership has overtly threatened Hezbollah for its support of the Assad regime. It also has accused Hezbollah of conducting the Hariri assassination in Lebanon. It has warned Lebanese Shiites to disassociate themselves from Hezbollah.

(2) Hezbollah itself is having serious problems; income from its criminal activities is down, aid from Iran has decreased, due to its declining economy, caused in large part by international sanctions, and its support for the Syrian Government, a major arms source.

(3) The Northern Command of the Israel Defence Forces has warned that Hezbollah may seek to take advantage of the chaos in Lebanon caused by the adjacent Syrian Civil War, and make a move to effectively take over the country, or move into the frontier with Israel. The United Nations Forces in the South Lebanon area have had problems with Hezbollah since it arrived.

(4) The United States, which had previously avoided regulatory action before the Lebanese-Canadian Bank scandal, recently seized $150m in sale proceeds, due to Hezbollah criminal activity and money laundering tied to the bank. Expect further US law enforcement and/or regulatory action.

Does all of this mean that Lebanon is headed towards another civil war,  or the next Hezbollah-Israel War, or  worse ? Factor all of the above threats when assessing Country Risk, particularly if your bank clients are engaged in substantial business with Lebanese companies, or your bank is itself involved in correspondent relationships there; Watch this one.

PANAMA'S PRESIDENT LINKED TO IRAN ?

Nobody in Panama seems to want to talk about the relationship between Panamanian President Ricardo Martinelli and the sanctioned regime in Iran. The US Department of the Treasury Office of Foreign Assets Control, or OFAC, designated six Panamanian corporations are fronts for the government-owned Iranian maritime transport, the Islamic Republic of Iran Shipping Line, or  IRISL. A closer look at those companies is disturbing.

The officers and directors include the president's two sons; the lawyers who formed the companies has long been regarded as the president personal law firm, VM & E. The vessels involved were reportedly previously registered through Isle of Man companies, but were transferred after this became public knowledge. They got new names, and new front companies in Panama.

The question remains: since the president's sons blindly follow his lead, what is the extent of the relationship between President Martinelli and the Government of Iran ? Given that Panamanian corporations are quietly but openly trading with Iran, is it because he has given a green light to such sanctioned commerce ?

WILL MONEY LAUNDERERS EXPLOIT NEW TAIWANESE-CHINA FINANCIAL LINKS ?

Two of China's largest banks, the Bank of China and the Bank of Communications, quietly opened offices in Taiwan this summer, as a part of the closer financial relationship that is developing between the two countries. Additionally, a new agreement reportedly executed in August will allow Taiwanese financial institutions to clear Chinese currency transactions. Two Taiwanese banks have reportedly opened branches in China, including the Bank of Taiwan.

Whilst we welcome the strengthening of financial ties between two countries that otherwise engage in bellicose political exchanges, this good news will soon come to the attention of experienced money launderers operating in Asia, and they will be looking to take full advantage of any potential opportunity to place, move and clean dirty money from China, whether it be criminal profits, or the proceeds of corrupt activities.

Though it is premature to look for evidence of cross-strait money laundering, employing these new financial connections, you can be sure that a variety of options is already being considered, especially by money launderers acting on behalf of corrupt Chinese PEPs seeking to move their ill-gotten gains offshore forthwith, in light of the fear generated by the Bo Xilai scandal.

Therefore, Compliance officers at international banks who have relationships with Taiwanese financial institutions, or whose clients regularly conduct substantial trade with Taiwanese companies, would do well to brief bank front line staff to be vigilant for changes in volume and character of transactions from Taiwan, lest they unwittingly allow your bank to become a back-door for illicit Chinese "flight capital."