ARE YOU FACILITATING THE SHIPMENT OF US DOLLARS TO HAMAS ?

The Hamas-controlled government in the Palestinian Territory of Gaza this week boasted that, if the Fatah-controlled West Bank was unable to cover its obligations, due to Israeli delays in forwarding tax revenues, that it was solvent, and could fund the West Bank's budgetary needs, providing that certain unspecified "adjustments" were made there.

Gaza happens to be a territory where, aside from government jobs and some small entrepreneurs, unemployment is universal, poverty is rampant, and the regime subsists on official and unofficial foreign government aid, handouts, charitable assistance, and remittances from abroad. So how can Gaza support the West Bank's budget ?

The answer is a massive influx of cash from Iran; most of it is in US Dollars, which are smuggled through the dozens of illegal tunnels from the Sinai Desert, or hand-carried over the frontier with Egypt. That is how most of the US currency arrives in Gaza. The dollar's universal acceptance eliminates the need for Middle East donors to acquire Israeli Shekels, not any easy task if you are an Iranian government agency seeking to prop up Hamas.

So how is this relevant to me, as a compliance officer in an international bank ? These notes have to come from somewhere; Iran needs sources of supply of greenbacks. Should your bank, through what I can only describe as compliance malpractice, assist in the acquisition and transfer of millions of US Dollar notes, from Iran (a sanctioned entity) to Hamas (another sanctioned entity),  it is guilty of providing material support to a designated terrorist entity.

Where do the greenbacks come from ? Here are some of the jurisdictions where banks (or governments) have assisted in the purchase of dollars for Iran:

(1) Iraq; It allows Baghdad banks to sell dollars freely, and does not restrict cross-border transactions. The Kurdish  Regional Government region is also especially complicit in dollar sales to Iran.

(2) Venezuela; its cooperating government actively assist Iran in the acquisition of dollars.

(3) Switzerland; some of its banks continue to work with Iran, ignoring international sanctions in favour of lucrative profits.

(4) Malaysia; Also aiding in sanctions evasion in the purchase of goods on the international market.

(5) Panama; a major player in Iran's sanctions evasion programme, often with Venezuelan businessmen.

In the event that the government in the West Bank agrees, and Gaza funds begin to flow east, you will want to carefully monitor any large requests for dollars from an existing client. I do not care how respectable they are, find out why they need these notes.

  Please ensure that the end user of dollar notes you ship out for a client is NOT Gaza, who is sending them to the West Bank, to meet its payroll needs. Irrespective of the beneficiary, Hamas is a specially designated terrorist organisation, whose leaders have made some extremely bellicose statements about Israel lately, and the people at OFAC and FinCEN have read most of them. Do not underestimate them when it comes fines & penalties.

VIKTOR BOUT'S MONEY LAUNDERER IS DENIED BAIL IN AUSTRALIA

Richard Chichakli, the Syrian-American Accountant who is alleged to have been Viktor's money launderer and CFO, has been denied bail in Melbourne Magistrate's Court in Australia. Chichakli is being held for extradition to the United States, where he faces Federal charges of money laundering, and violation of the IEEPA, which were filed in 2009 in New York. Viktor Bout was also charged, but under US law he cannot be tried in this case, for his extradition from Thailand was on other charges.

He had requested bail due to Special Circumstances, citing:
(1) Harsh prison conditions in the city's Metropolitan Remand Centre.
(2) The likelihood that the court process surrounding his extradition was expected to long and complex.

The sitting magistrate denied his request, ruling that there was a substantial risk of flight, and that the detainee, who had taken six overseas trips since he entered Australia in 2010, had the capacity and motivation to do so. Chichakli had entered the country with a Syrian passport identifying him as Jehad Almustafa, along with a Russian girlfriend, and had duly obtained a visa. When he applied for a Protective Services Officer position, and was fingerprinted, his Interpol Red Notice surfaced.

Chichakli* has indicated that he will contest extradition, because the US charges do not exist under Australian law. He is being held under maximum security conditions, in solitary confinement, as a escape risk. His next scheduled court appearance will be on 12 March, when the United States formally presents extradition documents.

Richard Chichakli in court in Australia

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* Chichakli has been linked to Bout's shipments of advanced Russian-manufactured weapons to Hezbollah, when he resided in Syria, after fleeing the United States.

IRAN LIES ABOUT THE 300m CHEQUE SEIZED IN GERMANY

Officials in Iran are scrambling to spin why the former Governor of the Central Bank was caught by German Customs authorities, attempting to smuggle in a cheque for 300m Bolivars (USD$70m). The official line from Tehran is as follows:

(1) The individual caught with the cheque, Tahmasb Mazaheri, whom they claim is not longer in government, is now an adviser to Kayson Company, a major corporation in Iran.

(2) The money supposedly was for the company's financial needs in Venezuela; it signed an agreement with the Government of Venezuela in March 2006, to build 10,000 public housing residences there. It may have never been built, for in 2010, it was still in the planning stage, and the Kayson website has nothing more current since that date.

(3) The Iranian Government alleges that the payee on the cheque is an unnamed executive at Kayson, and that it was signed by a Bank of Venezuela director "who was in Iran,"  and that Mazaheri was en route to Venezuela to deliver the cheque.

Now, my response:

(A) Kayson, an Iranian company that has a Venezuelan subsidiary with the same name, has been listed by both the UK( in 2010) and Canada as a procurer of goods and equipment for Iran's illegal Weapons of Mass Destruction (WMD) programme.

(B) No company of this size, and with this WMD responsibility, could exist in Iran unless it was government-controlled.

(C) Since when are company officials named as payees on multi-million dollar cheques that are intended for the company ? This simply is not a generally accepted business practise. Note that they have not named the payee; probably because he is a well-known PEP; most direct payments like these to PEPs are either bribes or kickbacks, in my thirty years of experience.

(D) The cheque was "signed" in Iran by a director of the Venezuelan bank ? This means that cashier's cheques from the Banco de Venezuela are being used in Iran to evade international sanctions. I was a money launderer for ten years; they insult my intelligence with this story.

(E) Who flies into Germany, via Turkey, whilst purportedly traveling to Iran ? He's going in the wrong direction, readers. Observers of the Iran-Venezuela connection know that there are direct flights, operated specifically for joint business matters. He was obviously moving these funds in the European banking structure, and I would love to know what bank was his intended destination. Switzerland  perhaps?

Remember well that my previous enquiries, as to the nature and purpose of the funds, indicate that the payment was a kickback for Venezuelan purchase of ballistic missiles from Iran. Whatever this money was for, it was certainly NOT a payment, in transit, to pay for public housing.

To the the spin-masters in Tehran: please try to construct a more plausible story next time your people get caught.
  

PANAMA TAKES THE EASY WAY OUT ON BEARER SECURITIES

After all that excitement, generated in the Republic of Panama when statements coming from members of the National Assembly led us to believe that the country's notoriously abused bearer shares would soon be relegated to the past, we learn that it was all smoke and mirrors. Bearer securities is Panama are not going way; the "reforms" appear to be little more than window dressing. Apparently, the OECD exerted pressure for reform, but they only got a sham. I would suspect that most prominent law firms in Panama City lobbied hard to prevent their golden goose, the lucrative fees that they earn to form, and manage corporations, from being killed. Remember, in Panama, only an attorney can form a corporation.

The latest information, from the National Assembly and the Cabinet, is that securities will be placed in the hands of an authorised custodian. This arrangement, which has been touted in other countries in the region as a solution, is neither effective nor logical, in a country where the rule of law often is dictated by the payment of bribes to the judiciary. Clearly, it only works where justice prevails, where custodians are held personally responsible for the criminal activities of those who have Beneficial Ownership and control of the corporate entities. This will not, with rare exceptions, occur in Panama, in my humble, and jaded, opinion.

Only when the names of beneficial owners must be duly and publicly registered, in a sworn document, filed by the attorneys for the corporation, will we ever properly identify the Beneficial Owners of Bearer Securities.

LARGE BULK CASH SEIZURE AT US BORDER

US Customs and Border Protection agents at the Lincoln-Juarez Bridge border crossing, in Laredo, Texas, have detained a US citizen from Chicago attempting to enter Mexico with $460,060, concealed in twenty bundles hidden in his Dodge Ram pickup truck. The individual had failed to declare the currency.

Unlike most large cash seizures made at the frontier, the identity of the detained party was not disclosed, nor was any information released as to whether he was charged with bulk cash smuggling, an offence that carries a maximum Federal sentence of five years, raising the presumption that he is cooperating with the authorities, and his name is being properly withheld so as not to reveal details of an ongoing investigation.

HOW THE ANONYMOUS CARDS ARE FUNDED

The question has arisen: how does the money get into the anonymous prepaid debit cards a/k/a stored value cards ? The vast majority, which originate in Venezuela, are funded in this manner :

(1) The card user has one of a number of prominent Panama City law firms form a corporation ( bearer shares, of course) and list the firm's partners as the sole officers and directors. They may also hold a Carta de Poder, or Power of Attorney, to act on behalf of the the corporation. With the corporate documents in hand, the lawyers open one or more bank accounts, as they are well known at the bank; the client's name never surfaces.

(2) The card user purchases a number of prepaid debit cards that have no owner/user identification information inscribed or embossed thereon.

(3) The money, either in the form of cheques, drawn on Venezuelan banks, or cash, bulk cash smuggled into Panama's principal private aviation airfield, is brought into the Republic.

(4) The bank accepts the deposits without performing any Customer Identification Procedure on Beneficial Ownership of the corporation, or requesting any information regarding Source of Funds, or any details of the client's lines of business, or business operations. Essentially, there is zero compliance.

(5) The customer can now authorise the bank to top off, or upload, any sum from the account, on into the prepaid debit card account, using the account number on the reverse of the card. If you have not seen the image that I posted, look below. He can now redeem the funds anywhere in the world.

"CAPITAL FLIGHT" FROM VENEZUELA TAKES OFF

There are persistent accounts of increased capital flight out of Venezuela, believed to be driven by fears of a post-Chávez crackdown. Three senior officers of the Banco Central (Central Bank of Venezuela) are said to be personally managing and directing the flood, taking advantage of the confusion, and jockeying for power of the three competing groups, the pro-Cuba faction, the independent faction, and the military, to loot government accounts and stored cash funds. They are acting on orders from those in command, to move funds overseas.

(1) Look for any unusually large funds transfers, especially in US Dollars, and possibly in bulk cash, coming from Venezuela.

(2)The transfers may appear to be the property of large corporations, when in truth and in fact, they are coming from prominent PEPs.

(3) Remember to check the names on wire transfers for government-controlled corporations.

(4) If the transfer purports to be payment for goods or services, verify the story.

TWENTY DISTRIBUTORS OF ANONYMOUS PREPAID CARDS ARE OPERATING FREELY IN PANAMA

There are more than twenty companies, currently operating in the Republic of Panama, who are distributing anonymous prepaid debit cards*, and which are not requiring the customers to properly identify themselves, or to disclose the Source of Funds. The cards are uploaded prior to delivery; there is no limit on the number of cards a user can acquire, and they can be redeemed literally anywhere in the world. The number of criminal, terrorist financing, and sanctions evasions uses for these cards is infinite.

Who owns these companies, and how did they obtain government approval to operate ? Some of the individuals involved are close relatives of senior government officials; others are known to have made substantial payments to corrupt officers in the relevant regulatory agencies. These illegal payments actually continue to be made after the necessary approvals are obtained. Employees at the card companies' local offices are also allegedly receiving illegal gratuities to approve these companies.

Why are anonymous prepaid cards such a major industry in Panama ? Inasmuch as a significant number of the parties involved are known to be Venezuelan nationals, (some of whom who have accounts at the Venezuelan banks with branches in Panama City), and their illicit purposes, and uses for these cards, include:

(1) Evading the global sanctions in place against Iran.
(2) Terrorist financing: criminal profits, earned by Hezbollah Venezuela, being transferred to Beirut.
(3) Funds obtained by corrupt Venezuelan Politically Exposed Persons (PEPs), being bribes, kickbacks, government money stolen from accounts, and money from padded government contracts.
(4) Narcotics profits.

Though complaints regarding some of these companies were filed with the appropriate Panamanian ministries in the past, investigations have not been conducted, and it is understood that certain corrupt officials were responsible for quashing all enquiries. These same officials are alleged to have received illicit compensation from operators of the anonymous card companies.

Likewise, though complaints were also lodged with senior local officers at the card companies, in Panama City, these were also dismissed out of hand, without any investigation.

Some of these anonymous card distributors are now believed to be under investigation in Panama City. When more information becomes, known, we shall update this story. If a bank customer attempts to give you a debit card that does not have his or her name imprinted upon it, make a copy of the card, decline to accept it, and immediately report it as a suspicious activity, to your regulator, and to bank counsel, who may choose to notify law enforcement.
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* These cards are also known as Stored Value Cards.

THE SEIZED 300m Bs CHEQUE WAS A KICKBACK FOR IRANIAN MISSILE SALES TO VENEZUELA

Readers who were asking themselves today what on earth that cheque* for three hundred million Bolivars (equivalent of USD$70m), seized, upon arrival in Germany from the ex-Governor of the Central bank of Iran was for, we have your answer. The information may cause you some discomfort if you live within range of Venezuela's newly-opened ballistic base** on the Caribbean Sea, though, like Miami or New Orleans.

The money in the cheque was a kickback for facilitating a massive sale of Iranian ballistic missiles to Venezuela. The individual who was attempting to smuggle it into Germany, Tahmasb Mazaheri, was responsible for arranging the arms sale. He may no longer control the Central Bank in Tehran, but he obviously remains a powerful figure in Iran.

So, to anticipate your next question: Why Bolivars and not dollars ? The story is that dollar-strapped Venezuela was, at the time, unable to put together $70m, so they were forced to pay him in Bs. Don't you wonder where he was taking that cheque for deposit ?
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Note: if you missed either of the two relevant articles, you can access them here:
*German Customs seizes 300 Million Cheque from former Governor of Central Bank of Iran
**Venezuela has become a Clear and Present Danger to the United States

PONZI SCHEMER'S WIFE PLEADS GUILTY TO MONEY LAUNDERING AND TWO OTHER CHARGES

Kimberly Rothstein, considered by some to be the free-spending "trophy wife" of convicted master Ponzi Schemer, and former attorney, Scott Rothstein, last week entered a plea of guilty in US District Court in Fort Lauderdale, to three counts;

(1) Conspiracy to Commit Money Laundering; She illegally sold, and attempted to sell, over $1m in jewelry, acquired by her and her husband during his billion dollar Ponzi scheme.

(2) Obstruction of Justice; the defendant denied having possession of the jewelry, when US Marshals were accumulating Rothstein's assets in the bankruptcy of his law firm.

(3) Witness Tampering; she was accused of asking her husband, then imprisoned for 50 years, after his
conviction, to lie under oath about a fictitious prior sale of the jewelry.

An individual who is reportedly her best friend, pled guilty to the same charges earlier that day. Stacie Weisman admitted assisting Kim Rothstein in the jewelry sales. Kim's personal attorney, Scott Saidel, had earlier also entered a guilty plea to the same charges.

Mrs. Rothstein faces a maximum of five years in Federal Prison; sentencing is scheduled for 19 April.

Mr. & Mrs. Rothstein, and then-Vice Presidential Candidate Sarah Palin

THE DARK TRAIL OF ANONYMOUS PREPAID CARDS BEGAN IN GIBRALTAR - UPDATED WITH CARD PHOTOS

Several readers have, after reading last week's article, "Alert for Distributor of Anonymous Prepaid Cards in Panama", asked how an unlicensed entity could have been able to create, and manage such an illicit enterprise. The operators, who sold what are referred to as "metal cards*," violated every compliance principle in the book. How did they get started in the first place ? Read on.

The anonymous stored card scheme utilised a clever multinational pipeline to evade regulators and law enforcement agencies;

(1) The corporation, which was formed in Gibraltar, obtained Principal Issuer Licenses from MasterCard and Visa. It is not a bank, but a seemingly legitimate financial services business, albeit one whose sole purpose is to as as a vehicle through which to gain entry into the global card payment structure.

(2) The Gibraltar company then sponsored a UK entity with the two credit card giants. Again, no local laws were violated

(3) The UK entity then distributed anonymous cards in the Republic of Panama, notwithstanding that it had no license to do so, nor was it properly registered in the jurisdiction.

Note that these are NOT the types of cards that are reloaded by users whose names are imprinted upon the face of the cards. These are blank cards, with no identification thereon. Sometimes referred to as "white cards," they can traverse most international frontiers without violating local laws on currency movement. Large amounts of funds are "topped off," as they say in Gibraltar, meaning that funds are uploaded prior to their delivery. Again, absolutely no Customer Identification or Source of funds enquiries are ever conducted. The user can take his or her criminal proceeds anywhere in the world and redeem the value, again without a paper trail. Billions of dollars in illicit funds, originating in Venezuela, Colombia and Mexico, have been adroitly and safely placed, using the anonymous stored card.

Look at the advert below:

"Does not require identification"
"No application and no credit check"
"No bank account required"
"Chip and PIN security"
"Accepted at more than 25m establishments"
"Purchase securely on the the Internet"

One client mentioned to me his story about moving into a suite of offices in Bermuda, and finding a large cardboard box on the floor, obviously left behind by a prior tenant. It was full of redeemed prepaid cards; obviously someone needed to covertly move funds, and knew that the transport of prepaid or stored value cards leaves no financial footprint. That is just the tip of the iceberg, for most experts now feel that stored value cards have, in many cases now replaced bulk cash smuggling,

Unfortunately, the Panama situation is soon be get worse. The individual I named in the article I mentioned above, and his partners. have actually formed a card processing company there. This entity will allow them to directly process, and redeem, the value from prepaid cards, through the actual financial pipeline of the credit card companies, again without checking on Source of Funds.

Apparently, it is all being facilitated through the offices of a  senior corrupt card company executive in Central America, who is reportedly being amply compensated for vouching for the criminal organisations that are in the anonymous prepaid card scheme. There appear to be several international law enforcement investigations in progress regarding the issues I have discussed, and expect an additional article with details shortly on this blog.
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*The number on the reverse of the card you see above is NOT a PIN number;  it is the user's personal account number, so that he or she can top off the card anywhere. The bank where the cash is on deposit is not identified, nor is it known to me at this time.

GERMAN CUSTOMS SEIZES 300 MILLION CHEQUE FROM FORMER GOVERNOR OF CENTRAL BANK OF IRAN

Detained: Former ICB Governor Mazaheri

By far, the most disturbing story to break this week is the seizure of a cheque, in the amount of 300m Bolivars ( USD$70m), from former Iranian Central Bank Governor Tahmasb  Mazaheri, who attempted to smuggle the instrument into Germany, without reporting it, in his carry-one luggage. The cheque was drawn on the Banco de Venezuela (Bank of Venezuela), a government-owned bank in Caracas. it has been impounded by Germany; Mazaheri's custody status remains unclear at this time.

Mazaheri had flown in from Turkey, but his travel had originated in Tehran. It is not known whether German Customs had inside information about the cheque, or whether he was profiled, due to his status as a long-time senior official of the Government of Iran. His current title, since he left the Central Bank of Iran in 2008, is not known, which could indicate that the nature of his current assignment is deemed to be classified by Iran. Is he directing Iran's massive international sanctions evasion programme ?

No further information is available regarding the cheque, or the named payee, but it should be assumed that it is a cashier's cheque, or some sort of official cheque, for few accounts in a bank in Venezuela would hold a sum of that size, nor would most banks wish to clear such a negotiable instrument if it appeared to be a private cheque, even if from a major corporation, from Venezuela.

The Government of Iran has been extensively using Venezuela to evade global WMD and ballistic missile sanctions, but the use of Venezuelan Bolivars to disguise Iranian funds has not been seen before. Whether this is a money laundering operation, designed to move Iranian funds into EU banks, to purchase goods and service, is not known. Iran may be avoiding the use of The Iranian Rial, which continues to depreciate against international currencies, altogether, and it could be exchanging its US Dollars with Venezuela, which is in dire need of hard currency, as the Bolivar continues to drop in the unofficial exchange market.  In any event, Germany has opened an investigation into possible money laundering.

A statutory fine, of $1.4m, for failing to declare the instrument, awaits Governor Mazaheri.

OFAC FINES CALIFORNIA COMPANY FOR SHIPPING SPARE PARTS TO UAE FOR IRAN

The Office of Foreign Assets Control (OFAC) closely watches sales, from American companies to countries that are known transshipment points for Iran, and often imposes substantial fines & penalties upon violators. This week's name and shame* goes to a Gardena, California supplier of spare parts and supplies used upon offshore drilling rigs.

The company named sent eight shipments of parts to a United Arab Emirates company, which were intended for an offshore drilling rig located in Iranian waters. The right owner and operators are both located in Iran, and both are blocked pursuant to E.O. 13382.

OFAC imposed a civil penalty of $ 97,695, and the company was required to implement an OFAC compliance programme. Note that the company did not disclose the transactions to OFAC, it learnt of the violations through other sources.

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* Enforcement Information for February 1, 2013. 

LAW FIRM FOR CONVICTED PONZI SCHEMER SUED BY TRUSTEE

Banks where a Ponzi schemer was a valued client are not the only entities who end up being sued, when action is taken to assemble assets for the benefits of victims and creditors in a bankruptcy proceeding. Professionals who facilitated the fraud are also often targeted.

The court-appointed trustee for a company involved in the $920m Nevin Shapiro Ponzi scheme has brought a civil suit, in Federal Court*, against the national law firm that represented Shapiro, as "defacto general counsel," and an attorney in the firm who was a childhood friend of the fraudster.

Joel Tabas, who is seeking to acquire funds to repay the victims, who invested large sums in a bogus grocery brokerage business, operated by Shapiro, has brought a "clawback"suit against Shook, Hardy & Bacon, and Marc Levinson, an attorney at that firm who was a childhood friend of Nevin Shapiro, alleging that the firm aided and abetted in the Ponzi scheme. Attorneys for the law firm and Levinson have filed denials, and Affirmative Defenses, in the litigation.

The Plaintiff alleges that the law firm negligently supervised its client, engaged in what appears to be legal malpractice, and committed securities violations, with regard to promissory notes issue by Shapiro to his victims. These are very serious charges, and the trustee prove them through a preponderance of the evidence, which is the level required in civil actions, in order to prevail at trial.

We shall be monitoring future developments ion this case.
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*Tabas vs. Shook Hardy and Bacon, et al, Case No.: 12-cv-20080-JEM (SD FL).

PONZI SCHEMER ROTHSTEIN'S WIFE'S ATTORNEY PLEADS GUILTY TO MONEY LAUNDERING

Fallout from the billion dollar Ponzi scheme perpetrated by convicted Attorney Scott Rothstein continues. Yesterday, Rothstein's wife's attorney, Scott Saidel*, entered a plea of guilty in US District Court in Fort Lauderdale.

Saidel, who assisted Kin Rothstein in hiding, and later selling, or attempting to sell, $1m in jewelry that her husband had bought with criminal proceeds, has pled to:

(1) Money Laundering Conspiracy.

(2) Obstruction of Justice.

(3) Witness Tampering.

Saidel, who is from Boca Raton, Florida, forfeited jewelry of his own, $65,000 in cash, and other assets. He faces five years in Federal Prison when he is sentenced on 7 June.
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* Case No.: 12-cr-60204-RSR (SD FL).