PANAMA'S FORMER SECURITIES REGULATOR, FACING CORRUPTION CHARGES, SUES THE INVESTIGATIVE JOURNALIST WHO EXPOSED HIM

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WIFE OF CONVICTED SUPREME COURT OF PANAMA JUSTICE MONCADA LUNA EXPECTED TO BE CHARGED ON MONDAY

As the investigation into systemic corruption at the Supreme Court of Justice of Panama expands, the spouse of Alejandro Moncada Luna, the imprisoned former Chief Justice of that court is to be charged, in a criminal complaint that is expected to be filed tomorrow. The former judge, in a plea agreement, received five years in prison, and has forfeited two luxury apartments worth close to $2m. The name of his spouse is María del Pilar Fernández de Moncada Luna. The nature of her charges have not been disclosed.

Additionally, reports from Panama confirm that fourteen bank accounts controlled by Moncada, totaling approximately $3m, have been located. Sadly, the Panama City attorneys who formed the opaque, bearer share companies that held this dirty money, which consisted of bribes paid to Moncada to fix cases in the Supreme Court, will most likely never face criminal charges. Panama has historically given its lawyers, who maintain a monopoly on corporate formation under the law, a pass on prosecution, irrespective of the level of their involvement. Until the lawyers who intentionally crate non-transparent entities to secrete illicit wealth are called to account for their actions, Panama will continue to be an offshore banking center of choice for Colombian and Mexican drug traffickers, corrupt Latin American PEPs, and all the other international financial criminals who obtain Panamanian corporations and foundations.

Of course, the best solution would be for Panama to abolish bearer share corporations altogether, as have most civilized countries, but that might disturb the lucrative fees that company formation generates, not just for the government, but for the attorneys involved in formation, as well as the inevitable annual fees paid to both parties, to maintain a corporation in Panama each year.

BLACK MARKET RATE FOR US DOLLAR EXCEEDS 269 BOLIVARS, AS VENEZUELA'S ECONOMY SELF-DESTRUCTS

With the rapid loss in value of the Venezuelan Bolivar, now exceeding 269 to 1 on the black market, and the scarcity of the US Dollar on the streets of Caracas, Country Risk for Venezuela has now reached the level where all transactions with Venezuelan companies, or even the government, are so fraught with risk that they should be totally avoided, under all circumstances. Any existing investment should be immediately liquidated, where possible, even at a loss, lest it be totally destroyed in the near future, when the economy collapses.

 Crime levels in the country are out of control, the rule of law has been totally abandoned in favor of government-directed court decisions, and those in the middle class who can leave, are doing so in droves, if they have not already done so. The imposition of mandatory visas for US nationals means that one may not be able to quickly solve in-country problems with American-owned businesses or investments through a personal visit. In essence, Venezuela has reached the point where only those willing and able to lose their entire investment should contemplate any activity in that country. Things are predicted to deteriorate further, which could mean financial and social chaos and disorder.

LAWYER SAYS RICHARD CHICHAKLI REJECTED SHORTER SENTENCE IN PLEA BARGAIN OFFERED

It may help readers to better understand why Richard Chichakli is pursuing the appeal of his Federal criminal conviction & sentence for violating sanctions: he believes that he is innocent. Chichakli was offered, at first, 38-42 months for a guilty plea, and later, according to his Russian attorney Aleksei Binetsky, a sentence for half that amount. He declined, and demanded a jury trial.

You may recall that he acted as his own attorney in that trial, where a number of the witnesses he requested were not allowed by the Court. Binetsky stated that, has co-defendant Viktor Bout appeared, his testimony would have been favorable to the defense. Bout could not be tried at that tie, because he was extradited solely for another case, and US law prohibits an extradited individual from being tried for any case other than the one he was brought to America for.

Ultimately, after trial, and a guilty verdict, Richard Chichakli was sentenced to five years' imprisonment, plus two years Supervised Release, $70,000 Restitution, a final judgment of $1.7m, and a Special Assessment of $900. His case is pending before the Second Circuit Court of Appeals.

PANAMA ABRUPTLY TARGETS FOREIGN COMPANIES FOR EXCESSIVE AND UNAUTHORIZED TAXES AND FEES

Foreign-owned companies located in the Republic of Panama have received extraordinary demands from local tax authorities, to forthwith pay taxes, fees and charges that are not only unwarranted, but have no basis in law. These fees, which should be considered confiscatory, due to their size, most be paid, according to government demands, or bank accounts, and other assets of the foreign companies will be seized.

In addition, additional fines, and prison terms for nonpayment, have been threatened. Some of the charges levied include:

(1) Taxes for closed and dissolved companies, properly shut down years ago, demanding payments of annual taxes for each and every year since the companies terminated their existence with government agencies.

(2) Social security taxes, for years, notwithstanding that some companies had zero employees.

(3) Capital Gains taxes on the sale of real estate, notwithstanding that such tax laws, imposed briefly by former President Martinelli, were reportedly repealed.

It is noteworthy that companies of Panamanian nationals have not been targeted for these unauthorized taxes and charges. Most observers believe the reason for the imposition of illegal taxes and fees are a crude and desperate attempt by the new government to raise funds for the national budget, which has major shortfalls. Unfortunately, the reaction will probably be that foreign companies, and investors, will flee Panama in droves, resulting in a smaller tax base, and an even greater deficit.

Why the new, reformist, Varela government would engage in these strong-arm tactics is a mystery, because its efforts to date, to root out domestic  problems, have been a breath of fresh air in what was a sewer of  corruption, official misconduct, and rampant white-collar crime. If it appears that the new government intends to become solvent by draining foreign companies of assets, then the net result will be mass capital flight, and a general awareness, by the international community, that one can no longer so business in Panama; That could severely impact the economy, which relies upon its status as an offshore financial center. 

WILL EL PASO LAWYER SERVING 20 YEARS FOR MONEY LAUNDERING PLEAD OUT IN PENDING $32m CASE ?

Convicted money launderer, prominent El Paso attorney Marco Delgado, was scheduled to have oral argument heard on the appeal of his conviction and twenty year sentence yesterday. Delgado has a second money laundering case, which was set for trial this month, but it has been reset for June.

In the second case, Delgado diverted $32m, which was intended for a Mexican public works project, into accounts in his control, located in the Turks & Caicos Islands, and later moved some of those funds back into the United States. He may be negotiating a plea in the second case. The first case received a large amount of attention, due to the fact that Delgado was acting as a confidential informant when he committed the money laundering crimes that resulted in the twenty year sentence.  

REPORT CRITICAL OF HIGH-RISK DATABASES MISSES THE POINT

A white paper, UK Humanitarian Aid in the Age of Counter-Terrorism: Perceptions and Reality*, released this week by the Overseas Development Institute, asserts that British banks are unfairly closing charity accounts, and perceiving bona fide charities that seek to assist victims in the Middle East as terrorist financing threats whose low level of profits for the banks does not justify the risk level that occurs when banking such charities.

There are valid points to be made on both sides of the argument, but my issue with the report is much narrower; it alleges that commercial off-the-shelf databases of high-risk individuals and entities

"Inevitably alert banks to client names that are not on official sanctions and designation
  lists.  How a financial institution chooses to interpret these "hits" is up to the institution
  in question,  but there is no doubt that the proliferation of such unregulated private sector
  compliance tools has increased rather than decreased 'de-risking..' Once a name is flagged
  as potentially risky, it  is far more work for a financial institution to investigate and retain
  a client, than it is to de-risk, particularly if the client in question is of limited
  profitability."  Report at 14.

The report makes much of the fact that one well-known database provider asserted that, in one year alone, it identified more than 180 entities before they appeared on the OFAC list. This is precisely my point; regulators often do not list a sanctioned entity until after exhaustive research and investigation, to ensure that they get it right. Commercial databases operate on a real-time basis, with a large global staff,
and often post information about an individual or entity years before sanctions appear. That is a plus, in my humble opinion. The report's reference to the databases as 'unregulated private sector tools," misses the fact that these private resources will return information needed now by the banks and NBFIs, not two years later.

If a dodgy British charity, sending money to a Middle Eastern country known for a dysfunctional domestic banking system, rampant corruption, and/or terrorist entities, is named & shamed by a private database, that is the correct risk-based outcome. We do not wait years for an official sanction appear,  to act, and there have been many instances of extremely long delays in sanctions imposition on charitable entities, as we well know.

In my humble opinion, the report is blaming the commercial high-risk databases for account closings, when it should cast blame, appropriately, upon charities that, intentionally, negligently, or even accidentally, fund terrorist organizations in the Middle East. Those charities should not have UK bank accounts.
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*http://www.odi.org/sites.odi.org.uk/files/odi-assets/publications-opinion-files/9479.pdf

IS IT FINALLY TIME TO REDLINE BVI COMPANIES THAT WANT TO BANK WITH YOU ?

If you read this week's Transparency International report on the widespread use of non-transparent corporations to hide beneficial ownership of a large portion of expensive London real estate, you saw that over 1/3 of the corporate entities employed for that express purpose were formed in the British Virgin Islands. Considering that tax cheats, corrupt PEPs, drug kingpins, and sundry other sordid types use BVI companies as a matter of course, you may want to prohibit their use by your bank clients altogether, as account owners. While this may sound extreme, it is sound management; You do not want to play Russian roulette with risk.

In truth and in fact, the use of a company from a notoriously opaque corporate jurisdiction increases risk for your bank, whether it be merely tax evasion, or serious criminal or terrorist activities. I believe that it is now time to decline any new account, wherein the client, or his professional front-man, chooses to have it in the name of a BVI company. Give your client the names of acceptable corporate jurisdictions, so that, if he really has a bona fine need for a company from an offshore tax haven, he can still find one that you can live with, and you can keep his business.

Kindly stand your ground with this policy; and any client who refuses to switch to an acceptable jurisdiction is not worth having anyway, in a risk-based environment. You can do without a corrupt Chinese general, a Venezuelan drug kingpin, or a billionaire PEP who never had even a six-figure salary; many of them are known to use BVI companies to hide their illicit wealth.

  

PANAMA'S IMMIGRATION SCANDAL INCLUDED COUNTERFEITING OF US VISAS

While most Panamanians are focused on the exploding immigration scandal, in which government officials, including former President Ricardo Martinelli, are accused of selling visas that afforded them entry into Panama, especially for nationals of China & India, there is a darker side to this illicit enterprise. Counterfeit visas, which allowed the holders to illegally enter the United States, were also available to those who could pay the obscenely high fees charges by the conspirators engaged in the fraud, who reportedly worked from hotel rooms, to conceal their activities.

If you remember our previous articles about how Syrian, Lebanese and Iranian nationals, working for designated terrorist organizations, arrive in Venezuela, and readily obtain Venezuelan passports ( and Spanish-language surnames) and Cédulas (national identity cards), which give them easy entry into Panama, it gets worse. These individuals then buy bogus US visas, which allow them to enter the United States without incident. Panamanian sources advise that over one hundred of these Middle Eastern terrorist agents have used the bogus American visas to enter the United States.

American authorities are aware of the existence of these phony visas, as passports confiscated from nationals of other countries have been found to include them. From a compliance standpoint, banking individuals whom you believe to be Venezuelan nationals, presents a risk that they are actually Middle Eastern terrorists with bogus papers.

Remember, your bilingual staff should be able to determine, from a short conversation, whether the individuals you are looking at, are really Venezuelans. Their lack of fluency, accent and slang, which are peculiar to Venezuela, should give them away.  Their place of birth, if accurately listed on the passport, should also provide a clue. The bottom line: one cannot trust that individuals who present identity documents indicating that they are from Latin America, are truly Latinos.

 Ask questions that only individuals who are immersed in Venezuelan popular culture will know; make a passing reference to a Venezuelan national holiday linked to the country's history, and see if you spot a blank look, instead of an answer. Eliminate the posers, lest your bank be later implicated in a terrorist financing nightmare.

PONZI SCHEMER FRANCISCO ILLARRAMENDI APPEALS HIS SENTENCE

Attorneys for the convicted hedge fund Ponzi schemer, Francisco Illarramendi, have filed a Notice of Appeal from his 156 month sentence. If you have been following the case on this blog, you know that, notwithstanding that his Guidelines sentence was Life in Prison, Government prosecutors in his case recommended at least 12 years; the Court gave him thirteen.

In his sentencing memorandum, the defendant's attorney argued that the facts supported a sentence that would have resulted in time served, for he has been in custody for two years, after his bond was revoked. I expect that they will assert the same issues in the Court of Appeals.

Mr. Illarramendi, instead of admitting that his sentence was fair, now looks for relief before the appeals court. Frankly, the Government did him a huge favor when it ignored the Guidelines. If, for some reason, the case does come back down to the trial court for re-sentencing (though it is doubtful), perhaps someone at the US Attorney's Office might want to reexamine the position of that office, and seek to impose the Guidelines life sentence. Such a move might cause defense attorneys, who represent Ponzi schemers in future cases, to reconsider appeals which are arguably frivolous. 

CAN YOU PROFILE HEZBOLLAH FINANCIERS OVERSEAS ?

Pro-Hezbollah parade in Nigeria.

The OFAC sanctions imposed recently, against expat Lebanese in Nigeria, who were providing material support to Hezbollah, means that there is a valid risk you are unwittingly banking overseas Lebanese who are working with, and supporting that specially designated global terrorist organization. Can you accurately profile possible Hezbollah members ? Hezbollah reportedly is operating in 45 countries, including 11 in Africa.

Let us take a quick look at the Nigerian case; the individuals who were sanctioned:

(1) Were wealthy Lebanese businessmen working and living in Africa. This is not an unusual occurrence.
(2) Reportedly hid weapons inside their amusement park; they also owned a supermarket, which is coincidentally a cash-intensive business.
(3) Were probably have been involved in the attempted covert importation of weapons into Nigeria, which was seized by Nigerian authorities while in transit.
(4) Maintained an armory in the city of Kano.

Exactly how does one determine whether specific Lebanese expats who are working in your country, and banking with you, have a high probability of being associated with Hezbollah ?

(A) We can probably eliminate those Lebanese expats, who are second- or third- generation locals with little or no ties to their country of origin.
(B) We can also rule out Lebanese who are Christians.
(C) We should include any Lebanese who are Shiite Muslims, as are Hezbollah.
(D) Was the individual born in Lebanon, and a naturalized citizen of your country ? That was the case with the sanctioned persons in Nigeria. Does he have multiple passports/citizenships ?
(E) Does the individual engage in international travel, though his business does not seem to require it ? Has he been to Beirut more than once a year ?
(F) Does the individual seem to be pious, with respect to his practice of his religion ?
(G) Is he sending "profits" back to Lebanon ?

You may want to take a close look, unannounced and in the field, at his stated business or occupation. Is it genuine, or does it appear to possibly be a front ? I would rather that you identify any Hezbollah operators early on, before a terrorist attack occurs, and your bank is named as the facilitator of funding that operation, or of sending money to Hezbollah's global headquarters in Beirut. The Nigerian contingent, who identified other Hezbollah agents working in Nigeria, intended to attack Western and/or Israeli targets; The financial and reputational damage arising out of negative publicity surrounding any banks involved, even indirectly, in such acts cannot be measured.

TD BANK VERY QUIETLY PAYS $67m JUDGMENT FOR ROTHSTEIN PONZI MISCONDUCT

TD Bank has paid the $67m judgment entered against it last year, awarded in US District Court in Florida, for facilitating Scott Rothstein's billion dollar Ponzi scheme. Though there was no announcement by the bank, nor any press on the payment. Plaintiff's counsel filed what amounts to an acknowledgment that full payment was made, just prior to the deadline set by the District Judge*. I did later find a note on it in a relatively obscure Ponzi website, PonziTracker, that was reprinted on plaintiff's law firm's website; Mainstream press ignored it.

Although the Eleventh Circuit Court of Appeals affirmed the District Court verdict and judgment, the Bank recently filed what it captioned as an "Amended Appeal, " apparently still looking to overturn the judgment, though it is debatable whether it has any chance of success. What is important is that the Bank was held accountable for the actions of an ambitious senior officer, who knew that there was no truth behind his statement to the victims, concerning the existence, and safety, of funds they were relying upon to be paid on their "investments," the so-called lock letters, which were bogus.

While the Bank is certainly entitled to the best defense that it can muster, and afford, in any civil suit, its conduct, and that of its former counsel,  demonstrated a bare-knuckle approach to litigation, that at times, went over the line, and was soundly sanctioned by the Court. This case will be remembered, as it demonstrates that the lure of lucrative profits can blind a bank officer to his responsibilities, and that a bank can be found liable for his misconduct, where it causes damage to third parties.

Let us hope that Coquina Investments vs. TD Bank will remind banks to always double-check their best clients periodically, to ensure that their activities are not only legitimate, but that suspicious activities of the clients are not being covered up by bankers who are deriving benefits from client fast-track success stories that are really financial crimes.
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* Plaintiff's counsel also advised the Court that the $9m paid to the client, by the RRA Receiver, has been refunded forthwith, thereby deflating the Bank's often-stated position, that the Plaintiff would reap a double recovery, if it paid the judgment. Did the Bank actually believe that plaintiff's counsel would permit that ?     

FINANCIAL PACIFIC FACILITATED ARMS SALES TO TERRORIST ORGANIZATIONS

in addition to its central role in the Petaquilla Mining Ltd. insider trading scandal, the Panama City securities broker Financial Pacific operated as a clearinghouse for illicit cash, which was employed by Panama's organized crime group to purchase arms and ammunition in Venezuela, for shipment to the Middle East and Africa. The source of the dollars was a combination of Colombian and Venezuelan narco-profits, money obtained through white-collar crime perpetrated in Panama, leftover cash from David Murcia that was taken for investment and never returned to him, and sundry other criminal enterprises.

The cash was smuggled into Venezuela, through Panama's Free Zone, in food items exported there. Extracted, the currency ends up in the hands of CAVIM, the acronym for Compañía Anónima Venezolana de Industrias Militares, the government-owned arms factory, and is used to purchase weapons and ammunition. These items are then shipped out, to users in the Middle East and Africa, including a number of specially designated global terrorist organizations.

The Panamanian organized crime group, which is composed largely of Panamanians of Middle Eastern ancestry, reaps an obscene profits from the weapons sales, which could not occur without the assistance of Financial Pacific, which some observers have asserted was largely controlled by former Panamanian President Ricardo Martinelli, who is known to have played a central role in the Petaquilla mining insider trading scandal, and which was orchestrated by Financial Pacific.

As more information surfaces regarding Financial Pacific, referred to by some Panamanians as "a pit of vipers," its involvement in other criminal activities is exposed to public view. FP's illicit operations were pointedly ignored by government regulators in securities and business regulations, whose ministers received bribes to close their eyes to widespread money laundering and fraud.

ORAL ARGUMENT SET FOR NEXT WEEK IN MARCO DELGADO 5TH CIRCUIT APPEAL

Marco Delgado Esq.

The Fifth Circuit Court of Appeals, which sits in New Orleans, has scheduled oral argument of Marco Antonio Delgado's criminal appeal for March 5, 2015. The case has attracted a large amount of public interest for a variety of reasons:

(1)  Delgado was a prominent El Paso attorney, with important connections in the Mexican political structure. Why would he cross the line, and jeopardize his lucrative law practice ?
(2) Caught red-handed laundering drug proceeds, he became a confidential informant for law enforcement, but continued in a life of crime, apparently right under the nose of his handlers.
(3) Why was he kept in a long string as an informant, which allowed him to engage in a multi-millon dollar diversion of capital, from a Mexican public works project ?
(4) Was he also tasked with obtaining information about Mexican internal politics ?
(5) Was this really a selective prosecution, meaning that he was charged, while others similarly situated were not ?
(6) Why did he stubbornly resist entering a plea, in a case that he had a very poor chance of winning at trial ?

If the Court found the appellate issues compelling enough to grant oral argument, there must be something there that caught the judges' interest.

PANAMA'S ANTI-CORRUPTION ORGANIZATION CLAIMS 300 CORRUPT PEPS ARE MILLIONAIRES

The Secretary-General of the Anti-Corruption Front of Panama, in a press conference, announced that corruption, at the highest level, pervades the government, and must be rooted out. He stated that the organization's investigation uncovered 300 corrupt PEPs in government, all of whom have become millionaires, due to their participation in corrupt activities.

He further indicated that 89 of the corrupt PEPs were from former Panamanian President Ricardo Martinelli's administration. Martinelli fled Panama, after his attempts to obtain immunity through membership in the Central American Parliament were unsuccessful; he claims to be in the United States, but there have not been any sightings there to confirm that, and insiders in Panama assert that he is living in palatial splendor in Paraguay, where he cannot be extradited.

The other bombshell dropped this weekend by the Secretary-General, Zulay Rodríguez: Some of the illegal profits earned in the Financial Pacific went for the purchase of arms, which were destined for terrorist groups located in the Middle East. This information was obtained from witnesses who have first-hand knowledge of the matter. The names of the terrorist organizations have not been disclosed.

We are monitoring unfolding investigations in the Republic of Panama, and will continue to report in all developments as they occur. Only a few names have surfaced, regarding the three hundred PEPs who are said to have enriched themselves through corruption, but the announcement alone is sufficient to require compliance officers at banks in North America (especially Canada) and the European Union, to revisit all their wealthy Panamanian customers, and initiate enhanced due diligence forthwith, to identify, and exit, any whose assets cannot be explained by legitimate income sources.