HAPPY HOLIDAYS FROM MIAMI, THE MAGIC CITY

The Financial Crime Blog will be back after Boxing Day. Enjoy your time off; 2016 promises to be even more difficult for compliance officers than this year was.

COMPLIANCE ALERT: AVOID STATE OF PALESTINE PASSPORTS TO BE ISSUED IN 2016

Current PA passports

The Palestinian Authority, which has administrative control over portions of Judea and Samaria, formerly known as the West Bank, when Jordan annexed it, and controlled it from 1948 to 1967, has advised that it will, beginning in 2016, issue passports entitled "State of Palestine," to its residents.  Ignoring politics, the compliance ramifications of accepting this passport, for any purpose, are extremely dangerous.

If you know your history, you know these passports represent a problem. Arabs residing in Judea & Samaria do not have "Palestinian" citizenship, because there is not an independent, sovereign state, nor has there ever been one. Most of them hold Jordanian passports, or have the ability to acquire one, but such documents do not confer either nationality nor the right of residence in Jordan, which is 60-80% Palestinian, according to most estimates. Jordan was 77% of the original British Mandate of Palestine, until the UK severed it, placing a Hashemite ruler upon the throne. These Jordanian passports held by Palestinians are, however, recognized in many countries as acceptable travel documents.

History aside, the massive level of corruption in the Palestinian Authority means that literally anyone who has sufficient cash will be able, one way or another, to secure one of these new passports. this means members of Specially Designated Global Terrorist (SDGT) organizations could show up at your bank to open an account relationship, meaning you could be banking a member of Hamas, Palestinian Islamic Jihad, or some other sanctioned group. There are also Palestinians fighting in Syria with Hezbollah, who could acquire them.

Trust me, there will be no due diligence performed in Ramallah, the administrative capital of the PA, when these passports are issued. Accepting any of them, for customer identification purposes, is inconsistent with any risk-based compliance program. While some EU banks may deem it politically correct to do so, they could be exposing themselves to a charge of Providing Material Support to a Terrorist Organization, in the United States, as US Dollars always seem to figure into terrorist financing operations.  

PANAMA'S SUPREME COURT ORDERS EX-PRESIDENT MARTINELLI DETAINED IN THE US

The Supreme Court of Justice of Panama, in a joint order, has directed that its former president, Ricardo Martinelli, be detained in the United States, and held without bond, pending his extradition to Panama. Martinelli has a dozen cases pending against him in Panama City, the most prominent being his illegal electronic surveillance program, which spied upon 150 of Panama's most powerful leaders, wealthy businessmen, and their wives, which most Panamanians found extremely distasteful, and regard as an espionage operation, directed against the people of the Republic of Panama 

Martinelli, who has been living openly in Miami of late, reportedly expressed anger at the Supreme Court action; his attorneys have been attempting to interpose every technical legal roadblock possible, in a futile effort to delay the cases, including Martinelli's bogus appointment to the Central American Parliament, and denying that he has received proper notice of the proceedings. 

Will Panamanian pressure to extradite a corrupt leader trump Martinelli's alleged deal with the United States ? Most observers have assumed that the rumors about his reputed status, as a Cooperating Individual for a US law enforcement agency, are true. Whether Martinelli ever faces justice in his native Panama is an open question.

ALLEN STANFORD REQUESTS A REHEARING EN BANC OF THE FIFTH CIRCUIT DECISION AFFIRMING HIS CRIMINAL CONVICTION

                                   

The offshore banker/Ponzi schemer, R Allen Stanford, has filed a Petition for an En Banc Rehearing, with the Fifth Circuit Court of Appeals. The Fifth Circuit has previously affirmed his Federal criminal conviction, in an opinion on October 29, 2015*.

Stanford is requesting that the entire Court rehear his case; the Court's October opinion was handed down by three Circuit Judges. The appellant has stated in his petition these grounds:

(1) That the October decision conflicts with other decisions rendered by this Court, also with decisions of other Courts of Appeal, and with decisions of the US Supreme Court.

(2) That "this case involves questions of exceptional importance."

Statistically, most petitions for rehearing en banc present nothing new, and are generally denied. You may recall that most of Stanford's appellate issues had no legal basis. He is currently scheduled for release in the year 2105, meaning that he will die while in Federal custody.
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*United States vs, Robert Allen Stanford, Case No.: 12-20411 (5th Cr. 2015)

THE PRESIDENT OF PANAMA SAYS HIS GOVERNMENT AND BANKS ARE RIDDLED WITH ORGANIZED CRIME

President Varela

Juan Carlos Varela, Panama's beleaguered reform president, has come out and asserted that both his country's financial institutions, and government, have been long infiltrated by powerful organized crime groups, a situation that he will not tolerate. Varela came into office on a reformist platform, and immediately began an anti-corruption campaign, seeking to cashier corrupt judges and government officials from the administration of his predecessor, Ricardo Martinelli, now himself facing criminal charges.

If you saw the photo, posted here Friday, of the large bulk cash seizure that took place in Panama, the fact that the individual arrested was a government employee was only the latest in a string of offenses committed by corrupt government officials and staff members, whose affiliation with known drug gangs is a sad fact of political life in Panama. Likewise, the fact that Panama's firmly entrenched organized crime group, composed largely of individuals of Middle Eastern extraction, owns or controls many of Panama's money laundering banks, has frustrated any efforts to control financial crime in the Republic.

Mainstream Panama city newspapers and television stations refused to carry the president's strong remarks, reinforcing the fact that corrupt influence extends to the media as well.

Some observers, who have questioned why the United States is not very active in the current anti-corruption efforts, and in money laundering investigations, have concluded that the Panamanian financial and governmental structures are so rotten with criminal infiltration, that any effective clean-up is impossible. Foreign capital has been leaving Panama, in significant numbers, of late, and it is not being replaced by new "flight capital" that is legitimate. Is Panama on downward spiral ?  



    

CAYMAN NATIONAL BANK AND THE $5m FINE FOR FACILITATING US TAX EVASION

It is not so much the disclosure, by Cayman National Bank, that it faces a $5m fine, from the United States, due to allegations that two of the bank's subsidiaries engaged in facilitating tax evasion of American customers, as the way in which it publicly reported it. Read the complete text of the announcement, which was buried in the bank's Fourth Quarter Report, and judge for yourself whether the bank's attitude about breaking the law is disturbing. a portion of the statement has been reproduced here, with no corrections or editing:

" Like many financial institutions around the world, including others in the Caribbean, two of Cayman National's businesses, Cayman National Trust Co. Ltd. and Cayman National Securities Ltd., have been under investigation by the US Department of Justice (DOJ) with respect to potential violations of United States criminal laws relating to the evasion of tax by US taxpayers.

 The investigation focuses on mainly past wrong-doing by Cayman National Securities Ltd. and Cayman National Trust Co. Ltd. necessary remedial action within these companies is nearly complete, We have cooperated with the investigation as far as we are able, given the laws of the Cayman Islands...

As a result of our on-going discussions and negotiations with the US DOJ, for this present year reported, we will be obliged to accrue and expense of CI$5 million as a potential settlement amount. This amount is not yet reflected in the unaudited results for the year to 30 September 2015 reported in this announcement....
 
   ... the Board of Directors has decided that it would not be prudent to declare a dividend at this time. "

A few observations:

(1) The amount of the fine may be linked to the bank's net profits for the year, CI$5.6m, which is an increase of 68%, according to the bank. Perhaps the shareholders, who will not be receiving their dividends this year, as the result, will agitate for reform.

(2) Why are "necessary remedial actions" not complete at this time ? Obviously, those who engaged in this conduct must be terminated, but I fear that they were merely reassigned to another department or division.  And why is there no mention of changes to the Compliance program ?

(3) Stating that other banks have also been targeted sounds like the bank is seeking to place blame on the United States; I see no apology here, or anywhere else in print.

Read the above, and judge for yourself. It appears that the bank's statement infers not that it is sorry about its conduct in the matter, but it is sorry that its subsidiaries were caught.

MISSING CAYMAN GANG OF FOUR FRAUDSTER RESIGNS DIRECTORSHIP IN CANADA

Derek Buntain, the president of Dundee Merchant Bank, the Grand Cayman brass-plate bank accused of illegally transferring more than USD$450m, and a reputed member of the criminal conspiracy known as the Cayman Gang of Four, has abruptly tendered his resignation, as a director of Dundee Precious Metals, Inc., a position that he had held for twenty-two years. Dundee Merchant Bank is a defendant in a civil suit, brought by one of the Canadian victims of what some believe is a Ponzi scheme, operated by the Gang of Four, who covertly took possession of investor funds entrusted to the bank. The bank, and Dundee Precious Metals, are both reported to be subsidiaries of Dundee Corporation.

Buntain has been missing and unavailable since the summer of 2015, when the scandal involving the missing money became public knowledge. He has accused, by Sharon Lexa Lamb, of drafting the instrument that was used to deceive investors into believing that B & C Capital, Ltd., a shell company operated by a known fraudster, Ryan Bateman, was a financial institution. Lamb made that statement, in the presence of several eyewitnesses in Grand Cayman, when she was confronted regarding the missing $450m. Journalists have sought to locate him on Prince Edward Island, without success. He has a residence and extended family living there, and a show horse, but he cannot be found after diligent search and enquiry.

Derek Buntain

TD BANK OFFICER WHO AIDED ROTHSTEIN PONZI SCHEME GETS SHORT SENTENCE

Frank Spinosa, the TD Bank Senior Vice President who wrote the infamous "lock letters," which falsely warranted that the bank had large restricted accounts for the investors in Scott Rothstein's bogus court settlement Ponzi scheme, was sentenced this week to two and one-half years in Federal Prison.  Spinosa was terminated by the bank when the details of the billion dollar fraud came to light.

The sentence handed down in US District Court* was shorter than the recommended guidelines, and there were some health considerations, but some observers may question the length of the sentence, inasmuch as the defendant was a banker, and one of the purposes of sentencing is to act as a deterrent, to prevent others, similarly situated, from considering engaging in criminal conduct. Was the sentence to short, given the size of Rothstein's Ponzi scheme, and its impact upon the victims ?

The other issue, which will now not be resolved, since Mr. Spinosa has entered a plea, and there will never be a trial, is whether any other senior officers at TD Bank had any knowledge of the Rothsteib fraud; he was a lucrative client for the bank, and even the most rudimentary due diligence inquiry would have revealed that there were no lawsuits filed, to support Rothstein's claims of a boatload of  employee discrimination, and sexual harassment lawsuit settlements available for investors.

In any event, Mr. Spinosa, who had experienced legal counsel, ends up with a relatively short sentence, when compared to many of the other 28 Rothstein defendants. Whether there will be any others ultimately charged in this scandal, including other TD Bank officers, is not known.
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* United States vs. Spinosa,  Case No.: 14-60257-CR-BLOOM (SD FL).

DRUG CASH SEIZED IN PANAMA

Drug profits continue to flow into Panamanian banks.This is $856,000 in cash, located in the back of an automobile, which was seized in the Republic of Panama in a drug money laundering investigation. According to the authorities, it represents narco-profits generated by traffickers in Guatemala & Honduras.

DEATH SENTENCE FOR CHINESE PEP WHO KILLED BRITISH BUSINESSMAN COMMUTED TO LIFE

A court in Beijing has commuted the death sentence given to Gu Kailai, the wife of the former prominent Chinese politician Bo Xilai, to a life sentence. Gu was convicted of murder in the death of British businessman, Neil Hayward, in a high-profile case that exposed the sordid underbelly of rampant corruption among China's elite. Her cold and calculating nature, and arrogance, caught the attention of all those who considered China as a golden opportunity.

The Gu case, where the greedy quest for bribes and kickbacks, of the two PEPs, was detailed, to the discomfort and pain of the Chinese Government, served as a wake-up call for Western businessmen seeking to turn a tidy profit by doing business in China. Since Gu, most Westerners have become more cautious with China, particularly in matters where their expected conduct, the illegal payment of gratuities, violates the corrupt practices laws of their home country. Bo Xilai is also serving a life sentence, after a conviction for corruption.

THE CAYMAN GANG OF FOUR THREATENED INVESTORS WHO REQUESTED THEIR MONEY

The Cayman Gang of Four had a policy for dealing with their victims; how to discourage any of the over sixty Canadian & American investors who requested that some of their money be sent to them: lie, deny and, if necessary, threaten. When an investor asked for a wire transfer of a portion of their funds, the Gang, and specifically Sharon Lexa Lamb, would throw up any one of an assorted list of excuses, none of which were true.

For example Lamb, who was answering "Dundee" to all callers, notwithstanding that she had been fired more than a year earlier, would tell callers that there were delays, due to compliance requirements, at the 'bank' where the funds were kept. (of course, the money was held by Ryan Bateman's shell companies, not a bank) Alternatively, she would ask the victims for information on their Source of Funds, even though the money had been passed through two prior financial service firms in Canada. These were lies to delay access to the clients' money.  Was this a violation of her fiduciary obligations ? You bet it was.

Finally, when these excuses were ineffective, Lamb would threaten to turn in the victim to his or her the tax authorities, reporting them for tax evasion. Whether some of the victims had not reported all their income on investments to the taxman is not relevant, for Lamb was desperate to avoid the truth: Ryan Bateman and the Gang of Four had their money, and it was gone forever, as are Bateman, Derek Buntain, and Sharon Lamb who notwithstanding her statements, has not been seen in public in Grand Cayman since the civil suit was filed against her.

Of course, the pressing question is : Where is the Cayman Islands Monetary Authority (CIMA) on this ? Asleep at their desks ? Who will wake them up ? Will it take UK intervention at CIMA to get justice in this case ?

ISIS POSSESSION OF TEXAS PLUMBING COMPANY TRUCK MEANS TURKEY IS NOT A SAFE DESTINATION FOR YOUR CUSTOMERS' EXPORTS

The disclosure yesterday, that a Texas plumbing company is suing AutoNation for $1m, when a truck it sold the vehicle auctioneer ended up in ISIS hands, means that Western bank compliance officers should reexamine any and all international trade transactions between their clients, and customers in Turkey. It is one thing to read about ISIS oil being sold in Turkey, and another to see the logo of your American company on a truck being used in Syria, by terrorists. AutoNation, after promising to remove the logo, negligently failed to do so. and thereafter sent the truck to Mersin, in southern Turkey, a stone's throw from Syria. Doesn't the company have any compliance officers over there ?

Frankly, the time has come for bankers to advise their clients to avoid all trade and financial transactions with Turkish companies, lest they end up publicly named & shamed by OFAC, in an expensive and embarrassing Civil Penalty fine case. Turkey is obviously providing assistance to ISIS; it is immaterial to know whether its companies are being paid. The prudent thing is to red-line all transactions at this time, and to advise bank clients that they jeopardize their relationship at the bank by ignoring your advice. 

WHERE ARE THE TWO CANADIAN GANG OF FOUR MEMBERS WHO FLED THE CAYMAN ISLANDS ?

Derek Buntain

Derek Buntain is a Canadian national who was the President, and Director, of the Dundee Merchant Bank, and who is one of a group of four financial professionals who were reportedly responsible for the illegal transfer, from Dundee, of over $450m in investor money. Buntain, and former Senior Vice President & Director, Sharon Lexa Lamb, have been accused by their victims of committing a breach of their fiduciary responsibilities, in transferring the funds to a shell company, purporting to warrant and affirm, in writing, that it was a financial institution

He has been missing for a number of months, but is believed to be living on Prince Edward Island (PEI), where he has a home, and where other members of his extended family reside. Internet traffic indicates, with a high degree of probability, that he is monitoring the news of the first civil suit, brought by a victim, against Ms. Lamb and the Dundee Merchant Bank, from PEI. he has not returned to his residence in Grand Cayman.

Buntain, far right, with his racehorse

Ryan Bateman, a native of Alberta, and the owner of the shell investment companies, B & C Capital, Ltd., Bateman & Company, Ltd., and Bateman Capital is believed to have transferred, without authorization, all the capital of the victims into his corporate operating accounts, and thereafter, to have engaged in multiple transactions, involving the purchase and sale of securities, through financial institutions located within the United States, and in the Bahamas.  He failed to appear for a criminal trial in the Cayman Islands, where he is a defendant, and is regarded there as a fugitive. His efforts to sell his expensive Cayman residence, and to transfer the funds out of the country, reportedly were blocked by the authorities.

Ryan Bateman

Bateman, based upon Internet traffic monitoring, is reportedly living quietly in the State of Florida, most likely in South Florida. Due to the violent nature of his pending criminal case, and his obvious wish to avoid publicity, readers are urged not to interact with him, in any way, should you come into contact with him.

Don't these two Canadians have licenses to sell securities ? Should they not be under review at this time ?

LEADER OF CAYMAN GANG OF FOUR COUNTERSUES VICTIM & WHISTLE BL0WERS FOR DEFAMATION

Sharon Lexa Lamb, the reputed leader of the Cayman Gang of Four, who is being sued for the theft of $450m, by a Canadian investor, has filed a counterclaim for defamation, against the plaintiff, as well as two whistle blowers, including this blogger, in an effort to control further news about her central role in the massive Cayman Islands trading scandal. She also has avoided any responsibility for the losses, which occurred when Lamb illegally transferred the victim's funds, which was a violation of her fiduciary responsibilities.

Lamb, who has previously threatened legal action, should her name be mentioned in coverage of the illegal transfer of investor money to a shell company controlled by a known fraudster, Canadian national Ryan Bateman, alleges that the plaintiff, a prominent retired Toronto attorney and Queen's Counsel, improperly assisted whistle blowers, by giving them details of the case, including threats and demands made by Lamb's counsel, which counsel did not want made public. The plaintiff has reportedly denied the defendant's allegations.

Suing a whistle blower, what is generally referred to as "shoot the messenger," is a futile effort to control the flow of news about the case to the investing public, including the other sixty victims of the Gang of Four, who are financial professionals accused of looting hundreds of millions of dollars of investors' money, for their own use. Lamb alleges that the news about the scandal amounts to defamation, though the truth about her prominent role in the fraud is supported by documentary evidence.

 The case has been cited as a prime example of the repeated failure of the Cayman Monetary Authority, CIMA, to take any action to protect foreign investors who lose assets placed in the Cayman Islands. CIMA has not shut down B & C Capital, Ltd., the Gang's corporate entity, which took the victims' money, nor even interviewed the members of the Gang of Four, who are Sharon Lexa Lamb, Ryan Bateman, Fernando Mota Mendes, and Derek Buntain. Is CIMA merely a paper tiger, who never displays its regulatory enforcement teeth, when confronted with financial crime ? Should it be disbanded, and replaced with an effective agency ?

Ineffective and toothless ?

  

WILL PANAMA NOW DEMAND THAT THE UNITED STATES EXTRADITE RICARDO MARTINELLI ?

Panama's former president, Ricardo Martinelli, failed to attend a mandatory appearance before a court in Panama City,where he is charged with conducting illegal electronic surveillance, and he has been held in contempt of court. On then-President Martinelli's orders, his National Security Council illegally intercepted email, telephone call, and other communications, where there was an expectation of privacy.

Martinelli, who faces a potential maximum sentence of twenty-one years of imprisonment, spied upon over 150 Panamanians, who were opposition leaders, journalists, and prominent members of Panamanian society and industry. He allegedly fears for his physical safety, should he return to Panama, and has claimed that he cannot get a fair trial at this time. The ex-president faces a dozen other cases in Panama, and there has been a growing movement, among Panamanians, for him to face justice for his corruption, human rights violations, and illegal surveillance program.

The Supreme Court of Justice can now file extradition papers in Washington, seeking Martinelli, who is now living comfortably in Miami, where many former dictators have retired to. The question is, will reformist President Varela demand that it take that step ? Or will Martinelli have the last laugh, at the expense of the people of the Republic of Panama ?