WAS HONG KONG UNIVERSITY USING BVI COMPANY TO MOVE DONOR'S MONEY OFFSHORE ?

Recent Panama Papers disclosures included details of the formation, by Mossack and Fonseca, of British Virgin Islands companies, by a university situated in Hong Kong. The facts raise an interesting question: was the university using an offshore corporation to covertly move cash, of one of its largest benefactors (he donated $2m) , out of the Peoples' Republic ? Or was it illicit money of Chinese PEPs ?

Ordinarily, we would not find the BVI company formation suspicious, or unusual, as other Hong Kong schools of higher education have also obtained offshore companies in this fashion, but there are a number of red flags:

(1) The school failed to report the companies in its financial statements and reports, which is curious.
(2) the school went to the Hong Kong office of Mossack & Fonseca, rather than its usual suppliers of services.
(3) Considering the availability of offshore corporations, formed in tax haven jurisdictions located in the Asia/Pacific region, one wonders why the university chose the BVI, which is notorious for the opaque nature of its corporation laws, the difficulty of obtaining documents in a timely manner, and the widespread use of BVI companies, by the Mossack firm, for dodgy purposes.

The facts raise two questions:

(A) Were these university-controlled companies use in a pipeline, through which funds of a wealthy Mainland Chinese businessman, with close ties to senior government officials, were moved offshore ?

or

(B) Were the BVI companies used, by the donor, to move illegal bribes and kickbacks, obtained by senior Chinese officials, out of the country ? After all, who would suspect a university of such conduct.

One wonders whether the use of legitimate front entities, to transfer and launder money, was a standard policy of the law firm of Mossack and Fonseca ? If so, we will probably see more examples of such amoral conduct, as additional Panama Papers documents and files are made public.

WAKED MONEY LAUNDERING ORGANIZATION WORKED WITH RICARDO MARTINELLI AND GARY LUNDGREN

The Wakeds

Not mentioned in the many stories published this week concerning the Waked Money Laundering Organization of Panama, are details about who the Wakeds did business with, as they moved, cleaned and invested dirty cash, both for their clients, and for themselves. These are individuals and entities not yet designated by OFAC, but who should be exposed, for the protection of Panama's legitimate businesses.

The pending criminal investigation should expand to include two prominent individuals who have a long history of involvement in money laundering, and who are known to have been closely linked to Waked: Former Panamanian President Ricardo Martinelli, and Gary James Lundgren, the Alaskan native who runs a dodgy investment conglomerate in Panama City.

(1) Martinelli's "Super 99" supermarket chain, which cleaned millions of dollars in Colombian drug profits, including narco-cash turned over to David Murcia Guzmán for laundering, is suspected of being an outlet for bulk cash from Waked. This was before Martinelli was elected president.

Ricardo Martinelli

(2) Gary Lundgren accepted bulk cash from Waked, and regularly sold the organization Panama City real estate: office and residential condominiums. This has been confirmed, due to the fact that Lundgren later defrauded Waked out of one of the condo units, and the organization threatened his life, necessitating the two omnipresent bodyguards that we see hovering around Lundgren at all times.

Gary Lundgren

Add this to the fact that Martinelli and Lundgren had a direct relationship, and a picture of a widespread money laundering network emerges, which includes the Waked Organization. Both Martinelli and Lundgren repeatedly placed bulk cash into several of Panama's suspect banks, and the US investigation should be expanded to include them, and others who assisted in the illicit money movement.

SOME ADVICE FOR BANKS SEEKING TO HOLD CUSTOMERS TO THE NEW 25% CDD RULE

Treasury has promulgated its Final Rule on Customer Due Diligence for corporate bank accounts, meaning that financial institutions must perform a due diligence investigation on all 25% shareholders, as well as anyone to effectively controls a corporation. The details can be found here.

The problem is that, considering that some really sharp lawyers will find effective ways to evade the requirements, within the law, compliance officers should recommend the following:

(1) Demand color copies, front and back, or all stock certificates. (Are any of them endorsed in blank ?)
(2) require a copy of the Stock Transfer ledger, which is an internal corporate record of all stock certificates issued, sold, transferred, or returned. Where is it being kept ?
(3) Get an Opinion of Counsel, from the clients' local, onshore law firm listing the shareholders. Remember, lawyers have a law license to protect, and will ensure that it is accurate, or they could be liable, and possibly suffer bar discipline, if it is not.
(4) Obtain a signed, notarized agreement, with the client, that any sales, transfers or otherwise change in ownership of any stock will be reported to the bank, forthwith, via registered mail. This will keep your clients honest. Obtain the president's signature, as well as that of the treasurer, on the agreement.

Unless you secure the equivalent of this suggested course of action, you cannot guarantee that the clients will not subsequently transfer the stock to OFAC-sanctioned individuals, or other undesirable individuals or entities. Keep your banks clients honest by insisting that they comply, or close the accounts.     

MOSSACK AND FONSECA EMPLOYED MONEY LAUNDERING TRADECRAFT BY USING CHARITIES' NAMES

The fact that the law firm of Mossack & Fonseca used the names of legitimate global charitable organizations as cover for their dirty clients is further evidence that the partners at that firm had left their profession as attorneys, and crossed over into the dark side as money launderers, plain and simple. it also demonstrates that there was nothing they would not do to conceal their clients' illicit assets from public view. There's nothing sacred to laundrymen; they know that legitimate businessmen trust charities, and would not think to look for suspicious activities there.

The abuse of the names of legitimate and respected entities is a central component of the tradecraft of money laundering. By illegally placing the names of these nonprofits as beneficiaries of bogus Panamanian foundations, MF demonstrated who they really were: financial criminals.

One additional technique they utilized, the use of a deceptively similar, but different, name, is common in money laundering. MF slightly changed the legal name of the Red Cross. This was intentional, as the use of a name that appears to be that of a legitimate company, but under close inspection, is somewhat different, is how money launderers often trick the legitimate financial community.

With the next exposure of Panama Papers documents expected soon, we will continue to see how Mossack and Fonseca employed classic money laundering techniques to hide illicit funds, and then assist in laundering them for career criminals, drug kingpins, corrupt political leaders, and Politically Exposed Persons (PEPs). We will probably find the names of additional well-known charities, and non-profit organizations, being abused.

EUROPEAN CENTRAL BANK TO DISCONTINUE THE €500 NOTE

Looking at the news this week, regarding the fact that the European Central Bank (ECB) has advised that, after next year, it will discontinue printing and distributing its €500 note, I have a point to make. Turn the clock back to the 1990s, when the EU was planning the switch to the Euro, from national currencies, I wrote an article, predicting that the large note would facilitate bulk cash smuggling, and thereby money laundering.

Of all the major media in Europe, only the Guardian saw fit to print my warning. Now, with the €500 note having played a major role in European, and indeed, global, money laundering, someone at the ECB has finally agreed with me. I wonder how many money launderers have now advised their clients to immediately divest themselves of their cash stash of the 500s, and switch to the €200, lest they later are questioned, when they deposit the big notes after 2018.

DEFROCKED SECURITIES TRADER GARY LUNDGREN PAYS HIS STAFF WITH SALT-ENCRUSTED DRUG CASH SMUGGLED IN FRON COLOMBIA

Gary James Lundgren, the Alaskan native, and Panama resident, whose US licenses to sell securities were revoked for life by FINRA, has a curious way of paying his staff, vendors, and others whom he transacts business with. He pays them in a special kind of cash that ordinarily never sees the light of day: drug profits, smuggled in from Colombia.

Here's how we know what Lundgren is using. A decade ago, he was one of the money launderers for David Murcia Guzmán, the pyramid/Ponzi schemer who used his "legitimate" business as a cover for the laundering of narco-cash. Murcia shipped the drug dollars into Panama, at night, covertly on fast speedboats, in large duffel bags, and plastic garbage bags. This bulk cash smuggling was conducted for several months.

While en route, sometimes the cash would be sprayed with Pacific Ocean saltwater. When it came in Lundgren's hands, he often had damp money to clean. it now appears that he retained physical custody of a large portion of the cash entrusted to him, when Murcia was arrested, and summarily deported to, first Colombia, and then the United States, to face multiple charges related to his Ponzi scheme.

If you have ever gotten your wallet wet while on the high seas, the cash, after it dries, tends to retain a unique, somewhat rotten, odor. This week, one of Lundgren's tradesmen noticed the exact smell on cash that was given to him, by Gary Lundgren, as payment for services rendered. Gary reportedly also pays his staff, vendors, and other payees, the same way.

We wonder exactly how many millions of dollars, in Murcia drug cash, Gary Lundgren stole, and still has on hand. Remember, David Murcia moved as much as $3bn into Panama, and most of it has never been accounted for. Just how much of this remains in Gary Lundgren's hands is, I am sure, a question that several American law enforcement agencies would like to know, as well as the location of the storage facility where it resides.

PANAMANIAN BANKS NOW REFUSE TO ACCEPT FOREIGN CHECKS

In an obvious response to the pressures that have arisen as the result of the publication of the Panama Papers documents, many financial institutions in the Republic of Panama are now refusing to accept checks, drawn on foreign banks, for deposit into their accounts. This has been confirmed by local businesses in Panama City, who have been rebuffed when they attempt to make deposits of checks of foreign banks.

This new development will seriously undermine the payment of expenses, including salaries, by foreign-owned Panama City businesses, who have resorted to the use of checks, after American & Canadian banks have allowed their clients to wire only a small amount of funds to Panama, or totally refused to send any money to Panamanian financial institutions.

Considering that non-payment of employee salaries, as well as defaulting upon Social Security remittances, are considered serious offenses in Panama, foreign-based employers in Panama City are finding themselves at risk, and may be forced to consider shuttering their businesses altogether, lest they find themselves facing criminal charges, which could be extraditable offenses. Also, those businesses that must pay their outstanding debts to government agencies in cash, as is generally required, will not be able to get the dollars they need to satisfy those obligations.

What this will do to the already shaky economy of Panama cannot yet be calculated, but it represents a clear and present danger. With employees unable to be paid, they will refuse to show up for work, disrupting the ordinary conduct of many businesses in the country's capital, and bumping up Country Risk to an extraordinary level.

These new measures will force legitimate businesses, who want to remain open, to purchase dollars from criminal elements who are seeking to launder narcotics proceeds, and to bulk cash smuggle greenbacks into Panama, both of which will strengthen criminal operations in Panama, especially, the Black Market Peso Exchange. 

DEA BUSTS MASSIVE PANAMANIAN MONEY LAUNDERING OPERATION

The Drug Enforcement Administration (DEA) has announced the arrest of Nidal Waked, by the Colombian National police, at Bogota Airport; Waked, alleged to be one of the world's largest money launderers, has been indicted in US District Court in Miami, on money laundering and bank fraud charges.

At the same time, the Office of Foreign Assets Control (OFAC) has designated 68 companies involved in Waked's international money laundering network, which utilizes Panama's Colon Free Trade Zone (Zona Libre) to launder drug proceeds, as well as six of Waked's known associates, including:
(1) Balboa Bank & Trust
(2) Grupo Wisa, SA
(3) Vida Panama (Zona Libre) SA

According to the DEA, the participants engaged in:
(A) False Commercial Invoicing
(B) Bulk Cash Smuggling
(C) Trade-Based Money Laundering

Due to the extensive use, by the Waked organization, of a wide variety of Panamanian businesses to launder narco-cash, readers who are at financial institutions whose clients have any businesses with Panama are urged to review the complete list of OFAC-sanctioned entities and individuals, lest they unwittingly continue to maintain a financial relationship prohibited by law. Please note that some businesses involved, including hotels, shopping malls and newspapers, will be granted limited OFAC licenses. You are urged to view the Resource Center section at http://www.treasury.gov/ and go to "Financial Sanctions."

The effect of this case upon Panama's economy cannot be calculated at this time, but it will most  certainly affect Country Risk, as it draws attention to the massive amount of money laundering that exists in the Colon Free Trade Zone, as well as the abject failure of Panamanian law enforcement to control it. The Waked organization has openly conducted its money laundering operations for at least a decade, and has well-established ties to the country's Middle Eastern Organized Crime Syndicate.

SHOULD AMERICAN REAL ESTATE PROCESSIONALS TAKE THE PANAMA PAPERS AS A WARNING ?

Given the intense interest, in tax haven corporations, generated by the information released in the Panama Papers scandal, real estate professionals in the United States should follow a prudent course of action, and create an AML/CFT compliance program in-house, to insure that they will not be the subject of unwanted law enforcement attention, or even criminal indictment, for failing to apply effective Know your Customer procedures.

It is humbly suggested that all those involved in the real estate sector consider these steps, though voluntary under existing laws, as measures which they should consider mandatory, for proper risk reduction in their firm. All real estate offices should follow this course of action:

(1) Create an anti-money laundering compliance program, with a written compliance manual.
(2) Designate a Compliance officer, and see that he or she is properly trained.
(3) Conduct a semi-annual AML/CFT training program for all employees, including the support staff.
(4) Arrange for an outside compliance audit, on a semi-annual basis.
(5) Reach out the regulatory and law enforcement community, and build a network of contacts, whom you may call upon with questions about operations, as well as suspicious individuals or entities.

UK PUBLISHES AML/CFT ACTION PLAN

UK readers please note that HM Treasury has published its Action Plan for Anti-Money Laundering and Counter-Terrorist Financing. You may want to examine the Summary of Actions section, which details precisely when a number of law enforcement enhancements will be completed. A hyperlink to the complete text can be found here.

NEW INCORPORATIONS DECLINE IN PANAMA

Statistics released in the Republic of Panama show that there has been a decline in the number of new incorporations, ever since the Panama Papers offshore scandal broke in global media. Though Panama's civic boosters have tried to put a spin on this news, by claiming that it is actually due to declining economic factors in Latin America, clearly the effect of the disclosures has been felt. News articles, some clearly planted to improperly suggest that the government is rushing to cooperate with foreign jurisdictions, do not have a true basis in fact, but indicate a serious effort at damage control by the present leadership.

The annual fees government collects on active and existing corporations are estimated to be as high as $90m, and any diminution in new company formation, which offsets the losses represented by defunct corporations, will have a major effect on the national budget of Panama, which has suffered greatly from the effects of massive corruption by the former Martinelli government. The Varela administration has a cash crisis on its hands, but an extradition order directed at its ex-president, available since December, has still not been issued, confirming that reform efforts have been ineffective in Panama City.

Reports that a number of Panama's banks have declined to accept new corporations as bank clients indicate that the Panama Papers scandal is having an effect, but whether this will become a widespread practice is not known. There have been no moves, in the National Assembly, to revoke the existing Bearer Share laws, which effectively obstruct transparency in both Beneficial Ownership, and Source of Funds. Unless there is true reform, of corporation law, Panama will remain opaque.

IF THE EU GIVES IN TO TURKEY'S REQUEST FOR VISA-FREE ENTRY, EXPECT HAMAS AS WELL

Turkey appears to be linking its demands that the European Union allow visa-free travel for its nationals, to its adoption of the reciprocal agreement that requires Turkey to accept the return of illegal migrants. On Wednesday, the EU Executive reportedly will propose enacting the removal of visa restrictions on Turks entering the Schengen Zone, notwithstanding that the reforms specified appear to not have been completed.

Here's the problem those good people in Brussels have failed to consider: Turkey is now the field headquarters for Hamas, a sanctioned terrorist organization, and it launches its terrorist operations from there, whether in the West Bank, or elsewhere in the world. You can expect, given the fact that Turkey provides material support to Hamas, that Hamas operatives will be given Turkish passports.  

If any of these agents try to open an account in your EU bank:

(1)  Let us hope that the compliance officer will assign a Turkish-speaking new accounts clerk to help with account opening, for that individual will be able to spot a non-native Turkish speaker in a heartbeat, and decline the business. The last thing you want in your bank is someone moving money for a specially designated global terrorist organization.

(2) Did the prospective client forget to alter his place of birth ? If so, you may find that this 'Turk" was born in Israel, or the Palestinian Territories; That's another tip-off.

(3) Is the new client avoiding Turkish altogether, and speaking Arabic ? There's another red flag.

While I am not suggesting that you profile all new Turkish clients , look for those with the above issues, as well as newly-issued passports. You do not want to bank Hamas agents.

WILL FINCEN EVER GET A CAREER DIRECTOR ?

                                                                 

The list of Directors, and senior staff, that have left their positions at the Financial Crimes Enforcement Network (FinCEN) prematurely, if placed end to end, would go around the room. James Sloan; Stephanie Brooker; William J. Fox; William D Langford, Jr.; Robert W. Werner, and now Jennifer Shasky Calvery, all leaving for the private sector. It is getting to the point where I am starting to feel neglected, because I have not had a turn at the helm.

Whatever happened to career public service leaders, the ones who would stay on for two decades, gaining valuable experience, and yes, wisdom, to aid them in the discharge of their duties ?  Unfortunately, the lure of middle six-figure positions in the banking world has been far too enticing for our best public servants at FinCEN, as major financial institutions, particularly those with bruises, believe that a former regulator can assist them, far better than their in-house counsel, in dealing with the uncertain future. I cannot blame them, but they take the best of the best away with them.

Can we please appoint a qualified individual, who will actually stay on indefinitely as Director ? Can we get a career-minded person, who will serve as steady hand, and guide FinCEN through what may be rough waters in the years to come ? Please, search committee, find a worthy choice, and one with years of prior government service, who will stay on the job, be effective, and raise the bar on banking best AML/CFT Best Practices. 

ALERT FOR HEZBOLLAH "PRINCELINGS" WITH ACCOUNTS IN YOUR BANK

After the Vietnam War ended, many American veterans were incensed when they learned a number of hard truths, which were not disclosed to the public*. One of these was the fact that no son of a US Senator or Congressman, in office at the time, ever served in the American military in Vietnam, between 1959 and 1975. Their fathers saw to it that they, like the young George Bush, were kept out of the combat zone, while individuals with no political power were less fortunate.

History has a habit of repeating itself; reports from Lebanon have confirmed that senior Hezbollah military commanders have been sending their sons to Europe, to evade their conscription into units sent to fight in the Syrian civil war, in which Hezbollah is sustaining major casualties in the field. This has been the case since 2015, when Hezbollah's demands for replacements for Syria duty, expanded.

One individual entered France, via one of the former Soviet republics. Inasmuch as they are favored sons, who can rely upon financial support from their fathers, who draw significant salaries, you can expect that they open, and maintain, bank accounts in EU countries, like the Chinese "princelings," who are often sent to the West, ostensibly for their education.

These Hezbollah youth, whose funding most likely comes from clever third-country transfers, pose a threat to Western European banks, for they may be called upon, by Hezbollah, to engage in terrorist financing, money laundering, or a number of other criminal activities, in material support of a designated terrorist organization. You do not want them as bank customers.

Identifying them may be difficult;
 (1) Your compliance department should look for places of birth, as listed on their passports, in those towns and villages in the Hezbollah-dominated south of Lebanon.
(2) They will most likely not hold full-time jobs, and will not be matriculated university students.
(3) Like the Chinese princelings, they may appear to be affluent, but without any visible means of support.

Remember, the EU has sanctioned Hezbollah's military ; you do not need to bank their adult children.
___________________________________________________________________________
* Inasmuch as April 30 was the anniversary of the end of the Vietnam War, readers who are too young to have personally experienced it firsthand should be aware that, afterwards, it was disclosed that the size of the infantry of the North Vietnamese Army, who opposed US and allied forces in-country, was three times the estimates given by the Central Intelligence Agency; this was considered a major intelligence failure.

PANAMANIAN FRAUDSTER GARY LUNDGREN MAKES DEATH THREATS TO JOURNALISTS COVERING HIS CASES

Gary Lundgren (after facelift)

Apparently, the disgraced Alaskan fraudster, Gary James Lundgren, is unhappy that we, and others, have been reporting on his lifetime FINRA ban from the US securities industry, the $75m suit against him, filed by Donald Trump in Europe, his bearer share scams, his money laundering, and his extensive sexual predator history, both in the US and in Panama. The publication of his criminal conduct has caused him to have repeated temper tantrums, both at his office, where he is protected by two burly bodyguards, and at other businesses, where he has vented his anger upon defenseless female employees, tenants  who rent from him, and various other unlucky Panamanians who happen to be in his path.

Gary before facelift

He has more recently been closely linked to the Canadian stock fraudster, Ryan Bateman, the mastermind behind the $450m  Cayman Islands trading theft, and who currently resides in Panama. The scandal, whose participants are known as the Cayman Gang of Four, include former Dundee Bank Senior Vice President Sharon Lexa Lamb, former Dundee Bank President Derek Buntain, a Canadian national, and B & C Capital Managing Director, Fernando Moto Mendes, a Portuguese national residing in the Cayman Islands.

Bateman, Lamb, Buntain

 Lundgren has recently made a number of death threats, against everyone who has published articles about his fraudulent activities. He has even threatened their spouses with death, in writing, including some who live outside the Republic of Panama.

The question is: who will arrest Lundgren first ? He is rumored to have a sealed arrest warrant pending against him in the United States, through it is not known if it is for money laundering, Federal securities offenses,  tax evasion, or sexual battery. For that reason, Lundgren has consciously avoided entering the US for several years. Whether he will now disappear into Colombia, to evade justice, just as he once did when he fled America for Panama, is not known, but his departure has been rumored for weeks.