BANNED STOCK TRADER OPERATES VIRTUAL MANHATTAN SALES OFFICE, DEFYING FINRA

Gary James Lundgren, the American stockbroker and fraudster who lives in Panama, is no stranger to this blog; over the years we have covered his bearer share fraud, insider trading in Panama, sex crimes, money laundering, and sundry other crimes and transgressions. Lundgren, who was banned for life from trading in securities by FINRA, when he refused to open his accounts to FINRA review, has now openly defied the ruling of the regulatory agency, by opening a virtual office, appearing to be located in New York City.

Lundgren is currently maintaining a landline telephone, whose number, (646) 403-4540, he is forwarding to his Panama location. This is a Manhattan area code, and callers hear a voicemail message, confirming that they have reached Mr. Lundgren's office, at Inter-Pacific, his now-closed American broker-dealer company, and assume that he has a satellite office in New York. This is a deliberate misstatement of a material fact.

Nothing could be further from the truth; Mr. Lundgren is far outside the Continental United States, but he is offering so-called high-yield investment products, which claim to pay 10% interest, on a monthly basis, but fail to deliver. His New York telephone number is a deceptive device to assure potential customers that he is a legitimate trader, when, in truth and in fact, he is a known investment fraudster, and trader on inside information, illegally offering fraudulent investments to US and Canadian victims. Lundgren represents a clear and present danger to the North American investing public.

Gary Lundgren with his two sons, James and ZacGary, who are sending in his trades

The Venezuelan attorney who is giving the Lundgren's advice on evading FINRA.

CORRUPT PANAMA OFFICIALS IGNORED DEA EVIDENCE AGAINST MOSSACK FONSECA IN 2009

The money laundering and tax evasion operations, conducted for clients by the Panama law firm of Mossack Fonseca, were frankly, an open secret in Panama City, but local law enforcement agencies and government prosecutors never brought charges against the firm, and it is alleged that the reason was the regular payment of bribes and hush money to the officials charged with enforcing the law.

In 2009, three whistleblowers, two retired US government agents, and the third a former US Government contractor, delivered a white paper to the Panama office of the US Drug Enforcement Administration (DEA), detailing overwhelming evidence of money laundering, at Mossack Fonseca. The evidence, coming from trusted sources, was damning, and was more than sufficient to support criminal charges in at least three jurisdictions.

The DEA Special Agent who was responsible for the matter brought the evidence to the Panamanian National Police, who forwarded it to the Organized Crime Prosecutors, who promised to conduct an investigation. At that time, the lead prosecutor in that division was José Ayú Prado, later to become the Attorney General, and ultimately, the Chief Judge of the Supreme Court of Justice.

Judge José Ayú Prado

Reliable sources assert that Ayú Prado notified Jürgen Mossack of the investigation, and saw that no action would be taken against Mossack Fonseca, notwithstanding the high level of proof of criminal activity. Furthermore, Prado used his significant influence to have the DEA agent transferred from Panama. This is the same Ayú Prado who is now the subject of multiple corruption investigations, involving the fixing of cases in the Supreme Court.

Jürgen Mossack

Therefore, seven years ago, the Government of Panama, with actual knowledge of Mossack's massive money laundering and tax evasion activities, ignored it, allegedly for the reasons that those same government officials were themselves accepting bribes, and that money laundering is the number one industry in the Republic of Panama.

MOSSACK FONSECA EMPLOYED EVERY TRICK IN THE MONEY LAUNDERERS' TOOLBOX

The recent disclosures, in the Panama Papers scandal, of documents and internal correspondence, involving William Ponsoldt, a wealthy American who wanted his millions hidden offshore, shows clearly that the law firm of Mossack Fonseca was not merely forming companies for its dodgy clients; it was engaging in massive money laundering and tax evasion operations. the tactics it deployed for its demanding clients were those used by drug money launderers, to hide the proceeds of crime.

The Ponsoldt documents showed that Mossack:

(1) Used banks that did not demand that the names of beneficial owners be disclosed to them.
(2) Moved money from banks that asked questions, to those that did not.
(3) Performed services for known convicted white collar criminals.
(4) Encouraged US citizens to use their secondary foreign passports to open accounts.
(5) Used straw men from "tax-convenient" jurisdictions.
(6)  Justified their money laundering and tax evasion procedures as "asset protection."

In the Ponsoldt case, emails, bank account details, and actual corporate documents were made public; they expose the depths to which Mossack Fonseca sunk, in its criminal zeal to move money covertly for its clients. It makes for extremely illuminating reading, and readers would be well advised to review the dozens of pages of documents made public, for its details the tactics and strategies the law firm used, for decades, to secrete the funds of its clientele.

USE OF BEARER SHARE BVI COMPANY COULD POSE A PROBLEM AT SALE

The international art world, like most other industries, was taken aback when it was revealed, in the Panama Papers scandal, that many high-end art dealers and collectors have used Mossack Fonseca to form offshore companies to own million dollar paintings. While the tax evasion and asset protection aspects of the Mossack-formed BVI companies are well, known, the dangers posed by placing the title to valuable personal property in the name of a bearer share offshore company are not.

When it comes time for the client to convey good title to the Picasso that he or she placed in the name of a BVI company, and now intends to sell, the legal issues one must confront are far more complex than those of a traditional company, where the shares of stock are registered on corporate records, and the chain of title to the shares can be readily ascertained.

The questions which may be asked by the purchaser's counsel could include these:

(1) Can you produce documentary proof that you have the power to convey the art ?
(2) Can you prove that you are the sole beneficial owner ?
(3) Do you have evidence to confirm that the officers and directors who are conveying the personal property are duly authorized to make that transfer ?
(4) Were there prior beneficial owners, other than yourself ? Do you have releases from them ?
(5) Can you prove the absence of liens, encumbrances or other possible hypothecations, that may exist against the art ?

These issues are, of course, in addition to the usual requirements of proof of continued corporate existence, and a current certificate of good standing, as well as certified copies of all relevant filings for the present year, and the certificate of incorporation, and corporate resolution, approving the sale.

One doubts where the paralegal assistants, who formed the BVI companies for Mossack clients, actually covered these issues with them. Given the boiler-room, assembly line nature of Mossack Fonseca operations, any client who should have ben counseled, or advised, by an attorney, probably never received any advice on the consequences of his using the BVI company to hold personal property.

So, was Mossack Fonseca also guilty of professional negligence, more commonly known as malpractice ?

DO NOT RELY UPON UNITED NATIONS STATEMENTS OF FACT

Compliance officers, kindly refrain from the use of any United Nations statements, white papers, or position papers, for the influence of political actors, and autocratic member states with horrific records in human rights, seem to have resulted in serious inaccuracies, and misstatements of material fact. The UN can no longer be relied upon for objective facts, for compliance purposes.

Here is a typical example. The recent statements by UNESCO, to the effect that Muslims are the only major religion with a prior historical claim upon Jerusalem, clearly illustrates this point. Both Christianity and Judaism predate Muslims in Jerusalem, by several centuries, or even millennia,  yet the latest UNESCO statement recognizes only a Muslim heritage. In truth and in fact, many historians dispute that Mohammed legendary night-flight came from Jerusalem, which is not mentioned by name in the Koran, and there is no record of a mosque in Jerusalem in his lifetime, though there were active churches and synagogues. The UNESCO statement is a failed attempt to rewrite history.

Nevertheless, UNESCO insists that there is no earlier Jewish or Christian history there. For that reason, we as compliance officers cannot rely upon "revisionist" history, and issues selective statements that are not factually accurate. When evaluating Country Risk, or for any other purpose, rely upon known authoritative sources, and ignore the United Nations on the subject. Far too many of its members seek to advance their own political agendas.     

VIOLATION, BY FEDERAL PROSECUTORS, OF ATTORNEY WORK PRODUCT RULE, COULD JEOPARDIZE PRIOR CONVICTIONS

 A Medicare fraud case, pending in US District Court in South Florida, is the subject of a situation that could affect dozens of prior Federal criminal convictions. It has been learned that US Attorneys, and FBI Agents, reportedly received copies of all documents ordered by defense attorneys, which could be in violation of the Defendants' constitutional rights, and even constitute prosecutorial misconduct, as the disclosure of probable defense evidence is an unethical and improper intrusion into defense tactics. The physician who was the primary defendant is Salo Shapiro.

It appears that,whenever defense attorneys requested copies of specific documents, from evidence seized in a criminal case, copies were automatically sent to the US Attorney's Office, and to the FBI, by the court-approved copy service, Imaging Universe There is a dispute surrounding the circumstances under when and how the copies were authorized, or ordered. Federal authorities deny any role in requesting the copies. The copy service admitted that it has been following this procedure for ten years.

The Work Product Doctrine, which protects the strategies, notes, and thought processes of defense counsel, strictly prohibits adversaries from accessing, or reviewing, this material. Attorneys for defendants, in whose case the duplicate copies were found have been improperly made and delivered, asserted violations of the Due Process clause of the Fifth Amendment, which occurred when the copies were delivered to prosecutors, and the Sixth Amendment right to effective assistance of counsel. US District Judge Marcia Cooke has not yet ruled upon pending defense motions.

The question of whether all criminal convictions, in the Southern District of Florida, or even elsewhere, are now to come under judicial scrutiny, in all prior cases where document copies were made, and delivered to the US Attorney. Will some cases now be dismissed, or will a new trial be ordered, and could such a new trial be sufficient, given the level of egregious conduct ?

PANAMA MORE CONCERNED WITH LOSS OF JOBS AT SANCTIONED COMPANIES THAN SUPPRESSING RAMPANT MONEY LAUNDERING

The President of Panama, Juan Carlos Varela, has announced the formation of a three-member blue ribbon panel, whose goal is to deal with the potential loss of 5000-6000 jobs, in the wake of the OFAC designation of 68 companies, in the Waked Money Laundering Organization. The government statement focuses solely on the impact of the loss of so many jobs, many in the retail field, in stores, upon Panama, and how this can be addressed.

One of the largest Waked-owned stores is transferring ownership to a trust, to be administered by the National Bank of Panama, other firms in the Waked empire will be looking for ways to license their way, albeit temporarily, out of the crisis. This is not what the Government of Panama should be focusing upon; it is short-sighted, and ignores the fact that widespread money laundering, of narcotics proceeds, is what really drives the country's economy, and it need to be suppressed, lest we ultimately arrive at a narco-state, which will end up being completely blacklisted by the global financial community.

President Varela has made much of his quest to "reform" Panama; perhaps it is time he makes good on his promise, rather than trying to save jobs at companies that are fronts for drug money laundering. 

COUNTERFEIT US$100 NOTES SEIZED AT BEIRUT AIRPORT

The above photo shows counterfeit currency that was seized at the Beirut Airport this week, from am Iraqi national. The 25,000 Iraqi Dinar is presently worth twenty-one US Dollars.

PANAMA MYSTERIOUSLY CLOSES SEVEN YEAR OLD MONEY LAUNDERING CASE

Money laundering cases in the Republic of Panama are extremely rare, and one of the very few pending cases was abruptly closed, under circumstances that confirm corruption, rather than the rule of law, was the determining factor. Of course, we should not be surprised, given the rampant corruption present at all levels of the country's criminal justice system.

The case was filed back in 2009, when a traffic stop yielded a million dollars in cash, being transported by an individual with a criminal record. Although the money tested positive for methamphetamine, the Court has now, seven years later, entered a judgment of acquittal, holding that there was insufficient evidence to proceed.

Exactly why the case was still pending after seven years is the story of Panama's corrupt judicial system. The lawyers for the parties to any case, be it civil or criminal, typically approach their client, and assert that a $100,000 bribe will fix the case in their favor. How much of that money finds it way to the judge is anyone's guess, for low-paid government prosecutors are known to own multi-million dollar homes, and some civil cases are stuck in the Supreme Court of Justice for years, without a ruling.

Candidly, when advising a customer, or client, regarding the feasibility of investing in Panama, opening a business, or extending substantial credit, the fact that courts are generally not going to afford you relief, should you have a valid cause of action, should be a determining factor in any decision about operating in Panama, at any level.

 Was the defendant guilty ? He reportedly failed to prove that his meager legal income could justify the $1m that was seized. Who bribed the judge/prosecutor/secretary/court clerk ? Maybe they were all paid off.  

HUNGARY TO ISSUE PERMANENT RESIDENCY PERMIT TO INVESTORS IN 30 DAYS

Hungary has announced that, effective 1 July, 2016, it will fast-track the issuance of Permanent Residency Permits, for foreign investors, in thirty days. For compliance officers, it raises the issue of whether to raise Country Risk on Hungary as the result of this action.

 The Hungarian Residency Bond Program, which previously had a 180 day processing time for temporary residence, with a six month holding period, before one could apply for permanent residence, requires a 300,000 investment per family; the money goes into a 5-year guaranteed bond. It was established in 2013, and reportedly has attracted over 1bn. Hungary is within the Schengen Zone, meaning that permit holders are entitled to visa-free travel throughout member countries.

Obviously, the vast majority of Asian, Middle Eastern and African applicants will pose no threat, but what about the exception ? The danger is that individuals who are transnational criminals, radical Islamic terrorists, corrupt government figures, or fraudsters, may not be identified during the extremely short 30-day period,  but they will be free to roam the European Union, engaging in criminal or terrorist activities, under the legitimacy of a Hungarian residency permit, albeit temporary.

Compliance officers who are responsible for the updating of Country Risk may want to take this new feature of the Hungarian Residency Bond Program into account, when assessing Hungary. It is always prudent to ascertain the place of birth of all new bank customers, and to initiate Enhanced Due Diligence, as needed, upon all applicants who were not born in their country of residence or citizenship, for the proliferation of economic passport programs has made such inquiries a necessary part of any Customer Identification Program, lest you unwittingly allow a career criminal, or worse, to open an account at your bank, by reducing risk, because he holds a passport from a low-risk country. 

US CORRESPONDENT BANKS PICKING AND CHOOSING WHAT TO SEND TO PANAMA

Canadian and American businessmen who have interests in Panama are facing an increasing number of times that the few US correspondent banks sending funds to Panama are declining to approve wire transfer orders. Either a low monetary ceiling ( under $5000 at a time), or a flat out refusal to process wires is making the payment of monthly overhead obligations vert difficult for foreign owners of Panama City businesses.

Canadian senders in particular are seeing the following scenario more often than not: wires are going from the remitting bank, to a US intermediary bank, to the New York correspondent bank, only to be returned to the originating bank, without comment. Some customers have reportedly resorted to sending their funds first, to banks in the EU (Deutsche Bank has been mentioned), in a ploy to somehow persuade the correspondent bank that their wires that there will not be any future issues with the payments.

A large number of Panama City banks are known to routinely handle narcotics traffickers' funds, and American correspondent banks do not want to ultimately be punished for moving repatriated narco-profits, or the proceeds of corruption, back to Latin America. The Panama Papers scandal has sensitized US banks to the clear and present dangers of dealing with possible dirty money, and dirtier Panamanian banks.

The American termination of a large number of correspondent relationships with Panamanian banks, which has been blamed on de-risking, is also about the banks' well-founded fears that they will be publicly named and shamed, for AML/CFT shortcomings, with the resultant reputation damage, for accepting Payments to Panama.

FCA PAPER ON DE-RISKING PROVIDES GUIDANCE

The closure of bank accounts, in the UK, by financial institutions concerned with their AML exposure, regarding customers that they perceive are high-risk, has been addressed by the Financial Conduct Authority (FCA), in an annotated treatment that deserves attention. Money service businesses, pawnbrokers, and charities located in certain geographic areas have found themselves having their accounts closed, as banks seek to reduce AML risk.

Readers who wish to review the material, FCA Research into the Area of De-Risking, can access the complete text here.

ARE BANKS THAT FORMED OPAQUE COMPANIES THROUGH MOSSACK HIGH RISK FOR MONEY LAUNDERING ?

The Panama Papers has drawn the financial world's attention to those banks that formed the most bearer share companies, through the law firm of Mossack and Fonseca. The argument, which is sound, is that, if these banks ordered hundreds of opaque BVI companies, and Panamanian foundations, through Mossack, how do you, as a compliance officer, trust that bank's clients not to be financial criminals, tax evaders, corrupt government officials, and sundry other fraudsters ? The answer is, you don't.

To put it another way, if an international bank routinely worked with Mossack and Fonseca, whose primary business was the formation of non-transparent offshore corporations, as well as assisting in money laundering for clients, then how can your bank, or your clients, feel secure about working with their clients ? There is a heightened risk that their clients are not exactly who they appear to be, which raises risk levels across the board, for your bank, as well as your customers.

Here are the names, as taken by researchers from the Panama Papers, of the international financial institutions who ordered the largest number of shell companies, from Mossack and Fonseca:

1.  Rothschild Trust (Guernsey) Ltd.
2. Landsbanki Luxembourg SA.
3. Societe Generale Bank & Trust (Luxembourg).
4. Coutts & Co., Trustees (Jersey) Ltd.
5. UBS AG (Rue de Rhone).
6. HSBC Private Bank (Suisse) SA.
7. HSBC Private Bank (Monaco) SA.
8. Credit Suisse Channel Islands Ltd.
9. Banque J Safra Saracin (Luxembourg) SA.
10. Banque Internationale Luxembourg SA (BIL).

Consider bank risk elevated for all the above financial institutions, due to their extensive business with the  Mossack and Fonseca law firm, for the formation of offshore companies.

US FINDING THAT NORTH KOREA IS A JURISDICTION OF PRIMARY MONEY LAUNDERING CONCERN

Readers who wish to review, in advance, the complete text of the Treasury Finding on North Korea, which is scheduled to be published tomorrow, June 2nd, you may access it here.

ARE PANAMA PAPERS CAUSING BANK CLOSURES IN PANAMA ?

A reported announcement yesterday confirmed that Credit Suisse, the second-largest bank in Switzerland, will be closing its private banking facility in the Republic of Panama. A spokesman for the bank has acknowledged that these reports are accurate.

While fallout from the Panama Papers disclosures has caused many US banks to severely limit the amounts of money that can be wire transferred into, or out of, Panamanian banks, this statement about Credit Suisse's actions could also be based upon public indignation over specific disclosures about the bank, that have been revealed in the Panama Papers.

Credit Suisse Channel Islands Ltd. has been reported to be the third-largest user of offshore companies ordered through the law firm of Mossack and Fonseca, whose operations were exposed by the release of the Panama Papers. Will other banks, whose role in the formation of dodgy, opaque offshore corporations through the Mossack firm, also now pull out of Panama, to seek to minimize the reputation damage that they have sustained ? We cannot say, but we will be closely monitoring all bank announcements from Panama City.

 Panama may now have become to hot to handle for Europe's  private bankers, who cater to wealthy clients seeking anonymity through such vehicles as the BVI corporation, owned by a Panamanian Foundation, or bearer share company. Their clients demand secrecy, and now, with the furor over the Panama Papers, the Republic of Panama has become a little too public for their liking.