RICHARD CHICHAKLI, HAVING LOST HIS APPEAL, FILES A SECTION 2255 PETITION

The Second Circuit Court of Appeals having affirmed his District Court conviction for sanctions violations, the Syrian-American CPA, Richard Chichakli, has exhausted all his appeals as a matter of right, but he is still in there swinging. He has filed one of the very few post-conviction remedies available to him: a Pro Se §2255 Petition.

His Motion to Vacate Judgment and reduce the Term of Imprisonment, Pursuant to 28 USC §2255, by a person in Federal Custody, lists three grounds:

(1) A recent amendment to USSG 3B1.2, of the Sentencing Guidelines, Mitigation, provides for a reduction in sentence, for a defendant who had no ownership right in a criminal activity. Chichakli alleges that he was neither a principal in Samar Airlines, nor was he to receive money. He is therefore entitled to a sentence reduction, he argues.

(2) The Executive Order, under which Chichakli was charged, was subsequently lifted. he is now entitled to a reduction of sentence.

(3) The United States Government had a confidential arrangement with prosecution witness Henry Gayer, which it failed to disclose to the defendant, in violation of Giglio vs. United States. For that reason, he he is entitled to relief.

Curiously, the Court  found that the petition should not be summarily denied, as lacking merit. It has entered a scheduling order, requiring the United States to respond in sixty days, and allowing Chichakli to file a subsequent reply. 

AVOIDING THE CONSEQUENCES OF COMPLIANCE MALPRACTICE: PART ONE

If you are compliance officer, charged with protecting your financial institution, or MSB, from money launderers, financial criminals, and terrorist financiers, the personal and professional risks associated with failure to identify and suppress problems, what we now call compliance malpractice,  or professional negligence, have grown exponentially in recent years.

No longer are you only concerned with termination of your position, compliance failures now carry additional, and much more serious, risks, such as:

(1) Being unofficially blacklisted in the financial community, through word of mouth, poor employer references, and even telephone calls warning potential new employers off. You end up working outside the financial industry altogether, at a greatly reduced salary.

(2) Civil fines and penalties, imposed by a regulatory agency. You are also publicly named and shamed, in agency and law enforcement press releases, which remain online indefinitely, and stigmatize you professionally. You story will end up in the media, to your extreme embarrassment and chagrin.

(3) Being suspended from your position and duties for a period of time by regulators, during which time you must be working somewhere else. The chances of returning to your original position generally become extremely slim, under those circumstances. More public shame accompanies this action, and your invitations to lecture at future compliance conferences and seminars, as a speaker, disappear.

(4) Being indicted, in a Federal criminal case, which generally means conviction and felony record, which, besides probation, or imprisonment, also brings with it a loss of Civil Rights. You spend time in a Federal Prison Camp, with low-level drug offenders, and after release, are further supervised for years, by the US Probation Office. It's like having a high school principal giving your orders, about where and when you can live, work, and whom you may associate with. Does that sound like fun ? It's not; You will become a pariah in your own community, and it will take years, if not decades, to repair your reputation and life.

In 2016, to avoid such untoward consequences, many compliance officers are doing what physicians, an often-sued profession, practice: we call it prevention. Go above and beyond the bare minimums, what we know as banking best practices, leaving ordinary, garden-variety due diligence behind, for total reliance upon enhanced due diligence, as a way of minimizing the risks of the compliance profession.

What are the most effective and efficient methods of performing enhanced due diligence ? I will discuss that in Part Two of this article; stay tuned.

REZA ZARRAB SEEKS TO HAVE TRIAL JUDGE RECUSE HIMSELF

The team of attorneys representing accused Iranian sanctions violator, Reza Zarrab, have filed a motion to recuse the District Judge assigned to the case, and for that reason, the scheduled hearing upon pending motions to dismiss, and to suppress evidence, has been cancelled.

At Zarrab's arraignment, the Court disclosed that it had participated in a legal conference in Istanbul, which was sponsored by a prominent Turkish law firm, some of whose partners were arrested, after the subsequent failed coup in the country, and thereafter accused of terrorism.

Additionally, the Court's comments, during the conference, whose theme was the role of an independent and effective judiciary, and the focus was the Rule of Law in Turkey, counsel pointedly argued, indicated that the Court saw the exoneration of Zarrab, from major corruption charges in Turkey, as having resulted from political actions of the Turkish government, and not from application of the rule of law.

Given that allegations, that Zarrab bribed government officials, to obtain his freedom in Turkey, were the 800 pound elephant in the room at the conference, and that several speakers there commented upon the case, and that press reports, attributed to the Court, critical of the handling of the Zarrab case, by the Turkish authorities, counsel now seeks his recusal. The legal argument presented appears to have merit, and many judges more or less routinely remove themselves from such cases, when facing recusal motions, as a matter of practice.

Federal law provides that a judge shall disqualify himself in any proceeding in which his impartiality might reasonably be questioned. The point is that he does not have to exhibit actual bias, but he must recuse himself, whenever an objective observer might conclude that his impartiality might be questioned, regardless of whether or not he is actually not impartial. The mere appearance of impropriety is to be avoided. The briefing schedule on the motion has been set.

DONALD TRUMP SAYS IF HE IS ELECTED, HE WILL BAR ALL REMITTANCES FROM ILLEGAL ALIENS

He wants to ban remittances

If you did not see presidential candidate Donald Trump's immigration plan this week, you may have missed the part where he has promised that, if elected, he will use the USA PATRIOT Act to require all banks and money transmitters to confirm that senders of wire transfers and remittances are legally in the United States. Apparently, this is his scheme to make Mexico pay for the the construction of a wall, between America and Mexico, to cut off illegal immigration.

No only would such a program be impossible for financial institutions, and money service businesses, to effectively operate,  it probably violates a boatload (no pun intended) of existing US laws.

WHEN DO AMERICA'S BIGGEST PONZI SCHEMERS GET OUT OF PRISON ?

Lest you think that America's biggest Ponzi schemers skate on their crimes, after stealing millions from their victims, here is a list of the Federal prison sentences of the individuals that I have been covering on this blog in recent years. While the victims often lose their life savings, and feel that these sentences are often too light, I think that you will find that the punishment often fits the crime with these fraudsters.

If you are not familiar with any of them, use the search box on this blog, to locate their stories. I am listing the reported Bureau of Prison presumptive release date. Federal inmates must serve 85% of their sentences, and if they are guilty of infractions while incarcerated, they can lose that 15%, or a portion thereof, and be required to serve it as well.

(1) BERNARD MADOFF    (150 years)  November 14, 2139
(2) JOEL STEINGER           (20 years)     July 30, 2029
(3) NEVIN SHAPIRO          (20 years)     November 9, 2027
(4) SCOTT ROTHSTEIN    (50 years)      June 1, 2031 ? ( in WitSec-witness protection, no official estimated release date available)
(5) ALLEN STANFORD    (110 years)    April 17, 2105

GERMAN MEDIA CLAIMS THREE IRANIAN BANKS WILL APPLY TO OPEN BRANCHES IN MUNICH

Parsian Bank

According to a leading Munich newspaper, three Iranian banks have advised the Minister of the Economy of the State of Bavaria that they have received approval, from Iran's Central Bank, to set up overseas branches, and that they all plan to open branches in Munich.

The banks are:
(1) Middle East Bank; head office, Tehran.
(2) Parsian Bank; head office, Tehran.
(3) Sina Bank; head office, Tehran.

What these bank branches will do to Country Risk assessments on Germany is something that compliance officers at EU banks will be considering, when these branches are approved, and become operational.

Sina Bank

IRAN SAYS TWO OF ITS BANKS WILL NOT DEAL WITH IRGC COMPANIES

A major media source in Iran has reported that two of its principal banks have refused to conduct any business with corporations controlled by, or affiliated with, Iran's Islamic Revolutionary Guard Corps. the Kayhan, a daily publication, has stated that both Bank Mellat and Bank Sepah, have declined to service foreign currency requirements, and to issue guarantees for affiliated companies.

The grounds cited for those actions were said to be international sanctions. 

HSBC DELAYS PROMPT RESOLUTION OF ITS APPEAL OF JUDGE'S ORDER TO RELEASE MONITOR'S REPORT

For those who have been wondering what has been happening with the HSBC Holdings appeal of the District Judge's order, which  required the release of the independent Monitor's report on the status of improvements upon the anti-money laundering controls ordered in the Deferred Prosecution Agreement, the bank's dream team of attorneys may be dragging their legal heels. A mortgage client of the bank, Herbert Dean Moore Jr., had moved to unseal the report, prepared by the court-appointed Monitor, Michael Cherasky, to ascertain whether HSBC was continuing to engage in practices that were to be corrected, pursuant to the 2012 DPA.

HSBC's argument is that public disclosure of the Monitor's report, even in redacted form, will hinder the Monitor's ability to supervise HSBC. The United States position is the same, and it adds that bank employees will be less likely to cooperate with the Monitor, if they knew that their actions could be publicly released. Nowhere is either party giving any consideration to the financial community's right to know if HSBC has cleaned up its dysfunctional AML/CFT compliance program. The world's banks operate risk-based compliance programs, and they require accurate information, to function at satisfactory levels. They cannot deal with HSBC in confidence if they are in the dark on its compliance effectiveness.

I will let you be the judge of whether HSBC has engaged in conduct that has delayed the prompt resolution of the appeal. HSBC filed its Notice of Appeal on April 8, 2016; its brief was due on May 17, yet its counsel filed a motion to extend the time to file, and the Court granted a new deadline date of July 21, which was, coincidentally, the date that the brief of the United States, which also opposed public release of the report, was due.

The listed reason to justify the HSBC delay was  stated as " setting a common briefing schedule for all of the consolidate appeals will benefit all parties, and facilitate efficient and orderly consolidation for the Court." [Motion to Extend Time at 3]. The Court routinely granted the motion, and the HSBC brief was filed on the July 21 date.

This net result of this delay is that  Moore's brief is now not due until October 20, after which HSBC, and probably the United States, will reply. This matter will not be resolved in 2016, and you can expect the appellants to seek oral argument, which will further delay the ultimate release of the report.

The financial community, and the bank's existing and future clients, deserve to know whether the bank is making any real progress in creating an effective AML/CFT compliance program, which will truly reduce the risks of money laundering.  We need to know whether HSBCs bad old days are gone forever, and know whether the reforms have been implemented. If not, the report will most likely tell us. That is why its public release is critical.

Remember, reportedly HSBC evaded a major criminal prosecution, for its money laundering sins and transgressions, by the proverbial skin of its teeth.  Delaying the resolution of the appeal of the court's order, which released the report, does not assure us that the DOJ decision was the right one.

MOSSACK FONSECA PERJURY IN SWORN TESTIMONY IN US DISTRICT COURT CASE EXPOSED

NML Capital, Ltd., vs. Republic of Argentina is a suit, filed in 2014, by an US-based hedge fund, to collect upon sovereign debt obligations of Argentina. NML, a so-called "vulture fund," purchased defaulted Argentine debt, and a major discount, and brought suit upon it.

 The case became one of great public interest due to the Panama Papers case. When the media published the documents and information, it was revealed that certain large, allegedly corrupt payments, facilitated through MF corporate formation, and bank account opening assistance, greatly reduced the amount of funds that Argentina had on hand to discharge its obligations, including those owed to the plaintiff, NML.

During the discovery phase, sworn testimony was given, seemingly confirming that the MF Nevada company was an independent contractor, and was not controlled by the parent law firm in Panama,, Mossack and Fonseca. Documents released, in connection with the Panama Papers articles, showed that this was no true; that Mossack and Fonseca not only controlled its Nevada subsidiary, but that it:

(1) Concealed and destroyed evidence.
(2) Knowingly proffered false evidence to the court.
(3) Refused to make discovery, without a legal basis for that refusal.
(4) Engaged in dilatory conduct, during the litigation.

While the plaintiff took great pains to note that the attorneys for the MF entities were not at fault for these transgressions, the name partners at the law firm of Mossack and Fonseca clearly engaged in improper, unethical, and illegal conduct, designed to mislead the court, and frustrate the ends of justice. Whether they ever will see the inside of a courtroom is another question, though. Will they be indicted in the United States ? We cannot say, but we will be watching.

LIQUIDATORS IN B & C CAPITAL LTD. INSOLVENCY FAIL TO PUBLICLY DISCLOSE IMPORTANT DETAILS ON ASSETS

The brouhaha over the liquidation of the fugitive stock trader, Ryan Bateman's shell companies, B & C Capital, ltd., and Bateman & Company, increased this week, with the disclosure that the liquidators stated to the press that they had located, and frozen, assets of the debtor corporations, in the millions of dollars. Conveniently, they have neglected to detail where the missing assets were found, and who is holding them. They are certainly not acting to protect the public.

There are an estimated sixty creditors of the Bateman companies, which illegally received millions of investor dollars, which were stolen from Dundee Merchant Bank's accounts at the Bank of Butterfield, by Dundee President Derek Buntain, and Senior Vice President, Sharon Lexa Lamb. both of these cashiered bank officers are missing; Buntain fled Grand Cayman last year, and Lamb  permanently departed more recently. All these individuals, who are mainly elderly Canadian pensioners, have claims upon any assets assembled by the B & C liquidators. It is vital that sufficient information be disclosed, so that these victims can prove up their claims. Were these assets located in Grand Cayman, or overseas, and if so, where are the foreign court proceedings filed, that were used to garner these assets ?

A claim, filed by an anonymous British Virgin Islands corporation, claiming millions of dollars has not been returned by B & C, may very well have been filed by the notorious Cayman Gang of Four themselves, or be a bogus claim. We cannot tell, because  BVI companies use bearer shares, and do not disclose the named of their beneficial owners in public records.

If the court-appointed liquidators continue to be non-transparent, its is feared that the Court will close out the liquidation later this month, without giving the victims of the Gang of Four an opportunity to establish a valid claim, upon the assets reportedly acquired in the liquidation. The totally opaque method, through which liquidation proceedings are conducted in the Cayman Islands, serves neither the investing public, nor the ends of justice. It is one of the principal reasons why any objective assessment of Country Risk on the Cayman Islands must conclude that an elevated level of risk exists, for investors who are seeking a safe haven for their wealth, in offshore financial centers.

AFRICAN COUNTRIES THAT SHUT DOWN THE INTERNET ARE NOT GOOD SOURCES OF INFORMATION

Are you periodically assessing Country Risk on African countries, on a regular basis ? Well, do not look to any of the nations on the list contained within this article, for they all have a history of turning off the Internet Service Providers (ISP) that service their countries, during election time, or any time there is a domestic problem. This week, the West African nation of Gabon turned off the Internet, lest their people report the truth, about political misconduct during elections.

This means that you cannot rely upon local whistleblowers to file accurate reports on negative news items. If you want accurate Country Risk calculations for these countries, use outside sources.

Name and shame:

(1) Gabon
(2) Uganda
(3) Burundi
(4) Ethiopia
(5) Chad
(6) Republic of the Congo

Note that officials in Ghana have threatened to close social media websites, during periods of unrest, but this has not yet been reported as having actually be put into operation.

Rule of thumb: use outside, reliable sources for these countries, when making Country Risk assessments.

AFRICAN COUNTRIES THAT SHUT DOWN THE INTERNET ARE NOT GOOD SOURCES OF INFORMATION

Are you periodically assessing Country Risk on African countries, on a regular basis ? Well, do not look to any of the nations on the list contained within this article, for they all have a history of turning off the Internet Service Providers (ISP) that service their countries, during election time, or any time there is a domestic problem. This week, the West African nation of Gabon turned off the Internet, lest their people report the truth, about political misconduct during elections.

This means that you cannot rely upon local whistleblowers to file accurate reports on negative news items. If you want accurate Country Risk calculations for these countries, use outside sources.

Name and shame:

(1) Gabon
(2) Uganda
(3) Burundi
(4) Ethiopia
(5) Chad
(6) Republic of the Congo

Note that officials in Ghana have threatened to close social media websites, during periods of unrest, but this has not yet been reported as having actually be put into operation.

Rule of thumb: use outside, reliable sources for these countries, when making Country Risk assessments.

HAMAS OPENS OFFICES IN TUNISIA

Hamas leadership in Tunisia.

A Tunisian news outlet, Al-Bilad, has reportedly announced that Hamas has opened offices in the country's capital, Tunis. Inasmuch as the Hamas "headquarters" in Turkey has been used to finance terrorist acts, both in the West Bank and in Europe, and to recruit and arm terrorists, it is reasonable to expect that the Tunis office, referred to as a headquarters, will not function as a diplomatic post.

This is extremely disturbing, for Tunisia, which has been the site of terrorist attacks that took a huge hit out of the country's precious tourist industry, does not need to facilitate the actions of a specially designated terrorist organization. There could also be assassination attempts made upon senior Hamas terrorists; this has occurred several times in the Middle East, and one wonders whether the Government of Tunisia has considered that Hams could be targeted in Tunis.

From a compliance standpoint, it raises risk levels for American banks whose clients include exporters to Tunisia, especially dual-use goods, which could easily be ordered by front companies, and delivered to Hamas, for further shipment. Also, there are other countries that have sanctioned Hamas, and compliance officers at banks in those nations should also pay close attention to what their clients send to Tunisia.

WHY DID GRAND COURT OF THE CAYMAN ISLANDS HOLD A CLOSED-DOOR HEARING IN BATEMAN & COMPANY LIQUIDATION ?

Cayman media, reporting on the latest developments in the unfolding scandal behind the court proceeding, regarding B & C Capital, Ltd.,* were forced to rely upon statements of the court-appointed liquidators, as the new proceeding, against Bateman & Company, Ltd., was held behind closed doors.  I don't know where you received your education, but if it was in a country whose legal traditions originated in English Common Law, you know that there's something seriously wrong, when any court denies access to the press and public, to a court proceeding, without just cause.

The Grand Court liquidation is a strictly civil matter, and there are no justifiable grounds to close the court to the public, especially when this is a matter of great public interest, with extensive press coverage. There was no legal privilege to protect, no right for either the insolvent companies, nor creditors, nor the liquidators themselves, to bar anyone from the court proceedings. The Court erred, in keeping the public from its right to know. Who gave that order to the Court ?

The Cayman Islands has been on the receiving end of a substantial amount of negative publicity about the underlying scandal, popularly known as the Cayman Gang of Four case, wherein four dodgy Cayman financial professionals stole as much as $450m from Canadian investors, in what may have been the biggest loss, suffered by investors, in the history of Cayman as an offshore financial center. Neither CIMA, nor the RCIPS, have brought any regulatory actions, and no arrests have been made.

Barring the press and public from the courtroom, in the pending liquidation proceedings, where there are serious allegations of missing money, and the individual behind the scandal, Ryan Bateman, is a wanted man in Grand Cayman, will only further convince foreign investors that the Rule of Law is not being followed in the Cayman Islands, and that they had better steer clear of the jurisdiction, purely on risk management grounds.
______________________________________________________________________
* We still are asking why the individual who prepared the affidavit, in support of the first (B & C Capital) liquidation, was no other than the missing, cashiered, former president of the insolvent Cayman bank, Dundee Merchant Bank ? How did the Court accept sworn testimony from a person who is accused of himself participating in the massive Cayman Gang of Four fraud ? And why did the parties refuse to make a copy of what is supposed to be a public document, available, for review ? Are we now sealing court documents, too ?

  

FEDERAL APPEALS COURT REVERSES $655m JUDGMENT AGAINST PA AND PLO ON JURISDICTIONAL GROUNDS

The Second Circuit Court of Appeals, in a 61-page opinion, has reversed the District Court's $655.5m judgment, entered against the Palestinian Authority, and the Palestine Liberation Organization. The suit, which was filed under the Anti-Terrorism Act, asserted that the two defendant entities were liable, for a number of terror attacks, in Israel, that killed or wounded US citizens.

The jury verdict, $218.5, was automatically trebled, pursuant to the Act. on appeal, the defendants argued that the Court lacked personal jurisdiction over them. The appeals court found

"In sum, because the terror attacks in Israel at issue here were not expressly aimed at the United States,    and because the deaths and injuries suffered by the American plaintiffs in these attacks  were 'random and fortuitous,' and because lobbying activities, regarding American policy  toward israel are insufficiently 'suit-related conduct' to support specific jurisdiction over these  defendants. Walden, S. Ct. at 1121, 1123." [opinion at 60].

The Second Circuit vacated the judgment of the District Court, and remanded, with instructions to dismiss the case, for lack of personal jurisdiction.  The plaitiffs' counsel has indicated that they will appeal; whether this will be a request for an En Banc hearing, or a Petition for a Writ of Certiorari, presented to the US Supreme Court, was not disclosed.

Readers who wish to review the complete text of the decision, may access it on the Second Circuit website here.