IRAN EXPANDS SANCTIONS EVASION THROUGH IRAQI KURDISTAN

The Islamic Republic of Iran has greatly expanded its commercial transactions with the Iraqi Kurdistan Region, and is using those trade relations to evade and avoid international sanctions, with impunity. This information should stimulate compliance officers at EU and North American financial institutions to conduct Enhanced Due Diligence investigations on all bank client transactions with Iraqi Kurdish companies, including a requirement for a sworn statement that the Kurdish company is not trading for the purpose of an Iranian end user.

                                                                 Consul Hossani

A senior Iranian diplomat for the autonomous region, Consul General Seyed Azim Hossani, in a interview with local media,  gave these details:

(1) At least 500 active Iranian companies are conducting business in the Iraqi Kurdish Region.
(2) Whilst the reported volume of trade between Iran & Iraq is officially $7bn, a more accurate number is $10bn, and an estimated 70% is with the Kurdistan Region.

I often wonder when someone in authority in the US Treasury Department will wake up and take some measures to keep the Kurdistan Region from flaunting international sanctions. Thus far, nobody seem to have the political courage to criticise the Kurdish Autonomous Government.

Remember these statistics when you are examining the accounts of your customers that trade with the Iraqi Kurdistan Region. Do not facilitate Iran sanctions evasion activity.

VIKTOR BOUT'S PRISON ASSIGNMENT BEING REEVALUATED

The Federal Bureau of Prisons is reportedly reconsidering the assignment of Viktor Bout to the "Supermax" prison in Florence, Colorado, to serve his sentence. Mr. Bout's attorney, Albert Dayan, has stated that the BOP has delayed Bout's departure from Metropolitan Detention Centre Brooklyn, where he was held pre-trial. Other sources report that the United States Attorney's Office has advised that his prison designation is being reevaluated. The BOP generally conducts a complex review prior to designating the institution where a Federal convict serves his or her sentence.

Bout's lawyer reportedly complained to the sentencing judge, the BOP, and the US Attorney in New York, about the Supermax designation. There is a Federal Prison located within the military complex in Fort Dix, New Jersey, and should he be incarcerated there, he could assist his counsel in the preparation  of his appeal, which is pending before the US Second Circuit Court of Appeals*.

In a related matter, the United States Attorney, Eric Holder, in an interview with Russian journalists, stated that the US may consider an application to transfer Bout to Russia, to serve his 25-year sentence. Statements by the Russian Foreign Ministry indicate that it will seek to return Bout to Russia.

Any transfer still fails to satisfy the question of how Bout's other US criminal case, which is still pending, can be resolved. Finally, the fugitive status of his co-defendant, Bout's reputed money launderer, Richard Chichakli, remains as unfinished business for the Court.

                                                               Richard Chichakli
_______________________________________________________________________
* Bout vs. US, Case No.: 12-1487cr (2nd Cir.) .

WHY HAS BULK CASH SMUGGLING FROM CARACAS TO PANAMA STOPPED ?

With Venezuelan President Hugo Chavez Frias reportedly near death, the private aircraft that routinely ferry millions of illicit US Dollars, accumulated by Venezuelan PEPs and drug-trafficking generals, to small airstrips in the Republic of Panama, (and on into those local banks in Panama City that ask no questions about Source of Funds), are not flying in this week.

Either all the usual suspects are waiting for regime change, or they are short on cash at the moment. Consider this a strong signal to start paying close attention to Venezuelan domestic politics. Most experts expect a bloody civil conflict.

Since so much of Panama City's rapid growth can be attributed to Venezuelan "flight capital," where "investors" build office buildings and massive oceanfront residential apartment buildings, all without financing, is the building boom destined to crash ? If there is a stutter, consider whether you might want to raise Country Risk on the Republic of Panama.  Meanwhile, where are the PEPs and narco-generals warehousing their cash ?

CHARLES TAYLOR DENIES WRONGDOING AT SENTENCING HEARING

Former Liberian President and convicted* war criminal Charles Taylor failed to admit wrongdoing this week at his sentencing hearing, nor did he express remorse for his many crimes against humanity. The best he could do was to express his "deepest sympathies" for the people of Sierra Leone.

The prosecutor asked that Taylor receive an 80-year sentence. His attorneys asked for leniency, arguing that sentence should give him some hope for life after release. Taylor alleged that the trial was a ploy by the West to achieve regime change.

In a tirade against the Court, Taylor reportedly charged that the witnesses were paid for their testimony, and were threatened with criminal prosecution if they failed to cooperate. His counsel said the suggested sentence was overly harsh, and placed too much of the blame on him alone.

The Court stated that sentence shall be pronounced on 30 May;  he will reportedly be serving his incarceration in a maximum security prison in the United Kingdom.

_________________________________________________________________________
* On 26 April, 2012 .

WILL MONEY LAUNDERERS EXPLOIT GREEK CHAOS ?

On Monday, depositors withdrew €700m ($894m) from Greek banks. Where all the cash taken out recently will go is unknown, but I wager that much of it will become flight capital, to be deposited at EU banks elsewhere in Europe. This present interesting opportunities for European money launderers seeking to place cash from narcotics trafficking. Remember, money launderers are always looking for targets of opportunity, new avenues through which they can move dirty cash into mainstream financial institutions.

If I was a money launderer today, working for a major trafficking organisation, I may seek to take advantage of the teetering Greek economy through one or more of the following schemes:

(1) Claiming to be a wealthy expat living in Greece, the laundryman opens a Euro account as an EU bank, seeking to exploit the news about the Greek turmoil, explaining that he was forced to close his business, clean out his accounts, and leave the country. He may also use a Greek national as a front.

(2) Since the domestic banking system appear to be extremely chaotic, the laundryman purchases a shelf company, opens accounts in Greece,  smurfs cash deposits into a number of accounts, consolidates them into one, and wires the funds out, relying upon the fact that all the bank's staff is inundated with work, understands if clients want to move money overseas, and in general is far to stressed out, and tired. to perform any decent AML compliance.

(3) Exchanges the drug cash in Athens for rare postage stamps, rare coins, precious metals,  rare art and antiques, and anything else that is extremely portable, trading upon the fear of economic collapse, tax cheating occurring in  these type of shoppes, and the general economic malaise, to have sellers look other other way in the transactions. The alternate items of value are then shipped to the country of origin of the narcotics trafficking organisation.

Money launderers always thrive during difficult times; they understand that compliance processes are often truncated, or even overlooked altogether, by financial institutions, when there are major problems inside, and outside, the bank. Remember that the next time you are asked to handle funds coming from an unstable jurisdiction.

HAVE REPUTATION COMPANIES RENDERED GOOGLE OBSOLETE FOR COMPLIANCE PURPOSES ?

The widespread use of Internet  "advisers," who manipulate what appears on the first couple of pages of an Internet search of a compliance research target, by placing various and sundry extremely relevant  items into the www, have rendered most normal compliance searches useless. If you are one of those few people who thinks that you don't have to spend money on commercial off-the-shelf high risk databases, think again. Search engines are now being gamed to deny you the truth about your target.

I saw a good one last week; the hacker involved had placed a wide variety of Internet entities, including subscriptions to many social networking and business contact sites, stand-alone websites purportedly by the the drug trafficker, operating a news service or public service, or both. Hobby and recreational sites, and even sites for images, are also a good method of pushing the real damaging data way back to the end of the search engine results, where most compliance officers deign to tread. There was even a nasty swipe at articles written by yours truly. about the someone's  long criminal history*, for "attack the messenger" is a favourite tactic, designed to make you question the accuracy of negative news.

A word to the wise: Unless you couple your Internet search with the criminal acts, or civil transgressions linked to your target, these reputation damage control firms will keep you from discovering the sordid truth about your prospective client. Since we rarely know exactly what your new customer's crime du jour  actually is (narcotics, white collar, child pornography, arms trafficking, etc.), you cannot therefore specify, with any degree of accuracy, in your  search. The only way to evade all those bland/positive entries about your target is to zero in on his crime; otherwise,

The obvious answer is that you need to batch up the queries, and outsource them all, as due diligence, or enhanced due diligence, so that someone with broader access, and investigative experience, can supply accurate answers. Search engines, as primary sources of compliance information, are becoming a very  dangerous place to troll for that data; avoid them.

__________________________________________________________________________
* I am sure that some of you may have articles critical of my information, or of me personally; this often happens when I expose career narco-criminals, dirty PEPs, or white-collar fraudsters. They do not like the public exposure.

US TELLS MEK WHEN IT WILL DECIDE ON REMOVAL OF TERRORIST STATUS

Senior staff at the office of US Secretary of State, Hillary Clinton, who has yet to decide on whether or not to remove the Mujahedin-e-Khalq (MeK) from its 1997 placement on the US sanctions list as a designated terrorist organisation, have given a timeline on that decision-making process. Whether this is an indication of how State intends to act, however, is a mystery.

The Department has advised that Mrs. Clinton will make her final decision on removal of the MeK from the terrorist sanctions list sixty (60) days after the last MeK member departs, for relocation, from the groups present location, Camp Ashraf, in Iraq.  MeK members are slated to transfer to a facility near Baghdad Airport that is a former US military base.

Some MeK members are expected to be relocated outside of Iraq. If the MeK is delisted as a terrorist organisation, Iran watchers reportedly expect that this decision will further harm US-Iranian relations.

How will Secretary Clinton rule ? Though there have been massive efforts, by paid lobbyists, to portray the MeK as a reformed organisation that has renounced violence as an instrument of policy, there are many who distrust the group aims, as it appears to operate, for all intents and purposes, as a cult of the individual, and insists on absolute obedience from its members. It was not founded on democratic principles. She must be considering the fact that it has a violent past in her decision process.

 It also appears to have zero support within Iran, due to the fact that it fought on the Iraqi side during the decade-long Iran-Iraq War. Finally, its earlier Anti-American  posture has raised the question of whether its pro-US stance is merely a temporary, expedient position, to receive aid and assistance.

Will the MeK exit Camp Ashraf, so that the Secretary can render her decision ? Only time will tell, but we are keeping an eye on the situation, especially due to reports of MeK representatives in Latin America. What exactly are they doing there ?

___________________________________________________________
Note to readers: There are nine earlier articles, here in the Financial Crime Blog, covering the MeK. You can access them by entering "MeK" in the search box at the top of the page.

WHY IS VIKTOR BOUT BEING SENT TO SUPERMAX PRISON ?

Disregarding the recommendations* of the sentencing judge, that he serve his sentence in the New York City Metropolitan Area, the Federal Bureau of Prisons this week is about to move convicted arms trafficker Viktor Bout to the most restrictive prison in the United States. Popularly known as "Supermax," it is the Alternative Maximum Facility (ADX) Florence, Colorado, home to Al-Qaeda terrorists, gang leaders, organised crime kingpins, escape risks, and individuals convicted of treason. It is believed to be escape-proof.

                                                                   ADX Florence

Bout, who is serving a 25 year sentence* for attempting to sell arms, including missiles, to the FARC, for use against US officials and military in Colombia, has appealed his conviction. It is assumed that the judge recommended that he remain in the New York area, so that he could confer with his attorneys during the pendency of his appeal.

The judge removed him from pre-trial solitary confinement, ruling** that he did not present a danger in General Inmate Population, and was critical of the Bureau of Prisons for placing him there for an extended period, given that he was confined under substandard conditions whilst fighting extradition in Thailand.

So, the question arises: why is the Bureau of Prisons treating Viktor Bout like a dangerous terrorist, when the judge found otherwise, and placing him in Supermax ? It has enraged government officials in Russia, who have stated that the case was purely political, and that he was entrapped by agents of the DEA. Is the United States making some sort of statement to Mr. Putin and the Government of Russia ? More likely, the US Government does not want Bout to disclose to other inmates certain covert activities that he performed on its behalf, and that might now embarrass America's intelligence community.  

This is not the way to get Russia to turn Richard Chichakli over to the United States; Richard is the Syrian-America CPA who is alleged to have been Bout's money launderer. He is a co-defendant in the FARC arms case in New York. We shall continue to monitor this case.
_____________________________________________________________________
*Viktor Bout sentenced to 25 years in American Prison
**Viktor Bout ordered transferred from Solitary Confinement

IRANIAN OIL, REFINED IN KURDISTAN, EVADES INTERNATIONAL SANCTIONS

                                                                Iraqi Kurdistan

Reliable sources, responding to our article* dealing with Iran's recent authorisation, given to private oil brokers, to sell Iranian oil on the international market, have stated that at least 50% of Iran's oil production is being diverted to adjacent Iraqi Kurdistan, where it is being refine alongside Iraqi oil. Thereafter, it is sold on the international market, and listed as being of Iraqi origin, thereby effectively evading international sanctions.

                                                            Kurdish oil refinery


Canadian nationals experienced in the petroleum industry are alleged to be the central players in this operation. Given the fact that the refined Iranian-origin petrol is reportedly co-mingled with the Iraqi production, identification of national origin becomes an impossibility.

Under those circumstances, compliance officers at international banks whose clients are engaged in the purchase of petrol from Kurdish refineries would be well advised to obtain affidavits from both the clients and then refineries, to the effect that no oil of Iranian origin is contained in any shipment. Whilst this is not a foolproof guarantee, such precautions, if implemented, appear to rise to the level of best practices. Have your clients visit the refinery facility to make a visual confirmation of non-Iranian origin, if this is feasible.
_________________________________________________________________________
*Seeking to Evade Sanctions, Iran Authorises private Oil Exports

WILL PANAMA FREE NORIEGA ?

Panamanian prison authorities are said to be in the final phase of decision-making regarding the disposition of imprisoned former Panamanian General Manuel Antonio Noriega. Medical reports are being examined and evaluated, for the purpose of determining whether Noriega should be freed, and place under house arrest.

The former general's attorneys have sought house arrest, also known as home confinement, or hospitalisation, due to Noriega's health status. Panamanian law provides that elderly prisoners may be released from confinement, and allowed to go to house arrest, to serve their sentences.

Noriega was admitted last week to Santo Tomas Hospital for Bronchitis and fever. He was reportedly returned to his cell at the El Renacer Prison this week; He is 78 years old.

SEEKING TO EVADE SANCTIONS, IRAN AUTHORISES PRIVATE OIL EXPORTERS

The Ministry of Oil of the Islamic Republic of Iran has decided to authorise private Iranian oil exporters to sell crude oil on the international market. The limit has been set at twenty per cent of exports. The conditions imposed are:

(1) Direct sales to foreign refineries, which would effectively disguise the Iranian origin of the crude, as the output would be combined with the refineries' own products.

(2) The state owned National Iranian Oil Company is to be excluded from all marketing of the private exports.

(3) Payment would not be made through the presently-sanctioned Central Bank of Iran, an incentive to  potential foreign refinery buyers.

20% of Iran's export capacity is said to amount to an estimated 400,000 bbl. per day. This is a significant amount of potential income for Iran, and appears to be an effective means of circumventing international sanctions.

How will the United States and the EU respond to this move ? We cannot say, but things must be getting difficult in Iran, if the government has agreed to effectively lose control over one fifth of its oil production, in its quest for cash.

Compliance officers at international banks whose customers include oil refineries will need to obtain written assurances from these clients that:

(1) No Iranian crude is being processed by the client at its refinery.

(2) No payments for Iranian oil are being sent through the bank, directly or indirectly.

It is suggested that outside bank counsel, with relevant experience,  be engaged to prepare such a document. It should be executed by the company's president or managing director, and attested
to by another senior officer. To do otherwise risks possible sanctions violations. Watch yourself on this issue.

RAISE COUNTRY RISK ON GUINEA-BISSAU

The situation in the Republic of Guinea-Bissau remains unchanged .The issues are extremely troubling:

(1) The "Military Command," the junta that ousted the legitimate government, remains in power.

(2) The EU has imposed travel bans and asset freezes on six senior leaders of the coup.

(3) The 15-nation Economic Community of West African States,  ECOWAS, has openly threatened military action to restore the civilian government.

(4) Cocaine trafficking flights from Brazil and Venezuela land undisturbed, and the resulting corruption from payments made by the traffickers is destabilising the country. Guinea-Bissau has become a primary transit stop for Colombian cocaine.

Until and unless the junta returns control to a civilian entity, or is displaced by ECOWAS troops, raise Country Risk for the Republic of Guinea-Bissau, to ensure that any financial transactions, by your bank, or its clients, receive close scrutiny prior to any exposure, due to the heightened risk of loss.

LEBANESE RECONSTRUCTION CELEBRATION MISSES THE POINT

This week's  Hezbollah observance of the success of the reconstruction of the southern Beirut suburb of Dahiyeh, the predominantly Shia district that suffered major damage during the 2006 conflict between Hezbollah and Israel, should be an abject lesson in risk for compliance officers. The up to $25,000 in cash that Hezbollah very publicly passed out to homeowners was believed by most to have come directly from Iran. The truth is somewhat different, and therein lies a tale.

According to the pilots who delivered the greenbacks, the cash all came via private jet from Venezuela, on the direct orders of President Hugo Chavez Frias. The aircraft who brought the cash were all owned by Petrolós de Venezuela (PdVSA), Venezuela's government oil monopoly. Whilst the origin of the physical cash is not know, PdVSA is paid for oil sold in international markets in US Dollars. The flight plan involved a route from Venezuela to Syria, and the money was then carried on surface transport into Lebanon, through areas controlled by Hezbollah.

                                           Chavez with Nasrallah and Hezbollah flag

In gratitude for the provenance of the cash, giant billboard signs later appeared in the Shite-controlled areas of Lebanon, thanking Chavez for his generosity. Also, two Lebanese restaurant names were changed to reflect Chavez' name. Whilst this was widely publicised in Lebanon, the Western press ignored it.

                                                           Beirut: Chavez posters

One wonders how many US banks honoured a request from Venezuelan financial institutions for large amounts of dollars, for PdVSA, not knowing that the cash was destined for a Specially Designated Global Terrorist organisation. What if one of the Venezuelan pilot disclosed where the cash came from, and where it ended up ? Do not the US banks that played a role have a duty to enquire about the extraordinary amount of cash that was requested of them ? Can anyone spell sanctions ?

                                           Beirut's Hugo Chavez Restaurant

 The lesson we learn here: sanctioned entities often depend upon third parties to achieve their goals; be alert that you do not unwittingly facilitate them. Mr. Chavez is laughing at you, Mr. New York banker.

ANOTHER ROTHSTEIN LAWYER PLEADS GUILTY

Even minor players in a Ponzi scheme often find themselves looking at substantial  prison time, especially when that scheme involves individuals who create counterfeit court documents to mislead investors, and seek to curry political favour through illegal campaign contributions. Judges do not like it when lawyers game the system for material gain, and everyone involved generally ends up in the criminal justice system,  and receives an adjudication of guilt, even those who are sentenced to Probation.

A non-equity partner in the law firm that perpetrated the massive $1.4bn Ponzi scheme, utilising bogus court settlements to bring in investors, has entered a plea of guilty in US District Court* in Fort Lauderdale. Steven Lippman, of the defunct Rothstein Rosenfeldt Adler firm, violated Federal Election laws when he made presidential campaign contributions, secretly on Scott Rothstein's behalf, to increase Rothstein's political power and influence. An Information was filed in the case, which usually indicates cooperation. Will Lippman be testifying against other Rothstein Rosenfeldt partners ? Probably so.

                                                         Steven Lippman and Scott Rothstein

Lippman, is facing a maximum five year sentence; his sentencing has been scheduled for 14 September. In addition to the lawyers, the Rothstein case has even resulted in convictions of some of the Rothstein Rosenfeldt Adler support staff:

(1) The CEO.
(2) The CTO.
(3) A senior computer tech.
(4) An admin assistant.
(5) Scott Rothstein's uncle.

The case continues to unfold; More to follow.





______________________________________________________________________________
*United States vs. Steven Lippman et al, Case No.: 12-cr-60078-JIC (SD FL). 

VIRTUAL CURRENCY WORRIES FBI

The Federal Bureau of Investigation, in an unclassified, but nonpublic, Intelligence Assessment, warns that the digital currency known as Bitcoin represents a dangerous technological advance, regarding the inability of law enforcement to identify individuals moving virtual currency online.

The Assessment, Bitcoin Virtual Currency: Unique Features present unique Challenges for deterring Illicit Activity*, concludes that Bitcoin is a convenient and untraceable digital currency. The white paper, which was prepared by the Cyber intelligence Section of the FBI Directorate of Intelligence, apparently was not released to the public, because it examines the strengths of this digital currency. It was obtained by the Internet magazine Wired, which posted it to the Web.

The Assessment offers a detailed analysis of the threats posed by virtual currency, including the facilitation of money laundering. Is it the shape of things to come ?

Note to readers: businesses that accept Bitcoin generally post a sign that shows a capital "B" with what look like quotations marks above and below.
____________________________________________________________________
Access the document here