IT IS TIME TO DESIGNATE LEBANON AS A JURISDICTION OF PRIMARY MONEY LAUNDERING CONCERN

It is high time for the United States to designate Lebanon as a jurisdiction of primary money laundering concern. A major American NGO* has actually asked Deka International SA, in Luxembourg, to divest itself of Lebanese sovereign bonds. Its argument tracks issues with which we we are all, sadly, very familiar:

(1) Hezbollah is laundering drug trafficking & smuggling profits through the purchase of Lebanese sovereign debt.
(2) The Lebanese banking system generally accepts large cash deposits without question.
(3) Iranian sanctions evasion efforts are facilitated by passing funds through Lebanese banks.
(4) Terrorist financing, for a number of specially designated global terrorist organisations, flows through Lebanese banks.

Green represents Hizbollah-controlled territory 

For some reason, the United States, which supports the beleaguered national government in Beirut, has utterly failed to deal with the reality. With Hezbollah, which is in actual control of several ministerial posts, several banks, and the entire southern portion of the country, funded in large part by Iran, it seems that there's no other choice.

If I was a director of compliance at a major international bank in the EU, or North America, I would take a hard look at all my clients' financial transactions with the Lebanese financial system, and close accounts that pose a risk to the bank forthwith. I would not want my bank to be found later to be a terrorist facilitator.

Will the US designate Lebanon ?
_____________________________________________________________________
*United against Nuclear Iran

IRAQI BANK HAS IRANIAN OWNERS

Kindly note that the Iraqi bank, Islamic Bank of Regional Cooperation for Development and Investment, with an email address of Taawenbank, reportedly is majority Iranian-owned. The bank, which has a branch in Iran, appear to have a close relationship with the Central Bank of Iraq. Its Iranian ownership not only represents an unacceptable risk for EU and North American banks, but it could be facilitating sanctions evasion through Iraq.

Add to this the fact that these Iranian banks were granted licenses to operate branches in Iraq:

(1) Parsian Bank
(2) Karafarin Bank
(3) Post Bank of Iran
(4) Keshavarzi Bank a/k/a Agribank

and the risk level for dealing with any Iraqi bank has now gone off the scale. Should you red-line all transactions with private Iraqi banks ? It appears that the answer must now be yes, especially after the focus on HSBCs transgressions with Iran in the Senate Report. You do not want any Iran sanctions violations found by regulators; therefore, it would be prudent to close your correspondent relationships with Iraqi financial institutions at this time.

CHINA BLAMES VIETNAM & THE PHILIPPINES FOR ASEAN SUMMIT FAILURE

Quotes in Chinese state media have attributed the failure of the ASEAN Summit to reach a consensus on a statement on the South China Sea crisis to Vietnam and the Philippines. A fair reading of the facts, however, indicates that Cambodia, as host country, endeavoured to keep the issue off the agenda, in support of its patron, China, which has committed to major investments in Cambodia. Blocking the issue does not serve the members of ASEAN well.

To add insult to injury, Qu Xing,  the Director of the Chinas Institute of International Studies, inm] what must be regarded as an official Chinese pronouncement, stated:

" China has sufficient historical and jurisprudential evidence of its sovereignty over the Nansha (Spratley) Islands and the adjacent waters."

Director Qu Xing

Additionally, Qu noted that China is a signatory to the UN Convention of the Law of the Sea. If Qu read the document, he would notice that the Convention establishes the 200 mile Exclusive Economic Zone, which China does not choose to abide by in its unilateral declaration that all of the South China Sea is an internal Chinese lake.

Compliance officers who are charged with Country Risk assessment should be aware that the Philippines is upgrading its military capability, and Vietnam is moving closer to a relationship with the United States that may include giving access to the US Navy to the facilities at Cam Ranh Bay.

The issue of the relationship between China, and the Southeast Asian countries that border the South Sea, continues to deteriorate.

WHAT TO DO WITH HSBCs MONEY LAUNDERERS ?

If you have read the three hundred page Senate Report on HCBC, you know that a significant number of senior bank executives, compliance officers, risk management officers, and managers committed acts that facilitated the laundering of proceeds of crime, or facilitated terrorist financing, or breached international sanctions. In my world, we call many of those actions money laundering.

Whether they are still at the bank, or now work elsewhere, or are now engaged in other occupations or professions, or have quickly and quietly retired ,the question remains: what, if anything, should we do about them ? Obviously, a very small number could be charged with a crime, but then again, they may all escape accountability. ACAMS should revoke their CAMS designations, for their actions went far beyond simple compliance malpractice, and became intentional torts. It is a shame that there will be no arrests.

Note well that the primary bad actor in the Pinochet scandal, who was the accounts relationship officer for Pinochet and his attorney at two banks, was never charged. I later tracked him down; he had actually obtained a real estate license, and was working in Miami's exclusive Coconut Grove district. Was justice served there ? No.

I recommend that, if you work in compliance, you extract the identities of the most egregious HSBC offenders, all of whom are named and shamed in the Senate Report, and send it on to Human Resources, so that none of those money launderers ever are offered positions at your bank. Otherwise, the stellar recommendations from HSBC that they arrive with may result in their employment in the office next to you.

 

THE SPANISH-LANGUAGE VERSION - LAVADO DE DINERO

Readers for whom Spanish is their first language will be able to purchase The Laundry Man  in Spanish in August. Above you will find a photo of the cover.  The publisher is Ediciones B in Mexico City. The title is Lavado de Dinero.

RELATIVES OF AMERICAN TERRORISTS KILLED BY DRONES FILE SUIT

The next of kin of American citizens, targeted abroad as terrorists, who were killed in Yemen by drone strikes, have filed a wrongful-death civil suit in US District Court in Washington. The father of Anwar al-Aulaqi, whose name was placed upon the "kill list" after his role in  the failed bombing of a Detroit-bound airliner became known,  and the mother of Samir Khan, an Al-Qaeda propagandist, were killed by a drone strike in Yemen on 30 September. Al-Aulaqi's son, Abdulrahman, was killed in a later strike. Yemen, which is in the centre of an Al-Qaeda military campaign against the established government, is considered a hot battlefield by the United States, and armed US Army and CIA drones target terrorism suspects as military targets.

Anwar al-Aulaqi

The Defendants named are the Secretary of Defence, the Director of the Central Intelligence Agency and two military commanders of Special Operations Command.

Samir Khan

The Plaintiff argues that judicial due process, meaning a Federal Court hearing or trial, did not occur, and that no American citizen should be deprived of life without it. The Attorney General has stated in the past that due process and judicial due process are not the same, and in matters of National Security, such as the Al-Qaeda terrorist threat, or within an armed conflict, there is no such right to prior court hearing. The case raises unique and important issues, and we will be closely following it.

al-Aulaqi and Khan

_________________________________________________________________________
* Nasser al-Aulaqi, as Personal Representative of the Estates of Anwar al-Aulaqi, et al vs. Leon Panetta, et al (D DC 2022) [case number not available yet].

DEFAULT ENTERED AGAINST ATLANTIC RIM FUNDING ATTORNEY

Readers who require an update into the Pennsylvania Federal Court case involving an Advance Fee/Ponzi scheme fraud allegedly perpetrated by Atlantic Rim Funding Corp, Seven Dean Kennedy, and their counsel, Jay Mac Rust, Esq., be advised that the Court has now entered a Default against rust. All defendants are now precluded from pleading or otherwise defending the action.

I expect that you will see a Final Judgment entered shortly. the Plaintiff has submitted a proposed judgment to the Court. I will keep you posted on this case, due to the large amount of public interest.
If you are unfamiliar with the case, read the articles posted here earlier.

Update: The docket now (20 July) shows that the Court entered the Default in error, due to the fact that rust filed a responsive pleading. I am unable to confirm this.

HSBCs MYSTERIOUS GLOBE-TRAVELING "FIXER"

I noticed that the US Senate Report on HSBC omitted any reference to the bank's "fireman," its unofficial fixer, the individual who reports to the Board of Directors, from the field, on the banks' myriad global problems. A Brazilian attorney from Rio, he has a direct channel to the bank's leader, Sandy Flockhart, who advises all who enquire that he is the designated problem-solver. Why wasn't he named in the Senate report, I wonder ? Was he even interviewed ?

This fixer is tasked by the board to assess all of the bank's far-flung major problems, and to engage local counsel in the area, to grapple with the issues, as quietly as possible. He also, as I have seen, fends off the curious; even if you have detailed personal knowledge of a specific HSBC problem, and even proffer suggested remedies, he will avoid and evade you. Apparently, he is the only one that Mr. Flockhart  relies upon to place a bank-aid on a difficult situation, though we may conclude from the Senate Report that he has not been very successful.

Perhaps HSBCs new management, and new compliance staff, will bring the bank's covert remedial measures programme out of the shadows,  and into the bright light of day, and dispense with fixers altogether; We shall see.

CAN INDONESIA COOL DOWN SOUTH CHINA SEA TEMPERS ?

The move by Indonesia's Minister of Foreign Affairs, to seek the cooperation of ASEAN meeting host Cambodia, as a means of diffusing the current South China Sea territorial crisis, is welcomed. If he can formalise the thus-far strictly informal Code of Conduct, perhaps the flames fanned by China, over the oil & gas-rich region, will subside.

Indonesia, a member of ASEAN, but not a claimant amongst China, Vietnam, the Philippines and Taiwan, to the island groups, shoals and reefs of the South China Sea, may be able to cobble together a consensus. For the sake of reducing the tensions that exponentially raise country risk, we hope that Minister Natalegawa will succeed.

Indonesian Minister of Foreign Affairs Natalegawa

SUICIDE BOMBER IN BULGARIA HAD BOGUS AMERICAN ID

Buried in the news about yesterday's story about the terrorist attack in Bulgaria was a note that the suicide bomber had bogus American identification. We trust that the authorities will release details forthwith. US media are showing a counterfeit Michigan Driver's License. A counterfeit US Passport was reportedly also found. They are also saying that the suicide bomber was released from Guantánamo Prison several years ago.

RAISE COUNTRY RISK ON IRAQ FOR SANCTIONS EVASION

If you work in an international bank, and you are shipping US Dollar currency (notes) to the Central Bank of Iraq, or to financial institutions located in Iraq, you are probably facilitating a major international sanctions evasion scheme. US Dollars are flooding into Iran and Syria, through a variety of pipelines:

(1) Bulk Cash Smuggling.
(2) Payment, directed to "merchants" in Iran and Syria, employing invoices for phantom sales of goods or services.
(3) Hawala.
(4) Unregulated, unlicensed and unofficial financial institutions, or non-bank financial institutions (NBFI).

The daily figure in Iraq of currency auction volume is averaging $260m per day, five times the pre-sanctions figure, and of the 33 so-called financial institutions purchasing from the CBI, only 21 are licensed. There is actually so much US Dollar purchasing at this time, that it has hurt the value of the Iraqi Dinar, and the Iraqi economy. Unlicensed currency traders number in the hundreds. Know also that the Kurdish Region contains the worst offenders.

If you are charged with the assessment of country risk at your compliance department, consider the facts, and decide whether you should raise Country Risk for Iraq to a high level.

If your bank has a relationship with Iraqi financial institutions, NBFIs, or any financial services company, it is time that you take a hard look at that business, and exit if if there are any indications that you are shipping bulk cash. Note well what is about to happen to HSBC for its dealings with Iran.

THE PHILIPPINES FILES DIPLOMATIC PROTEST OVER CHINA'S ESTABLISHMENT OF OF SANSHA CITY IN SOUTH CHINA SEA

The Philippine Department of Foreign Affairs has filed a formal protest with China, over that country's establishment of an extensive prefectural-level municipality around Sansha City. The protest, which was lodged due to the fact that the Philippines considers it a fresh attempt to exercise control over the Spratley Islands, includes an area within the Philippines' Exclusive Economic Zone, which extends out 200 n.m.

Sansha City HQ (official photo)

The newly-established municipality contains over two hundred reefs, sandbars and islets, encroaches upon sovereign territory of a number of neighboring nations, including the Philippines and Vietnam. This new Chinese tactic is certain to become an aggravating factor in the ongoing South China Sea dispute.

Aerial view of Sansha "City"

DOES BULGARIAN ATTACK SIGNAL A NEW PHASE FOR TERRORISM IN EUROPE ?

An attack on a busload of Israeli tourists, on a bus in the airport, in the Black Sea resort of Burgas,  Bulgaria, has left seven dead and two dozen injured. Due to the fact that the attack came on the anniversary of the 1994 attack on the Jewish Community Centre in Buenos Aires, responsibility for the attack had been laid upon Iran by Israel.

Whether this is the shape of things to come is too early to tell; the Iranian economy is visibly suffering from international sanctions designed to impede illegal WMD and ballistic missile programmes. Is this terrorist attack the first in a series, intended to create chaos in Europe, damage economic recovery, and therefore raise country risk in the EU ? We cannot say, but we will be watching closely for further attacks or incidents, and analysing their impact on risk.

MONEYVAL REPORT ON VATICAN CITY RELEASED

Readers who wish to  review the Mutual Evaluation Report: Anti-Money Laundering and Combating the Financing of Terrorism can review it through this link. The report, which was created by the Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism [MONEYVAL], was issued on 4 July.

SHOULD HSBC GET THE DEATH PENALTY ?

Most compliance officers are fully aware that us regulators have the power to impose the "death penalty" (charter or license revocation), upon financial institutions, for egregious conduct. They also know that no US bank has ever been hit with that sanction. Perhaps now that time has come, as one compliance horror story after another unfolds in the HSBC scandal.

When a bank, over a period of a decade, launders not only criminal proceeds, but facilitates terrorist financing, this constitutes what lawyers call willful, wanton and reckless conduct. Such behaviour deserves a punitive response, so that justice may be done. I did see that one of the US Senators involved in the Congressional investigation mention loss of charter as a remedy, but do US regulators have the intestinal fortitude to take such drastic action ?

So long as the directors of the world's largest banks know that they will receive only a financial slap on the wrist, and a required upgrading of their compliance departments, the system of pandering to high net-worth clients, who are an important profit centre for the bank, will continue unabated. Maybe it is high time to nail up one of the biggest violators, so that their competitors will take note.

There are a number of different HSBC corporate entities operating in the United States. Should a few of them have their charters revoked ? What do you think ?