CHARITIES CAN BE FRONTS FOR CRIMINAL ACTIVITIES

This week, a large business jet was seized by law enforcement authorities in the Canary Islands. Coming from Venezuela, its flight plan stated that its ultimate destination was the African nation of Benin. Though it was designated as a humanitarian flight, purportedly carrying cargo for distribution in that country, in truth and in fact, its cargo was quite different.

Acting on a tip, the authorities conducted a search, and found that the aircraft contained a ton of cocaine. The aircraft bore a tail number from Malta. The next time that you accept a client who claims that it is a charitable organisation, make a visit to its physical location, to confirm that its operations are exactly what is represented to you to be. Don't find out the hard way that it was merely a front for criminal activity.

INDICTMENTS LOOM AGAINST ASSOCIATES OF DAVID MURCIA GUZMAN

Though he remains imprisoned in the United States, serving a nine-year sentence for money laundering*, the Colombian Ponzi schemer, David Helmut Murcia Guzmán, appears to have rendered sufficient Substantial Assistance to warrant a major Sentence Reduction. It is believed that his sentence will be reduced to 5 or 6 years. His present location is unknown, and a check at the United States Bureau of Prisons Inmate Locator database has failed to identify his whereabouts, which is a possible indication that he is in some state or local facility, assisting law enforcement in the indictment of others in his case.

It appears that information he previously submitted has borne fruit. Reportedly, the focus of the ongoing law enforcement investigation are:

(1) Murcia's former  business associates, partners, and recipients of his investment capital, many of whom are presently holding a large portion of DMG's criminal proceeds.  Though they have not been publicly identified, the names of several Panamanian businessmen have been advanced by observers who have noted that enquiries have been made into their assets since April**. Some of these individuals are understood to have taken advantage of Murcia's naivete, and engaged in massive theft of his assets. Remember, disregard the official figures; we are talking about a probable $3bn in Murcia's hands, some of which was admittedly Colombian narco-profits that was quietly and efficiently laundered, along with his fraud proceeds.

(2) The missing assets themselves. Outside of Panama, DMG assets have allegedly been located in Singapore, Switzerland, the Bahamas, the Turks & Caicos Islands, Belize and Andorra.. We have already discussed the seven yachts purchased, for cash, the six-figure luxury cars, and the penthouse condominium suites in Panama, but there were also other luxury yachts, bought through corporations having bearer shares, for Murcia, in a manner that resulted in the laundering of many millions of dollars.  In other countries, accounts and investments placed by, or on behalf of, Murcia Guzmán, remain in place. Some of these assets have reportedly been identified for seizure and forfeiture.

Are there sealed indictments against additional individuals ? We cannot say, for that information would be be disclosed until the defendants are in American custody, either through arrest, or extradition to the United States. We will continue to follow the case as it unfolds. An additional article will appear here shortly, covering other Murcia assets under investigation.

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* USA v. Guzmán, 09-cr-00110-WHP (SDNY).
** The court file contains 6 sealed pleading that have been filed, under seal, since his conviction, the last one being filed on 4 April.

WHO READS KENNETH RIJOCK'S FINANCIAL CRIME BLOG EACH DAY ?

For those who are curious, here is a list of the top ten countries where my readers came from yesterday; for some reason, the UK is not up there in number two this time. The list is in descending order:

The United States
Poland
India
The Ukraine
The Philippines
Indonesia
Bulgaria
Canada
Romania
Vietnam

WATCH IRANIAN EARTHQUAKE RELIEF CLOSELY

The natural disaster that occurred in Iran this week, the earthquake in the northwest of the country, should result in humanitarian relief efforts from countries in the Middle East, or even the EU. Should exemptions from existing international sanctions in place against Iran be implemented, be certain that any payments, or shipments of goods to the afflicted area are genuine relief efforts, and not dual-purpose goods, or US Dollars seeking to sneak in amongst the fog of the disaster.

CHINESE CLAIMS TO SOUTH CHINA SEA THREATEN VIETNAM'S HISTORIC TERRITORIES

Vietnamese protest China's heavy-handed actions in the South China Sea.

Again, the President of the Chinese National Institute for South China Studies, has made what appear to official statement sof Chinese foreign policy that directly threaten Vietnam's island territories in the region. Wu Shicun, who also holds the strange title of Director general of Hainan Province's Minister of Foreign Affairs, has stated that China has sovereignty over 80% of the islands, reefs and submerged land of the South China Sea, and the surrounding waters. Wu also claimed the right to control maritime traffic through the area, which is one of the world's busiest trade corridors.

China's research facility and propaganda arm for South China Sea expansion

These extraordinary territorial claims run up against Vietnam's long historic and legal claim to the Spratley and Paracel Islands. In truth and in fact, Vietnam has far more settlements, research facilities, and other installations, in the South China Sea than any other country; its seamen and fishing vessels have been in the area for many centuries, and its claim is superior to that of China.

A Chinese installation in the South China Sea; no island or land mass can be seen

The impending militarisation of the region by the Peoples Liberation Army will only increase tension, and potentially raise country risk for all countries whose national territories border the South China Sea. Any military incidents could threaten the safety and security of international trade in Southeast Asia.

CHINESE COURT DISTORTS THE TRUTH TO PROTECT CORRUPT PEPS

The lies presented as evidence at the Gu Kailai murder trial beg the question: where did all this money come from ?

(1) If the defendant killed Neil because he threatened her son, over a 10% commission that he was supposed to receive ( £13,0000) from a successful investment, where did the money come from to make such a large investment that it generated £130,000 in profits ? Gu Kailai was no longer working as an attorney, and her husband, Bo Xilai, only earned £12,000 per year.

(2) How did Gu Kailai, and her grown son, attending expensive universities in the UK and US, enjoy such a lavish lifestyle, if nobody was employed ? Did you bank them in the UK ?

(3) Why accuse the victim of threatening the life of the defendant's son, when he appeared to reside permanently outside of China ? He still is living in the US, and shows no signs of returning. What son fails to go to the side of his parents when they are charged with a crime ? How much bulk cash smuggling and money laundering has he done in the United States, we wonder. Is he banking with you ?

Attacker and victim

Unfortunately, the truth would alienate most of China's middle class, who don't drive Ferraris.

This case is an abject lesson for compliance: all Chinese PEPs banking overseas are high-risk; believe it.

WATCH CHARITABLE CONTRIBUTIONS TO THE PHILIPPINES AND INDIA CAFEFULLY

Remember, whenever there are hurricanes, typhoons, tornadoes and floods, the flow of charitable contributions must be carefully vetted to ensure that some imaginative and enterprising money launderers are not engaging in funding terrorist organisations, in the midst of the fog and confusion of a catastrophic event. The Philippines and India have experienced record flooding this past week.

Money launderers and financiers of designated terrorist groups look for such opportunities; both India and the Philippines are home to terrorist groups. Remember these rules:

(1) Only bank known and established charitable organisations, or NGOs with a track record.

(2) New charities or nonprofits must be thoroughly vetted, including leadership, objectives of the organisation, their physical premises and staff, and record of good acts; Consider Enhanced Due Diligence.

(3) If an established charity under what appears to be totally new leadership, check out the new officers and managers.

(4) After opening an account, monitor it for activities inconsistent with the charity's stated objectives, expected account volume, frequency of international wire transfers, and requests for cash withdrawals.

Always ensure that you are not unwittingly facilitating terrorist funding and financing.

GU KAILAI MURDER CASE AVOIDS MENTION OF HER CORRUPTION AND MONEY LAUNDERING

The fast-track one day murder trial of the Chinese attorney Gu Kailai, who admitted to murdering a British businessman who apparently refused to participate in an illegal operation, carefully evaded any mention of the defendant's organised movement of her family's illicit wealth out of China. We call that money laundering where I come from.

 The Defendant, whose involvement in seeking to launder what was obviously criminal proceeds, was clearly engaging in money laundering whilst a resident of the United Kingdom, years before. It appears that the Government of China wants to conceal all the underlying corruption, as well as the money laundering, from the public. It is important for us, as compliance officers, to learn about her extensive activities outside of China, so that we can be better prepared to identify typical strategies and tactics coming from China.

The Chinese whitewash of what really caused Gu Kai to kill Neil Haywood puts international bankers who number Chinese PEPs amongst their clients at a disadvantage; they can better protect their institutions against corrupt PEPs when they understand exactly what happened, and what was planned.

There is a lot of critical information that has not seen the light of day. The defendant's Hong Kong-based sister, reportedly worth US$79m, was involved in Gu Kailai's business transactions. How much of the sister's wealth actually came from Bo Xilai ? What was the sister's role in laundering, and subsequently investing, the bribe and kickback money ?

The officially-prepared cover story; that Gu Kailai committed the murder to "protect" her grown son, against whom Hayward alleged threatened dire consequences, doesn't hold water, because why would a mother act upon a threat made several years before ? The defendant must have demanded that he commit a criminal act that was extremely dangerous, or represented an unacceptable level of risk. Remember, China does still have Capital Punishment; he obviously refused, and may have threatened to become a whistle blower.

Whatever the underlying facts, know this: that money laundering of illegal wealth exiting China covertly continues to represent a clear and present danger to banks in the EU and US; Watch yourself.

PONZI SCHEMER BOUGHT PRESIDENT MARTINELLI HIS YACHT

More details have surfaced since last week, when Panamanian President Ricardo Martinelli's yacht mysteriously ran aground in the Bay of Pineapples, one of the most remote places in Panama. Rumours of a cargo consisting of narcotics have permeated Panama since that event. New information about the presidential yacht makes the case even more interesting:

(1) First of all, the yacht, which was manufactured by the Bertram Yachts, of Miami, Florida, was purchased at Ever Marine, in Panama. Ever is the sole Panamanian distributor for Bertram Yachts.

(2) The purchase price was $3.5m; it was paid for in cash, by DMG Inversiones, which was owned by the convicted Colombian Ponzi schemer, David Helmut Murcia Guzmán. Murcia purchased the yacht* for Martinelli, with whom he had an extensive business relationship, believed by many legal observers to include laundering the DMG profits through Martinelli's businesses. We have previously covered the close ties between Martinelli and Murcia here**.

(3) President Martinelli has repeatedly refused to discuss the issue of his yacht, fueling speculation that it was involved in an illicit voyage. Sources who have seen the vessel say that the interior was completely stripped, which raises the presumption that its sole use was transport. Was the yacht improperly loaded, or did the heavy cargo shift, causing the vessel to list, and run aground ?

(4) Did the yacht contain an illegal cargo, narcotics and was a son of the President truly on board, notwithstanding the official version of the incident ? These and other questions remain.

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* Murcia is known to have purchased seven yachts from Ever Marine.
**Seized Panamanian Assets of David Murcia Guzman are Missing

STANDARD CHARTERED RESPONSE INSULTS OUR INTELLIGENCE

Management and Public Relations staff at Standard Chartered have attempted to spin the scandal against the very regulator that filed the allegations of massive Iran sanctions evasion. We call that "kill the messenger." and it is usually the last refuge of a scoundrel. Here's some of the nonsense they are spinning over at StanChart:

(1) That the deficiencies were "technical clerical errors," which were minor. Do they take us for idiots ? Perhaps senior management should read the 30-page report and order before making statements without any factual basis.

(2) That the New York regulatory report has resulted in bruised feelings from Federal regulators, who thought the actions should not have been taken at this time. Patience, when you learn of major money laundering lapses. is not a virtue. Those violations were committed between 2000 and 2010. Why wait any longer to expose them ? Late-filed violations invite bank responses, to the effect that management has changed in the interval, and old errord should not be blamed on the new officers, who have made changes. They do that every time. File your charges early on, not many years later.

(3) Allegations that the head of the New York regulator. DFS, is ambitious and not a "team player" with law enforcement. Again, more spin against the messenger. There were serious sins committed here; do not complain about the character of the regulator, please.

(4) That this is a attack on the UK financial system. Rubbish; More "confusion to the enemy," but after looking at the HSBC scandal, maybe there is something to it. Why are UK banks breaking the law ? Should not US regulators, the only group with the courage to go after bad banks, hit them hard for their sanctions violations ?

(5) That the bank will sue US regulators for reputation damage ? Have they never heard of Sovereign Immunity, which protects government agencies from civil litigation.

I doubt that Standard Chartered, whose stock has tanked this week, will fall, but it, and the banking industry, needs to be taught a lesson, that it will not soon forget; do not do business with rogue states.

IRAQ WARNS ABOUT BULK CASH SMUGGLING INTO THE WEST

The Government of Iraq has taken the unusual step of publicly warning Western financial institutions about the massive amount of US Dollars that are being illegally sent abroad. Conservative Iraqi estimates have placed the amount at $4bn per month, and it is fleeing the country in a number of ways:

(1) High-level governmental and party officials have been implicated by the Iraqi Government, though to date it has refused to disclose their identities.

(2) Influential businessmen, with ties to government, and the family members of these officials, are all listed as participants in this capital flight scheme.

(3) Illegal currency exchange operations, whose primary objective is the bulk cash smuggling of dollars out of Iraq.

(4) Forged international trade documents, in support of phantom purchases of goods overseas, are being used as a cover for the exit of dollars.

You can expect to see a number of extremely affluent Iraqi bankers, and corrupt PEPs, seeking to open accounts in Europe this year. They will be depositing cash, if you are foolish enough to accept it.

The dollars streaming out of Iraq, and a similar flood in Afghanistan, should cause you to red-flag all large cash transactions, where the client/customer is coming from a combat zone, whether in Asia, the Middle East, or Africa. This "war zone flight capital" is not clean, nor by any stretch of the imagination, or wishful thinking of a relationship manager, will it be clean. Do not accept it, and document your actions thoroughly, lest your bank be amongst those investigated by law enforcement or regulators, tracking the client that you were smart enough to reject.
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For Further Reading:
Are you Unwittingly Banking any of that Iraqi "Flight Capital ?"

SHOULD RICHARD MEDDINGS BE INDICTED FOR MONEY LAUNDERING ?

Richard Henry Meddings

For those of you who were curious, the Group Finance Director at Standard Chartered  who uttered the now infamous profanity at US regulators* has been identified by American media as Richard Meddings. Of all the greedy senior staff at the bank who pushed for an expansion of Iranian business, notwithstanding  the American sanctions that were in place to deter Iran's efforts to to develop an illegal nuclear weapon, and the ballistic missiles necessary to deliver them, it is submitted that Mr. Meddings deserves special mention. His arrogant statement says it all.

I am sure that Mr. Meddings, who has obviously lived a life of privilege, never had to deal with an incoming rocket attack from time to time, as was my experience in Vietnam, but I wonder how he will feel when Iran's missile programme acquires the ability to hit London with a nuclear weapon ? If it happens, it will be, in no small part, because of the absolute greed of Standard Chartered management, in taking on sanctioned Iranian banks as clients, when everyone knew that those banks were sanctioned due to support of the nuclear weapons programme. I cannot explain how strongly I feel about these sins and transgressions.

Let me suggest that some on in the US Department of Justice reach and touch Mr. Meddings, and those other "financial war criminals" who provided financial support to the regime in Iran, with Federal money laundering charges. That is a 20-year felony, for those of you not familiar with the American criminal justice system. As a wise man once said, let the punishment fit the crime.

Western Europe in 2014 ?

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*"You f____ing Americans, who are you to tell us, the rest of the world, that we're not going to deal with Iranians."DFS Order at 5.   http://www.dfs.ny.gov/banking/ea120806.pdf

DO WE NOW NEED TO GET ANTI-STRIPPING AFFIDAVITS FROM CORRESPONDENT BANKS ?

In light of the sordid actions of ING, HSBC, and Standard Chartered Bank, in admittedly "stripping" out all indicia of Iranian banks or companies, or those of other rogue nations, from their wire transactions coming into the USA, and substituting information specifically designed to evade OFAC alarms, must US banks now compel their correspondents to execute affidavits like this;

                                           



                                      S  A  M  P  L  E   A F F I D A V I T
                    (It is strongly suggested that this be prepared by your outside bank counsel)



(1) My name is __________, and I am the Managing Director of XYZ Bank (hereinafter "the Bank"), and this Affidavit is being made upon personal knowledge.

(2) XYZ Bank, as a matter of policy, does not engage in removing (stripping) out any information from wire transfers handled by the bank, nor does it accept transactions where information has been deleted, changed, disguised, or altered, in any way.

(3) XYZ Bank's staff, including, but not limited to, the Wire Department, the Operations Division, and the Compliance Department, all follow the above policies, which are included in the bank's Compliance Manual, relevant portions of which are attached hereto as Exhibit A.

(4) [Such additional details as your counsel deems relevant].

SWORN TO and subscribed before me, the undersigned Notary Public....

                                                                                            __/s/___________________

Should we start requiring this ? I welcome your opinions.
miamicompliance@gmail.com

ARE YOU UNWITTINGLY BANKING ANY OF THAT IRAQI "FLIGHT CAPITAL" ?

It is currently estimated that at least four billion dollars is leaving Iraq each month. Yesterday, the Central Bank of Iraq sold $307.6m in US Dollars; today it was $280m. Whilst I understand that most investors are hesitant about holding large quantities of the weak Iraqi Dinar, there's much more to this story.

The amount of dollars exiting Iraq is increasing, whilst at the same time, the volume of goods entering the country is actually decreasing. Would some economist kindly explain that to me ? Also, we are into Ramadan now; international trade transactions are not being conducted; only food sales are active. So where are all those greenbacks going ?

It is common knowledge that large amounts of US currency are entering the Iranian economy, courtesy of the banking system operating in the Kurdish Regional Government (KRG), but there is much more to the puzzle than the banks in the KRG. Obviously, Bagdhad banks are involved as well.

However, not all the US currency is destined for Iran; money obtained by PEPs through bribes, kickbacks, or other corrupt activities is certainly headed for the UAE, and to banks in the EU. You need to be extremely careful, because many Middle Eastern PEPs have successfully obtained dual citizenship, or  immigrant investor status. A proper Enhanced Due Diligence investigation will pick up and expose anyone who is concealing their Iraqi origin.

If you are a compliance officer at an EU bank, I would suggest that you perform a look-back, upon all your high net worth Arab clients, to en sure that you did not miss any Iraqi PEPs masquerading as something else. Of course, if you have Arabic speakers at your bank who are knowledgeable in identifying regional linguistic identifiers, and they have personal front-line contact with the high net-worth clients, they may be able to separate the legitimate clients from the posers.

$ 250bn "CATASTROPHIC REPUTATIONAL DAMAGE" AT STANDARD CHARTERED

If you have not yet read the complete text of the Order Pursuant to Banking Law §39, entered against Standard Chartered Bank by the New York State Department of Financial Services (DFS), you may access it here. The lengths to which the bank went, for a decade, to hide its Iranian transactions, are frankly, obscene; Read it for yourself.

On 15 August, the bank is due in the DFS offices, to demonstrate why its license to operate in the State of New York SHOULD NOT BE REVOKED. We will be closely following this case; Stay tuned.