WHY IS THE UNITED STATES GIVING REFUGE TO PANAMA'S CORRUPT (AND FUGITIVE) FORMER PRESIDENT ?

Vargas Reynaga and Ricardo Martinelli

 
Evelyn Vargas Reynaga, the former attorney for the family of Panama's ex-President, Ricardo Martinelli, recently disclosed a disturbing story, which was made public in Panama this week. Vargas, as you may recall, is the lawyer who admitted that she hid millions of dollars, in bribe money associated with the Odebrecht construction scandal, and she has been testifying about her role in the matter.

While in Mexico, and knowing that an INTERPOL warrant for her arrest, and removal to Panama, existed, she was contacted by the sons of the former president. They invited her to travel, not to Panama, but to Miami, where presumably they could meet with her, and thereby evade the Mexican authorities. They clearly did not want her to be interviewed by Panamanian prosecutors.

The presumption is that she would be "protected" in Miami, and not be extradited to Panama. This is extremely disturbing, given that ex-president Martinelli has been living openly in Miami, notwithstanding that Panama delivered an extradition request to the US State Department back in September, 2016. His two sons, who are also wanted in Panama, have not been taken into custody, although their whereabouts are not publicly known. Are they quietly living in Miami as well, and are they also immune from Panamanian justice, for the same reason their father is still living here ?

Vargas, whose US visa was reportedly revoked, said that she told the Martinellis that she was unable for that reason to travel to Florida, and she was detained by Mexican law enforcement shortly thereafter.

What is this special relationship that Ricardo Martinelli has with the United States, that the dozen white collar criminal cases pending against him, involving billions of dollars his administration stole, or accepted bribes and kickbacks, and otherwise violated the trust placed in him, are not sufficient to justify his prompt extradition to the Republic of Panama ?

DOMINICA'S ROGUE SALE OF DIPLOMATIC PASSPORTS VIOLATES INTERNATIONAL LAW

If you have ever read the 1961 Vienna Convention on Diplomatic Relations, you know that all the countries of the world, save one, are signatories to it, including Dominica, and that the United Nations has ratified it, giving it the force of what passes for international law in these troubled times.

Dominica's, pay-to-play diplomatic passport sales scheme, which has allowed international criminals, Politically Exposed Persons (PEPs), and other suspects, to acquire such valuable documents, violates at least a half dozen of the requirements of the Vienna Convention,, and thereby clearly violates international law.

Here are just a few of the numerous blatant violations that one can easily see are occurring:

(1) Only Dominican nationals qualify to become diplomats, with rare, and justified,  exceptions. ALL the sales of diplomatic passports are to foreigners, rendering them invalid, on their face.

(2) Diplomats are to have specific assignments, and missions (called postings) to specific duties. NONE of the rogue Dominican "diplomats" have work assignments, other than a few which have vague and ambiguous titles, none of which  carry with them actual duties.

(3) Diplomats must be accredited to a specific destination, have their credentials presented to a foreign jurisdiction, and be approved & admitted there, for that purpose. Again, this is not a part of what is going on at Dominica's "fire sale" of passports.

(4) Diplomats are assigned by the ministry or agency, of a nation, that is responsible for foreign affairs. These passports are sold directly, and illegally, without any formal interaction, training or selection, based upon experience or merit. Some of purchasers NEVER even come into Dominica.

(5) There is a public list of accredited diplomats. Dominica's Minister of Foreign Affairs arrogantly refuses to name her "diplomats," saying it is a non-public aspect of diplomacy, to enable it to function. That is total nonsense.

The bottom line: if you, as a compliance officer, at an international bank, or a customs agent, at an airport of entry, happen to receive one of these bogus documents, where the owner is not a Dominican by birth, ask the holder for their REAL passport, and confiscate the illegal one; send it to the United Nations, so the international community can see this charade for what it is: an illegal effort to collect fees for an illicit, and prohibited, purpose.
 

PROPOSED CAYMAN ISLANDS REGISTER OF BENEFICIAL OWNERS HAS NO TEETH

The proposed Cayman Islands Register of beneficial Ownership of Corporate Information, which is reportedly slated to become effective in June, 2017, and which was created in the face of global demand for corporate ownership transparency, falls far short of its goals.

First of all, outside of United Kingdom regulators and law enforcement agencies, nobody else will have access. The United States, which has a critical interest in learning which of its taxpayers are using Cayman entities to evade American taxes, is curiously out of the loop at this time, as are law enforcement agencies of the EU, who need access. Though there is language stating that such agencies will have access, no others are even hinted at.

Second, it is not a publicly accessible database,  meaning that no compliance officers at banks can conduct due diligence through it. I can understand privacy concerns, but potential financial crime trumps such issues, in my book.

Third, the method through which the Cayman companies identify their beneficial owners is flawed: asking the company itself to correspond with, and receive back "information" regarding who is a beneficial owner, and relying upon that data ? Come on, only licensed professionals, meaning attorneys and accountants, who have something tangible to lose for misconduct or negligence, can be trusted with verifying beneficial ownership of a client, not the fox in the hen house.

What we will most likely see is the total failure of probable beneficial owners to verify their status to the corporation making the inquiry, which is to be expected, and the corporate officers duly reporting, and relying upon that failure to disclose, and not designating the true, ultimate beneficial owners.

Is it all smoke and mirrors, in response to the the Panama Papers scandal, regarding opaque offshore companies ? You be the judge, but, in my humble opinion, the Cayman Register is little more than a snow job, perpetrated at the expense of the world's tax authorities.

WHERE IN THE WORLD IS PANAMA'S CORRUPT FORMER SUPERINTENDENT OF BANKING ?

In the wake of the flurry of anti-corruption cases, now showcased in the Republic of Panama, the individual who, more than most, was responsible for the country's current money laundering culture, ex-Superintendent of Banking, Alberto Diamond R, is conspicuously missing. The powerful Diamond, who headed the Superintendency of Banking under the now-disgraced administration of Ricardo Martinelli, disappeared shortly after President Varela forced his resignation.

Sr. Diamond's, "accomplishments," during his 2009-2014 as Superintendent of Banking:

(1) Diamond did not indict or charge ONE bank for money laundering, during his tenancy. To the contrary, he presided over a major expansion in money laundering, and terrorist financing, activities within the Panamanian banking sector, choosing to accept hefty bribes, rather than enforce the law.

(2) Diamond often extorted $50,000 bribes from local businesses, owned by foreigners, as the cost of him not targeting them for some supposed violation of his agency's regulations. Most Panamanians regarded him as little more than a blackmailer.

(3) He allowed ex-president Martinelli, and his cabinet, free an unfettered access to the country's financial institutions, for the movement of bribes & kickbacks, as well as the proceeds of securities fraud, in a celebrated insider trading case. An accountant with no relevant prior experience in  government, or in the banking industry, Diamond was long rumored to be related to Martinelli, hence his surprise appointment.

(4) He promoted his son-in-law's money service business, by seeing that competing MSBs were removed from the marketplace.

(5) He accepted mega-bribes, directly from banking sector owners, targeted whistle blowers, and threatened any foreign businessmen who dared to oppose any actions of his corrupt agency, which demanded money to perform just about any ministerial act, and usually got it.

Has anyone seen this individual of late ? He dropped out of sight in Panama City, right after his abrupt "resignation," and justice demands that he be held to account for making Panama the money laundering capital of the world. He must be arrested, and justice served, if Panama finance is ever to extricate itself from the mess he placed it in.

 

WHEN TURKEY CENSORS THE INTERNET, IT REDUCES COMPLIANCE EFFECTIVENESS

This week's news, regarding the fact that the government of the Republic of Turkey is blocking local access, on the Internet, to Wikipedia, when added to the fact that other websites are known to have been blocked or censored within Turkey, is not good news for compliance officers, no matter where their banks are located.

If compliance officers inside Turkey do not have free and unrestricted access to the world wide web, then their efforts to confirm negative information on a customer could be blocked, meaning that an high-risk individual could be granted the ability to open accounts, when a complete, and unimpeded, due diligence, or enhanced due diligence investigation would have uncovered information sufficient to block his or her access.

This impacts banks located outside of Turkey, for existing clients for whom assurances of adequate due diligence are assumed, may be, in truth and in fact, money launderers, terrorist financiers, or international sanctions violators. Let us not forget why Reza Zarrab, and one of his Turkish bankers, are facing long terms in Federal Prison in the US, for oil sanctions violations; they used Turkish financial institutions to evade UN, and US, sanctions.

If Turkey's compliance officers are working with one hand tied behind their banks, perhaps you want to take a hard look at any substantial wire transfer, originating from Turkey, as part of your risk-based compliance program. You do not want to be approving any major transaction, from Turkey, where you rely upon their banks' due diligence, using a restricted and censored information resource.

UNREPORTED BOMBING OF HEZBOLLAH MUNITIONS FACILITY INSIDE LEBANON RAISES CONCERNS

While world media attention was focused on an air attack, upon what has been described as an arms shipment, located near the Damascus airport, of advanced weapons said to be destined for Hezbollah, another operation received no media coverage, probably due to the sensitivity of the location; inside Lebanon, to the probable dismay of the Beirut banking community, if word got out.

Actually, details of the earlier arrival, at the Damascus Airport, of two IL-76 cargo planes, one Syrian and one Iranian, which may have ferried the advanced weaponry destroyed, as it was destined for Hezbollah, appear to further focused attention on the Damascus attack, said to have come from Israel. Was this an effort at news management, to insure that the Damascus attack capture the exclusive attention of the media ?

Information received, from a totally reliable source, indicated that there was a second attack, at a location inside the Lebanese Republic, at a site controlled by Hezbollah, and that a facility that stored munitions and weapons, was destroyed. Obviously, coming on the heels of statements, from Lebanese leaders, that they control their country, and its borders, after a Hezbollah "guided tour," of the frontier with Israel, Lebanon does not want to admit that an attack even took place, let alone that munitions were located, targeted and eliminated.

If the attacks upon Iranian-supplied weapons that Israel does not want Hezbollah to possess will now be conducted against Lebanese targets, and not exclusively within Syria, then the risk of armed conflict increases, as does Country Risk, for Lebanon's most precious resource, its Beirut financial center, is a prominent potential "infrastructure target," of Israeli warplanes and missiles, as repeatedly promised by senior military officers, if Hezbollah starts yet another war.

  





 

GRAND COURT OF THE CAYMAN ISLANDS BANS COPYING OF COURT FILES

The Chief Justice of the Grand Court of the Cayman Islands has issued an order, prohibiting the public from making photocopies of court pleadings. You can just make out the notice, prominently posted on the door at the clerk's office, according to witnesses.  Of course, the public can review the court files, and take notes, but no method of copying or photographing shall be permitted hereafter.

One wonders whether the recent high-profile fraud cases, originating in the Cayman Islands, have directed more negative attention towards the offshore financial center than the government desires, hence the effort to keep the original court documents, some of which could be interpreted as a "head in the sand" approach, by local regulators and law enforcement, off the Internet.

In any event, reporting on major financial crime in the Cayman Islands, just became for difficult for the foreign press, who often rely upon court filings when covering the news of the Cayman Islands. Also, as the democracies of the Caribbean seem to be slipping further and further into authoritarianism, and rule by strong men, who seem more like banana republic despots, rather than the elected democratic leaders they are supposed to be, risk levels for foreign investment keep climbing upward.

IS THE CHINESE EMBASSY IN DOMINICA SPYING ON THE UNITED STATES ?

 This is the Embassy of the Peoples' Republic of China in Dominica. According to local sources, this structure has a very high degree of security. It is located in an exclusive residential area, Morne Daniel, and it is protected by a special paramilitary unit of the Dominican Police Force, the Special Service Unit, or SSU. Locals, who are unable to see past the solid wall, report that they are intimidated by the sinage, as well as the SSU palace guard outside, discouraging visitors.

Considering that, outside of the rare Dominican university student, attending school in China, the embassy serves no practical function. The amount of international trade between the two countries is negligible, and outside of Dominican Prime Minister's trips to the Peoples' Republic, there's little or no international commerce, tourism or exchange. it is far too large for its official function, as an embassy, and to provide consulate services. So why is it there ?

When Dominica's left-leaning, and often declared anti-American, Prime Minister, Roosevelt Skerrit, unilaterally withdrew his country's recognition of Taiwan, and established diplomatic relations with China, the two countries embarked upon a relationship which appears to be only at the highest level.  Dominica is actively pursuing high net-worth Chinese, for the country's Citizenship by Investment (CBI) economic passport program, as well as "investors, " though national agriculture took a severe hit during a 2015 tropical storm, and there is no other established industry; even tourism is a small factor.

Taken in the embassy courtyard; note the walls

The obvious conclusion is that the Government of China is using the embassy as a protected  listening post, under diplomatic cover, focused upon the East Caribbean region, as well as the United States, to gather intelligence, whether electronically, or through use of human assets. considering that the United States has one embassy in Barbados, serving no less than six East Caribbean nations, China's footprint in Dominica is large, indeed.

The embassy also exists to exercise, and expand Chinese influence, for an emerging China is seeking to acquire a global reach. Whether its power, and opaque goals, will adversely affect the people of the Commonwealth of Dominica, we cannot say, but this curious embassy bears watching. Does anyone out there remember the Grenada invasion ? 

ZARRAB'S ATTORNEY-POLITICANS ATTEMPT TO MINIMIZE HIS CRIMES, BUT INDICTMENT SAYS OTHERWISE

The unsucessful political efforts, on behalf of the indicted Iranian oil sanctions violator, Reza Zarrab, reportedly conducted with senior government officials in Turkey by Rudolph Giuliani, whose co-counsel are said to have minimized their client's role in the $400m international sanctions evasion scheme, by labeling Zarrab's acts as only involving "consumer goods," which flies in the face of the superseding indictment, alleging Zarrab's support for both Hezbollah and the IRGC, specially designated global terrorist organizations. The US Attorney's Office in New York has, according to published reports, disputed this effort to portray Zarrab in a lesser light.

One report says that Rudolph Giuliani's strategy is to enlist Turkey in a cooperative campaign against ISIS, and argue to senior US officials (NOT Department of Justice) that the release of Zarrab to Turkey, as part of an omnibus agreement between it and America, would be in our best national security interests. In essence, he wants to give Zarrab a "Get out of Jail Card," in an arrangement through which US interests are better served in the Middle East, by Turkish military action.

Whether you agree that this maneuver smells of backroom dirty politics, it doesn't appear to have worked, the US Attorney in Manhattan is moving forward with its case, and since we have seen no evidence of plea negotiations, we must assume that the case will, ultimately, go to trial. Of course, inasmuch as Zarrab is looking at 75 years, or more, of imprisonment, he may still decide to cooperate, and in that event, all the other conspirators in his organization, Zanjani, Monfared, and others, may find themselves as co-defendants sooner, rather than later.

INVESTIGATORS FIND MANY COSTA RICANS IN PANAMA PAPERS ARE PEPS

 As each country delves deeply into the Panama Papers, they are finding, by and large, that many individuals investigators discover within the incriminating documents are their nation's Politically Exposed Persons, also known as PEPs, which raises the question about how such government officials came to possess large amount of money that greatly exceed their salaries, and known wealth & other assets.

Over in neighboring Costa Rica,  local media are referring to the scandal as the "Costa Rica Papers," due to the fact that 37, of the 137 Costa Ricans whose names show up in the Panama Papers, are PEPs. This information has spurred local authorities to launch multiple investigations into the possibility that these corporations formed, and accounts opened, by Mossack and Fonseca were created solely for the purposes of illegal tax evasion.

Among those located in the Papers were:
Two Vice Presidents
Four Deputies
Fourteen Ministers
Three directors of public institutions
One former diplomat who was assigned to the United States
Several individuals linked to the country's major political parties

Most of the offshore entities formed by the Mossack firm were incorporated in Panama, the British Virgin Islands, and  the Bahamas. Details of the MF branch in Costa Rica were also made public. Form the tone of the publicity surrounding the release of this information, it must be assumed that criminal tax evasion charges will ultimately be filed in San José.

ARE THE MONEY LAUNDERING LAWYERS THE NEXT TARGETS FOR PANAMA'S ANTI-CORRUPTION PROSECUTORS ?

I note that a prominent Panama City attorney, who represented the two sons of former (and fugitive) President Ricardo Martinelli is in hot water with prosecutors. Is this a sign that money launderers, who just happen to be attorneys, are now to be charged in Panama ?

The lawyer formed a corporation, and then purchased a multi-million dollar property in Spain, even flying to the closing, rather than expose her client, who was a Martinelli son. The Spanish Government has now seized the luxury building, in the same way that the Swiss Government froze $22m of Odebrecht bribe money, in Martinelli accounts, where again, a lawyer fronted for her Martinelli clients. Can this be really happening ?

When Panama actually shuts down the money laundering lawyers, for criminal elements, both local, and foreign, the country has a slim chance of true reform. President Varela, please continue the crusade being waged by your anti-corruption divisions ; jail, and prosecute, the offenders. 

A NEW DICTATORSHIP EMERGES IN THE EAST CARIBBEAN

The right of peaceable assembly may be one of the cherished rights of the English-speaking countries, but this week it was abolished in a country that must now be regarded as a former democracy, now rapidly becoming a dictatorship. The population of the Commonwealth of Dominica has now, by decree, lost the right to assemble, and discuss their grievances.

Today, April 24, 2017, the Minister of Justice, Immigration, and National Security enacted a regulation that enables him to ban any public meeting, assembly or demonstration. He then used this new & absolute power to forbid an assembly, to be conducted by Opposition parties. It is all displayed above and below.

Democracy fades out, in Dominica, and dictatorship becomes the order of the day. if you have been reading any of the articles that I have been posting of late, you have seen the deterioration of the rule of law in Dominica, and the rise of autocratic rule. This one act, which has codified the acts of the local government in 2017, is the beginning of the end for democracy in Dominica.

For  foreign investors, eco-tourists, yachtsmen, and other travelers, the risk levels have flown off the chart, given the rampant corruption, vote buying, sales of passports to all comers, and general fear and loathing. For international bankers, Country Risk has risen so high as to make it a jurisdiction to avoid, leaving the population high and dry, while the corrupt national leadership rakes in their lucre.

Dominica; the newest police state.

Welcome to Dominica; for risk management purposes, it is the new Haiti; a kleptocracy.

THIS WEEK'S PANAMANIAN BETTING POOL: WHAT DAY WILL MOSSACK AND FONSECA FLEE THE COUNTRY ?

The hottest bet around Panama city these days involves picking the day when Jurgen Mossack and Ramón Fonseca, the senior partners of the law firm whose stolen files became known as the Panama Papers, flee the country to avoid prosecution for money laundering. Apparently, most Panamanians are busy counting the days when the duo leaves town for good, to collect upon their bets.

Why have two obviously guilty lawyers have been let out of jail, only to permit them to run ? Perhaps they have far too much incriminating evidence against not only the Martinelli cabinet, but also the present, Varela, government. Perhaps justice will be denied, again, to protect "flight capital" of dubious origins, which many Panamanians regard as the lifeblood of their country's opaque economy.

Where will they go, Miami ?  If so, they can pal around with former Panamanian President Ricardo Martinelli, who seems to have cheated justice, thanks to some hidden American sponsor, most likely a law enforcement agency. If I see them with Rama Vyasulu, of Rosemont Financial "Permuta" fame, I will try to take a photo.

DOMINICA'S TARGETING OF WEALTHY CHINESE FOR ITS ECONOMIC PASSPORT PROGRAM IS HIGH RISK FOR THE WORLD'S BANKS

Dominica PM Skerrit with officials from Chinese investment firm

If you have been following the ongoing controversy involving the Citizenship by Investment, or economic passport, program, of the Commonwealth of Dominica, you may have seen that the country's Prime Minister, Roosevelt Skerrit, recently traveled to China. While there, Skerrit, according to media releases, met with a prominent Shanghai-based firm that specializes in high net-worth Chinese. The joint press releases discussed creating Chinese investment in Dominica.

What is not mentioned is the new focus Dominica has placed on securing Chinese investors for its economic passport program. In fact, Dominica participated in the 2017 International Migration Summit in Shanghai, which just concluded on April 21, 2017.

Here's the problem: Chinese names must be converted into roman letters, for the purposes of passports from English-speaking countries, and the complex issues involved allow criminal elements, governmental officials, and even potential terrorists, to artfully conceal their true identities. there are several important issues, all of which could bar a compliance officer, at an international bank, from learning the applicant's true identity, at account opening, exposing the bank to increased risk of money laundering, or terrorist financing.

China has an embassy in Dominica much larger than it needs

 (1) The romanization of a Chinese name, to a Western name, offers a career criminal, or other undesirable applicant for a Dominican passport, an opportunity to create a totally new identity, whether by altering the spelling, deleting one or more letters, adding a Western name, and moving the given name to middle name status (which is common), effectively rendering any enhanced due diligence ineffective at best, and a total waste of time, at worst.

(2) Unlike in the West, mainland Chinese also may have acquired additional complete names. These are not just nicknames,  though many exist, but are classified as official "school names,'  so-called courtesy name, and even pseudonyms, all of which complicate the due diligence process.

Affluent Chinese are intent upon moving their wealth outside China

 Add the name issue to the fact that Chinese face significant legal obstacles to moving their wealth offshore, to tax evasion schemes, to efforts of Chinese Politically Exposed Persons (PEPs) to send the proceeds of bribes and kickbacks out of the reach of Chinese authorities, and you have a potentially large  class of "investors" who believe that they must obscure their identities to the West.

Of course, the appointment of agents, without any professional qualifications, or oversight by government, who are the only avenue available to applicants, complicates the matter further, Look at this notice, posted by the CBI unit for Dominica. It is practically offering to obtain identity documents for his clients' applications, which guarantees that the names offered will not be the true names of the clients.

If I am a compliance officer. at a North American or European bank, and run the name of a "Chinese Dominican" passport holder, through my due diligence resources,  his or her real identity, whether it be criminal or not, PEP or not, most likely will not be discovered. If you contend that the original Chinese name should also be checked, exactly how many international banks have Mandarin-fluent compliance officers, and where are they to obtain competent information on Chinese nationals, when the Peoples' Republic controls the media?

Chinese and Dominican flags

Operating a risk-based compliance program means that, should you encounter any passport holder, who was not born in his "adopted" Caribbean country, which happens to award economic citizenship, you must institute enhanced due diligence. If the individual is Chinese, you may have no choice but to decline the account, lest you open a relationship with an individual whom you later learn poses a clear and present danger to the bank.      

OFAC PUBLISHES FAQ ON FILING A PETITION FOR REMOVAL FROM AN OFAC LIST

If you were wondering how SDNs get off the OFAC list, the Office of Foreign Assets Control does have a page with Frequently Asked Questions about the procedure. You can assess it here.