DON'T DENY ALL PEPs ACCOUNTS; JUST PROFILE THEM AND MONITOR THOSE YOU ACCEPT

 

Those articles detailing how major banks in the UK have lately blackballed ALL Politically Exposed persons (PEPs), and either denied them a bank account, or closed out existing account relationships, totally miss the point. Risk management doesn't mean that you exclude all PEPs as probable high-risk clients; it means you make a value judgment regarding whether each specific PEP represents a significant threat which you are not interested in assuming.

In truth and in fact, most PEPs don't have access to government funds, or have large budgets to disburse, or are purchasing agents. Most are minor government functionaries, or their immediate relatives, or private individuals who happen to be closely linked to one or more PEPs. Thus fantasy that PEPs run around with checkbooks on multi-million dollar government accounts that they are authorized signatories on is nonsense. 

 The correct way to mitigate your PEP risk is simple:

(1) What is your PEP's specific position in government, or with a nonprofit or NGO, or charity?

(2) Pursuant to that position, does he or she have ready and unquestioned sole access to draw funds?

(3) If the answer to (2) is yes, is there an established (and uncorrupt) approval process in place for that money?

(4) What is your PEPs history with funds movement he to she has access to? 

(5) Is your PEP in any legal, administrative or ethical trouble, actual or threatened?

Using these guidelines, it is relative easy to separate chronic risks from individuals who are unable to access any funds, free of restraints or checks and balances.  Do not lump all PEPs into the clear and present danger category; just accept the low-risk ones, and institute permanent transaction monitoring upon their accounts, just in case your conclusions, taking into account the list above, are incorrect. 

PAIR FACIAL RECOGNITION PLATFORMS AND AI-DRIVEN RESEARCH TO PROPERLY IDENTIFY NEW BANK CUSTOMERS WITH ARABIC NAMES

Commentators covering the difficulty in transliterating names in the Arabic language into English, using our Latin or Roman alphabet, have long noted that there is often no single exact equivalent, citing the fact that there are 30 different correct spellings of the word Muhammed. Considering the potential threats posed by terrorist financing in the region, and the possible regulatory sanctions which Banks in the EU and North America face when they unwittingly onboard a terrorist financier, reducing the risk that you accept an individual who later is identified as a major player for Hamas, ISIS, or some other specially-designated global terrorist organization, allow me to make a suggestion.

If I was a director of compliance at an international bank that regularly must conduct due diligence on new clients from the Middle East, irrespective of any English equivalent name on their passport. I would employ a two-barrelled investigative approach:

(1) Run the official passport photograph, and any others you find in your online search, through a good Facial Recognition software platform. I suggest one that has its own proprietary image library (e.g.  Facepoint).

(2) Then, take your newly-confirmed identity, and put it through an effective AML/CFT program that features Machine Learning and advanced Artificial Intelligence (AI). Use one that your have had prior experience with, and which you personally know gets the job done.( e.g. SymphonyAI Sensa-NetReveal). 

(3) Now, review all the data and information you have obtained from your routine due diligence investigation, and from (1) and (2) above, and make your, now educated, onboard decision. You have either ruled out your new bank customer as a risk, or have declined to accept him or her, based upon what is as close to a foolproof method as a compliance officer can expect to have.

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Note: I am not affiliated with, nor have I accepted compensation from, either of the two companies listed above, but as an independent observer, I believe that I have an obligation to my readers to suggest  effective AML products which are out there in the marketplace.

FINALLY, SENTENCING OF MAJOR FIFA DEFENDANT JEFFREY WEBB APPROACHES, AFTER EIGHT YEARS OF DELAYS AND PREFERENTIAL TREATMENT

He may have pled guilty way back in 2015, but JEFFREY WEBB, one of the principal defendants in the massive FIFA corruption case is finally scheduled to be sentenced on August 8, 2023*. Webb, who is obviously a significant Cooperating Individual, who rendered assistance with information resulting in  indictments against several other defendants in the case, and/or their decision to plead guilty, due to his expected testimony against any of them foolish enough to go to trial, has lived a  normal, and some might say privileged, life while under a loose form of House Arrest (Home Confinement), at one of the homes he allegedly purchased in the United States with the Proceeds of Crime. 

Had he not been charged, Webb was expected to be a major candidate for president of FIFA. The maddening thing is that Webb, a Caymanian reportedly married to an Atlanta doctor, has had his incarceration delayed, while he remains a wanted man on other criminal charged in Grand Cayman, in a case where others have already faced justice and prison terms. He has been able to work the system to his advantage, solely because of his reputed value as a witness. Stories of lavish parties at his Georgia mansion certainly do not serve as a deterrent of other individuals contemplating acts of corruption.

This is what House Arrest looks like?

When law enforcement gives favorable treatment to guilty defendants, irrespective of their level of  culpability, solely because they serve a purpose against yet others in a case, the criminal justice system fails. Will he now receive only a nominal sentence, instead of that which he deserves, or will he be assured of a Rule 35 Sentence Reduction, meted out quietly post-incarceration, and out of the public eye, to be released without paying the full price for his sins and transgressions ? And will he be assisted in evading justice in the Cayman Islands case? We cannot say, but we suspect that he will continue to game the system that is supposed to be designed to deter others through incarceration of the guilty.

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*Nov 4, 2022

ORDER granting 1838 Motion to Continue Sentencing as to Jeffrey Webb: Sentencing is adjourned to 8/8/2023 at 10 a.m. in Courtroom 4F North. Ordered by Judge Pamela K. Chen on 11/4/2022. (FG)

Order on Motion to Continue Sentencing.

COMPLIANCE OFFICERS, STOCK TO AI-POWERED AML PLATFORMS; AVOID CHATGPT AND ITS PROGENY DUE TO FABRICATED AND INCORRECT INFORMATION

There's even more nasty civil litigation being filed against users of ChatGPT, who are alleging that they have received totally fabricated information, libelous information and even malicious data, when they have employed the generative AI Chatbot. Allegations that information "bearing no resemblance to the truth" has been obtained and acted upon, with dangerous results.

The most disturbing feedback is the statement that the product has been accused of returning misinformation and disinformation verging on "hallucinations," resulting in major defamation litigation. These are not isolated events, so compliance officers would be well advised to totally ignore the buzz over any similar AI product in both Customer Identification Programs, as well as Transaction Monitoring, when seeking information and data to supplement inquiries through their legacy systems.

It is prudent to limit your use of AI to those AML/CFT platforms that employ AI within a system designed for your use, and not to stray outside such systems. It is apparent that ChatGPT, and similar products, when asked for information, could create or manufacture an answer, leaving the world of facts behind, in its zeal to please the user with a response. Do you really want to find out, and too late to correct your mistake, that you relied upon fabricated data, resulting in litigation against you and your client?  Govern yourselves accordingly.

HOW MANY FAMILY OFFICES ARE INVESTING THE LAUNDERED PROCEEDS OF CRIME?

There are a number of controversial topics that the American financial press will not touch; the extent of money laundering in the hedge fund industry, for example. I assume that this is because to name & shame any hedge funds would result in the immediate filing of civil litigation, especially in the area of defamation, which is costly, and media owners do not like to pay out large fees to lawyers which cannot be recovered even if they win, and are a major operating expense that nobody wants to deal with if they can avoid it. 

Another consistently underreported subject is whether family offices, which invest and protect the wealth of America's affluent class, are engaged in placing capital which originated as the proceeds of crime, but which since has been skillfully laundered through the financial system. It is important to understand that some criminal organizations have long-term goals for their "profits," which includes investing them in significant assets with not only good growth potential, but are protected from adverse events, which is a characteristic of the abilities of family offices. Some wisely want to build a portfolio for a future when they are no longer engaged in crime.

Furthermore, family offices often serve multiple clients simultaneously. When new business is referred to them by prominent local professionals, they generally welcome new business, after performing due diligence, and verifying both Source of Funds and Source of Wealth. 

But they also, like hedge funds, thrive on developing new business, and we wonder whether any due diligence shortcuts are taken from time to time, to allow them to accept new business. Say for the sake of argument, a client who has criminal proceeds carefully cleaned by an experienced money launderer engages a lawyer or law firm with established ties to individuals in a family office, specifically for the purpose of gaining entry as a client. The lawyer makes the referral, unaware of the dark origin of the capital involved, and unwittingly recommends what is a criminal organization. The family office thereafter efficiently and effortlessly invests millions into office buildings and other income-producing assets.

While we do not at the moment have any specific information, my decade on the dark side tell me that such situations not only exist, but they have been developed to the extent that superficial efforts to pierce them by law enforcement will fail. Only when one of the participants is charged with another crime, and chooses to mitigate his eventual sentence, will such an arrangement be uncovered. Meanwhile, the banks, which court the huge account balances family offices might offer as customers, are in the dark. We wonder when one will be exposed, and what the consequences will be.

Remember my rule: in the business of money laundering, you are only limited by your imagination. Expect that laundrymen have already embedded their clients in family offices.

WHERE DID ALL THOSE M-4s IN THE HANDS OF JENIN TERRORISTS COME FROM?

If you took the time to look carefully at the photographs that appeared last week, of the Palestinians in the Jenin Refugee Camp on the West Bank who were firing at the Israeli Defence Forces trying to arrest known terrorists, you saw that the weapons they employed were fully automatic American-made M4 assault rifles. For those of you with no military experience, those were not Vietnam-era vintage M16s, that could have come from anywhere, but the modern version of that battle rifle, which was used in Iraq and Afghanistan, and is in current use in the US Army. Look at the retractable stock, and shorter barrel, and you can tell these terrorists have the latest equipment, not old castoffs from a prior war.

Where on earth did those rifles come from, we wonder? Israeli media has accused Iran of being the funding source for the Palestinian Islamic Jihad (PIJ), the terrorist organization responsible for most of the murders of unarmed Israeli civilians in recent months, but specifically, which ostensible ally of the United States has been the supplier of that equipment?  Who is selling them to Iran, which has been engaged in smuggling arms, ammunition and explosives to terrorist organizations in the Middle East? With friends like that, facilitating terrorism, who needs enemies?  Those M-4s have been used to kill Americans who happen to be in Israel.

All those weapons have serial numbers. I'd like to know who they were shipped to, please. Can you say arms trafficking? 

USE FACIAL RECOGNITION SOFTWARE TO VERIFY YOUR CUSTOMER IDENTIFICATION RESULTS CONFIRMED THROUGH AI PLATFORMS, PLEASE

 

With all the focus upon the fictional case law manufactured by an AI-powered legal search program that got a number of New York lawyers into hot water with a Federal Judge recently, compliance officers involved as gatekeepers approving new clients through Customer Identification Procedures should take away from that story the possibility that  their artificial intelligence-driven CIP research could create bogus confirmation of the bona fides of potential customers. The perfect storm of the availability of legitimate passports under aliases acquired through corruption, and through Citizenship by Investment (CBI/CIP) passport programs giving financial criminals bulletproof official identity documents, means that you might get AI-powered verification of a fraudster's carefully created alias identity. 

That is extremely disturbing to me as a former career money launderer, because well-crafted identities, that are subsequently AI-verified, will most likely be passed by gatekeepers every time. This means that clever money launderers, whose identities are well known in the financial world, could create new identities for their criminal clients, or terrorist financiers, by planting verification information in obscure places, online or otherwise, thereby consistently deceiving CIP inquiries that rely upon AI to find the truth. 

This is a serious matter, given that the laundrymen could then exploit the new accounts with impunity, until transaction monitoring catches up with them. Unfortunately, by then, the damage would have been done, and the laundrymen moved on to another bank, with still another set of stellar identity credentials, also employing the artful use of aliases. 

It is humbly suggested that compliance officers therefore supplement their CIP programs, which already use AI platforms to confirm the identity of new bank clients with an effective Facial Recognition* Software system. The system that you should acquire will feature an extensive private photo library, assembled by the program, of both official and unofficial images. This means passport and visa photos, as well as images otherwise obtained and accumulated.

Only through verification of the face proffered by the customer can one actually be able, with confidence, confirm identity. Technology, aided by systemic corruption in governments abroad, has presented compliance officers with the possibility that they are the targets of a very convincing campaign of disinformation and misinformation, which might actually be confirmed by their AI program. Use Facial Recognition Software programs to identify the laundryman, fraudster or other financial criminal  for whom he really is, and stop a potential problem in your bank before it starts. 

__________________________________________                                                                                   *e.g. Facepoint  https://www.facepoint.co

GIVE YOUR NEW COMPLIANCE HIRES THE TOOLS THEY NEED TO COMPLETE THE JOB

We note that a large number of AML compliance officers are reaching their retirement age; many were hired after 9/11, when the USA PATRIOT Act caused banks around the world to expand their compliance staff. Now, new people are being actively solicited. Here are my thoughts on the subject:

(1) MAKE SURE THAT YOUR NEW HIRES HAVE A WELL-ROUNDED EDUCATION. A good liberal arts degree generally insures both Cultural Literacy*, as well as Geographic Literacy*, qualities which go a long way to helping one to recognize financial crime, and specifically money laundering, while in progress.

(2) TEACH THEM TRADECRAFT BEFORE THEY GO ON DUTY. I cannot stress enough the importance of having a knowledge of both advanced as well as esoteric money laundering methods and techniques. Since I have covered this subject extensively in prior articles in this space, I will assume that my message has gotten through to compliance directors, and that training budgets are being adjusted accordingly. There's nothing worse than a deficiency in Tradecraft knowledge.

(3) GIVE THEM READY ACCESS TO LEGAL COUNSEL AND SUPERVISORS. Questions will always come up in real time, and they must have someone to consult with on time-sensitive matters, and especially at the end of the business day, when they spot something that they do not understand.

(4) DON'T BE CHEAP WITH CONFERENCE AND EVENT ATTENDANCE REQUESTS. Send them to those relevant AML/CFT conferences, so that they not only learn, but network with regulators, law enforcement, and yes their brother and sister compliance officers at other banks. One day, that casual friendship acquired at a conference could pay off in a big way.

(5) PROMOTE FROM WITHIN. Do not be afraid to give your younger hires more responsibility in critical areas, especially when they already excel at every routine task you have given them.

(6) GIVE THEM SOFTWARE PLATFORMS THAT WORK. Don't scrimp on systems that are effective. Your budget should be expanded to accommodate their needs, and make them successful. 

Above all, mentor these new compliance officers, because you yourself will not be around forever, and someone will need to step into your shoes one day. Make sure that person is qualified, please.

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* I have explained the importance of these qualities in prior articles; if you still have questions, email me at miamicompliance@gmail.com   .

CHOKSI'S CONTRIVED 'KIDNAPPING" STORY IS FURTHER COMPLICATED BY THE CORRUPTION OF ANTIGUA POLICE COMMISSIONER ATLEE RODNEY

Notwithstanding our thorough investigation of India's Most Wanted fraudster MEHUL CHOKSI, and the report we published, which debunks his fantastic story about being kidnapped, Choksi continues to have help, on a official level, in support of his bogus claim. We know he intended to flee to Cuba, a non-extraditable jurisdiction, but the Government of Antigua, whose officials were well paid to fabricate a fiction about Indian agents kidnapping him, continues to assist him in cheating justice. It might be relevant at this time to focus on Police Commissioner ATLEE RODNEY, who was one of the senior officials aiding and abetting Choksi in evading extradition to his native India. Rodney, who is Dominican, not Antiguan by birth, helped establish the Choksi kidnapping myth. He is named, and quoted, extensively in my Report, which is widely available on the Internet, as well as on my blog. His statements on the subject are abject falsehoods.

 According to our reliable sources within the government, the Commissioner, who ascended to his position in 2020 after being confirmed* by SAG Steadroy Benjamin, runs a corrupt law enforcement organization where he consistently covers up crimes that his staff commits. He is widely known to lie about their misdeeds, and then claim that civilians speaking up about him have no evidence. An Antiguan police officer was duly reported to the Commissioner's office by a civilian, who was defrauded out of $7000. Both the the Commissioner, and the Sergeants in his office, declared  the offending officer free of wrongdoing, even though evidence of misconduct proved otherwise. Additionally, the Commissioner was instrumental in obstructing the civilian victim from taking legal action against the officer. if the officer was free of guilt, why did Rodney stop the victim from taking legal action against him?

Therefore, for this and other reasons, Commissioner's Rodney's public statements on the Choksi matter cannot be believed, and his corrupt role in covering up the Indian fugitive's failed escape attempt, which was disclosed by individuals in his own department, and we have consistently reported, is confirmed. He should resign, and if he fails to resign immediately, Attorney General Benjamin must sack him forthwith. There is enough corruption in Antigua, without the Royal Police Force of Antigua further contributing to it.

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* Rodney's appointment as Commissioner was recently ruled unlawful, null and void by an Antiguan Court. So much for the principle that Antigua follows the Rule of Law.

ISRAEL RELEASES PHOTO OF CAPTURED TERRORIST COMMAND AND CONTROL CENTERS

Having once worked in one, I know the term Command and Control. It's where military leaders direct combat operations, gather and analyze intelligence, and make command decisions. Israel's IDF today released photographs of what it called "combat management rooms," captured during an operation against Palestinian terrorists who has been attacking Israeli civilians in recent months. Terrorists operating like an army, which is extremely disturbing. These are not lone gunmen; they are an organized military force. Was their IT acquired in Europe, we wonder?

Photograph of improvised explosives, captured in a hidden storage area underneath a mosque used by terrorists to store weapons. These appear to be what are known as Molotov Cocktails, which Palestinian terrorists are known to throw at civilian Israeli automobile traffic.

WANT TO STOP MONEY LAUNDERERS FROM CONSISTENTLY MOVING FUNDS THROUGH YOUR BANK? CLOSE UP YOUR LOOPHOLES AND VULNERABILITIES

If you sincerely want to suppress money laundering at the bank where you are responsible for Anti-money Laundering Compliance, start thinking like a money launderer. Having been on that side for more than a decade, I can think of a number of things that you can do do reduce, or eliminate, the loopholes which laundrymen routinely exploit, day after day. There are literally, dozens of such vulnerabilities that they target, and attack, which I have personally used, but these I find to be significant in reducing risk:

(1) FRONTLINE COMPLIANCE STAFF WITH INCOMPLETE TRAINING: I have previously explained the importance of extensive training in money laundering Tradecraft, the actual advanced methods and strategies employed to successfully transfer, and ultimately clean, the proceeds of crime. I refer you to my previous articles on the importance of the subject, e.g. Is the Lack of Proper Tradecraft Training the Reason for Money Launderers' Success? (May 29, 2023); Money Laundering Tradecraft for Compliance Officers - a Live Presentation (June 4, 2023).See also my ongoing Tradecraft 101 series in this blog, currently published here up to Chapter 16, with more to follow.

(2) GAPS IN THE PRESENCE OF EFFECTIVE COMPLIANCE OFFICERS ON DUTY: If your senior people are not constantly on hand for in-person consultations, when needed by junior staff, reviewing files, transactions, or real-time queries by your bankers, including tellers and customer relationship officers, they will not be able to interdict potential money laundering in progress, or worse will miss something entirely. Do your experienced compliance staff take off at end of day to fight rush hour traffic, leaving the new guys to figure it out? Do you give your senior people several weeks of holidays, during which time, there is incomplete coverage and supervision? is everyone off that day for the World Cup broadcast, except the junior staff?

(3) A LACK OF INCREASED ATTENTIVENESS DURING HIGH-RISK PERIODS: Smurfs and field assistants for money laundering organizations choose busy business periods, such as Fridays, and the eve of holiday weekends, as well as the first hour your bank is open for business during the post-holiday period, calculating that everyone is sufficiently hung over or too fatigued to spot an obscure, but effective, trick or technique.

I took full advantage of dozens of these vulnerabilities and loopholes during my decade on the Dark Side, but these I have listed above can be easily remedied, provided you understand the important of cleaning up these flaws. Otherwise, money launderers will keep exploiting your bank, and when some of them are caught by law enforcement through other means, your bank's name will show up as an unwitting facilitator, and there may be consequences that your executives will not be happy about. Close these basic loopholes now, please.

ARTFULLY HIDDEN IN SWITZERLAND FOR DECADES, ASSETS OF HOLOCAUST VICTIMS SURFACE IN THE HANDS OF HEIRS OF HUNGARIAN NAZIS WHO SEEK TO REDEEM THEM

 

Before I served in the Vietnam War,  and attended law school, my undergraduate university major was the intense study of history, especially that of twentieth century Europe, so bear with me on the backstory. The story of Nazi Germany's infamous "Hungarian Gold Train," loaded with the wealth of thousands of Jews from Budapest who perished in Auschwitz-Birkenau late in the war, a train which never made it to Berlin,  its intended destination, is well known. The fact that the assets on board were never repatriated to their victims, or their heirs is a sad story, made darker by subsequent evidence that many senior US Army officers looted some of art and jewelry treasures for their own use, is a well known aspect of post-war history, some of which was classified by the United States for decades, given the onset of the Cold War, with Hungary then being located behind the Iron Curtain. 

What is not generally known is that Hungary's Arrow Cross Party, a fascist organization which assisted Nazi Germans in the 1944 invasion of Hungary, which was a central figure in the rampant murder and deportation of their country's affluent Jewish population, collected and confiscated tens of thousands of the victims' 1924 German External Loan Bonds (Deutsche Aussere Anleihe),  which were gold-backed obligations to pay for post-WWI recovery, and underwritten by a financial institution in the United States. 

We have previously detailed how individuals in Hungary, linked to ministerial figures in Hungary's present far-right government, are seeking to fraudulently redeem some of these bonds, which disappeared in 1944 from two Jewish-owned banks in Budapest. See 80 Years After the Holocaust, The Descendants of Hungarians who committed Atrocities try to Cash in German Bonds of the Victims (May 31, 2023); Hungarian Fraudsters with Bonds stolen from Murdered Holocaust Victims seek to Redeem them...  (June 18, 2023). We intend to name the Hungarian attorneys who are orchestrating this well-organized fraud in a subsequent article in this series, as well as the Asian entities being employed as fronts in the applications, due to testimony and evidence that we have received from Holocaust Survivors, whistleblowers with first-hand knowledge,, intelligence analysts and compliance officers, who are continuing to investigate the fraudsters, and those who committed unspeakable war crimes in Hungary at the end of the Second World War, and passed down that stolen treasure to them. 

While the infamous Gold Train, whose journey was interrupted, and later terminated, never reached its intended destination, the cargo which included boxes of these German Bonds, and which was under the control of the Iron Cross, was removed and transported into neutral Switzerland, reportedly with the aid of corrupt senior officers in Germany's Schutzstaffel (SS), who secured passage, and were compensated for their assistance. The bonds were delivered to a financial institution in Zurich, in the German-speaking part of Switzerland, where they have been secured in a warehouse for several decades, until a legal opportunity (a new 3 year redemption window) arose to bring them out into the sunshine. We have whistleblowers

Although efforts, by the heirs of Arrow Cross officers, whom we intend to identify by name, are attempting to redeem these bonds, and collect what amounts to blood money of the Holocaust, have to date been reportedly unsuccessful, it is time to bring to light the guilty parties involved, in both Switzerland as well as Hungary, so that not only will this dark history finally see the light of day, but that accountability be assigned to the bad actors who are presently involved; Stay tuned. 

IF YOU ARE ATTENDING AN AML CONFERENCE IN FLORIDA THIS FALL, STAY IN YOUR HOTEL FOR YOUR OWN SAFETY

The Governor of the Sunshine State having signed the Permitless Carry Bill  into law, it became effective on July 1. Also known as Constitutional Carry by its  zealous advocates, the law allows any Florida resident, or even resident of another state who happens to be in Florida, to carry a concealed firearm within a permit. The only restriction is that the holder must carry identification, and cannot enter a school zone armed.

This means untrained, and potentially unstable, individuals are now walking around in public with concealed firearms. Inasmuch as AML conference attendees like to socialize on South Beach during the event, and some choose to visit "gentlemen's' clubs for more adult entertainment, the person sitting next to them might very well be armed, intoxicated, unstable and dangerous. Most AML conferences seminars and events in South Florida are held at hotels where there is more than enough entertainment to satisfy most attendees. Stay there, please. We do not need to read in the news how a compliance officer became a victim, by being in the wrong place at the wrong time, or agitated someone in a bar or club with fatal results. Florida has now become a far more dangerous place to have fun; Watch yourself, please. Stay in the hotel after hours.

TRADECRAFT 101 PART SEVENTEEN: MONEY LAUNDERING THROUGH THE USE OF INDUSTRY TRADE SECRETS AND CLOSELY-GUARDED PROCEDURES

When compliance officers engaged in Transaction Monitoring encounter a set of unusual, but not necessarily suspicious, transactions, they often quickly pass over them when the bank client is in a trade or industry not known for being used by laundrymen, or is not, by virtue of its type and nature, amenable to money laundering methods. That may not necessarily be the case.

As we intend to further cover in depth in this series, money launderers stay up nights and weekends to create scenarios which will not be detected by compliance officers. Their job is to beat you, every day of the week, They are never off duty; those cogs are forever turning around in their brains 24-7, spawning new methods, as well as the strategies behind them. Expect the unexpected. 

In their constant quest for new and esoteric laundering tricks and techniques, laundrymen tune in on extracting information specific to an industry or business type that is not only non-public, it may be a closely-guarded secret known only among experienced individuals in that sector, but which serves as a valuable (and often lucrative) component in its success. Laundrymen inquire into inside information about specific businesses, in hopes of ferreting out those secrets, because they may be useful in facilitating money laundering through that type of business. They talk to the cognoschenti to learn those secrets.

For example, tricks of a specific trade that allow virtually undetectable tax evasion in international funds transfers, or covert cooperation between competing businesses in the same industry or trade, regarding shipping might provide an avenue of access not publicly known, but exploitable by laundrymen. As we say, in this dark profession, you are only limited by your imagination. Company secrets and tricks can be fertile ground for money laundering. outside the industry circle, nobody, not even experienced law enforcement investigators, are unfamiliar with these techniques.

 Compliance officers, however, who are sensitive to the fact that their Transaction Monitoring has revealed something possibly, but not probably, inconsistent with the business type they are looking at, might be part of a non-public aspect of their bank client's operation linked to financial crime, must be alert for anything that doesn't add up, no matter how insignificant it appears. Not all legitimate international transactions arr what they appear to be, or they may have illegal components hiding within something clean, as frequently happens in Trade-Based Money Laundering, or Product Diversion, two subjects which we have covered in prior installments here on Tradecraft 101. Trust, but verify, please.

CHINA'S NEW ANTI-ESPIONAGE ACT AMENDMENTS, WHICH DIRECTLY THREATEN YOUR DUE DILIGENCE, TAKE EFFECT TODAY (1 JULY, 2023)

 

What you are looking at is a direct translation of the amendments to the Counter-Espionage Law of the Peoples' Republic of China (2023 Edition), which took effect today. Its intentionally broad language gives PRC officials the ability to detain, arrest, and charge any individuals who are engaged in the collection of business intelligence as part of a due diligence investigation within China, on espionage grounds. We cannot stress how serious this new law is; it can result in foreign nationals working in China receiving extremely long prison sentences for making routine inquiries which Chinese authorities decide impact their definition of National Security.

Compliance officers from outside China, whose duties include conducting due diligence or enhanced due diligence upon any Chinese nationals, companies, government agencies, or any other entity located in or operating within the PRC can no longer safely enter the country, without assuming the risk of being arrested for spying, even though their inquiries seek open-source information not related to the Western definition of what constitutes National Security information. 

Please consider this a direct warning to all compliance officers to refrain from even considering entering the PRC to conduct due diligence; this especially includes native Chinese speakers holding passports from North American and EU jurisdictions, as they may find themselves targeted for that reason. Foreign companies have been closing their offices inside China that conduct due diligence, and we trust that their staff have now all left the country, or closed down any operation that remotely appears to be collecting business intelligence.

If this isn't a reason for foreign businessmen to leave China, I don't know what else it would take to convince them to depart forthwith.