Kenneth Rijock

Kenneth Rijock

Monday, April 24, 2017

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.

Sunday, April 23, 2017

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.      

Saturday, April 22, 2017

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.

APPEALS COURT IN PANAMA GRANTS BOND TO MOSSACK AND FONSECA


 A Panamanian magistrate, sitting in the Second Court of Justice, in an appellate capacity, has overturned the initial ruling of the Seventeenth Criminal Court, and granted bond to Mossack and Fonseca senior partners Jurgen Mossack and Ramón Fonseca. The Court found that preventive detention, whereby the partners were incarcerated during the ongoing criminal investigation, was not proportional to the charges of money laundering, and set bond in the amount of $500,000 each.

Whether this is a serious error in judgment will become apparent as the money laundering case against them develops. The trial judge originally denied them bond, due to two major concerns:

(1) That they would flee Panama, to avoid prosecution. The massive amount of evidence against them appears to weigh heavily in favor of ultimate conviction, and if they flee the jurisdiction, they may never face justice.
(2) That they would continue to destroy evidence. While they were under investigation, Mossack staff members shredded firm records, and quietly stored the remains in a private residence, in an obvious attempt to commit Spoliation of Evidence; Panamanian law enforcement subsequently located the house.

MF partner Edison Teano, who is also incarcerated, was ordered released on $70,000 bond. He is listed as an executive at Mossack Fonseca . Aside from the attorney who admits that she was the manager at the law firm's Brazil office, no other Mossack attorney, or staff member, have been arrested to date, though many of the attorneys have since relocated to other firms in Panama City. Some of the lawyers who reportedly committed money laundering acts, for their clients, have deleted from their resumés any mention of the Mossack firm as their last plasce of employment, and they may have taken some MF clients with them.

Friday, April 21, 2017

COURT ORDERS EXTRADITION OF LEROY KING IN STANFORD PONZI SCHEME



In a ruling that many legal observers thought would never come, the High Court of Justice, of the Eastern Caribbean Supreme Court, has held that Leroy King, the former chief financial regulator for Antigua & Barbuda, shall be extradited to the United States. King was indicted in Texas, in the notorious Allen Stanford/Stanford International Bank Ponzi scheme, in 2009, and extradition proceedings have been knocking around the Antiguan court system since 2010, much to the chagrin of Allen Stanford's victims, as well as, I am sure, the US Department of Justice.

Although a Warrant of Extradition was executed in 2012, counsel for King has, through multiple dilatory acts, appeals and Habeus Corpus filings, managed to delay justice, but the Court, in a 71-page decision, discussed, at length, and ultimately disposed of, all the arguments advanced by counsel for Mr. King, holding that none of them barred his immediate extradition.

This ruling will go a long way towards reassuring observers that the rule of law is alive and well in Antigua & Barbuda. Readers who wish to review the complete text may access it here.
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* In the Matter of Leroy King, Claimant -and-the Attorney General and Minister of Foreign Affairs,
Antigua & Barbuda Claim No. ANUHCV 2012/0220 (ECSC).

THE SALE OF PASSPORT BLANKS IS NOT A RARE EVENT



Our article detailing statements made by reliable sources in Dominica, to the effect that a very large quantity of blank, official passports were sold, by senior members of the country's present government, and have now shown up in the Middle East, seems to have struck a nerve, but the underground movement of passports is a sad story often repeated in the developing world, where corrupt officials often take cash to sell out their national identity documents. Articles seeking to deny the truth of the Dominica story conveniently ignore the fact that the country is hopelessly mired in corruption at the highest level, and that such events, and worse, are unfortunately a regular occurrence.

When the United States military conducted offensive operations in Afghanistan, after the events of 9/11, soldiers battling the Taliban recovered dozens of blank passports, from the Republic of Haiti, during a raid. Precisely how a terrorist organization acquired those documents has never been released to the media, though a Palestinian businessman visiting Port au Prince shortly before the attack on the World Trade Center was believed to have purchased them.

In an era where the new variety of machine-readable passports are the rule, rather than the exception, the possession of such identity documents, when properly encoded, gives financial criminals, or terrorist financiers, a seemingly irrefutable piece of identification, which make the illicit transfer of passports more dangerous today than it was in the past.

Thursday, April 20, 2017

DETAILS EMERGE OF REZA ZARRAB'S NEW ATTORNEYS' EFFORTS TO ACHIEVE A POLITICAL SOLUTION IN HIS IRAN SANCTIONS EVASION CASE



Affidavits filed, by former US Attorney Rudolph Giuliani, and former Federal Judge and Attorney General of the United States Michael Mukasey, indicate how these two new attorneys for Reza Zarrab sought to obtain a resolution of their client's serious Federal criminal charges through what they referred to as a "state-to-state," or political, solution.

Although these pleadings are available to the public, through a review of the court file, The cover letter, to US District Judge Richard Berman, states that "all materials being submitted UNDER SEAL and for IN CAMERA review." It is unknown why they were not so sealed; this District Court has specific procedural requirements, when a party desires to have a document filed under seal, and if they are not strictly followed, the Clerk of Court will fail to seal them.

Giuliani's Affidavit explains his role in the case:

"... I have been retained to provide advice, and to consult, although not to appear in court, with respect to Mr. Zarrab's defense of the charges in this case. These services have focused principally, although not exclusively, on an effort to determine whether this case can be resolved as part of some agreement between the United States and Turkey, that will promote the national security interests of the United States, and redound to the benefit of Mr. Zarrab."

The Affidavit later states that senior officials on both countries "remain receptive to pursuing the possibility of an agreement that could promote the security of the United States, and resolve the issues in this case.

Mukasey's Affidavit tracks some of the same exact language as Giuliani's;

"... services have focused principally, through not exclusively, on an effort to determine whether this case can be resolved as part of some agreement between the United States and Turkey, that will promote the national security interests of the United States, and redound to the benefit of Mr. Zarrab."

These affidavits were submitted as part of a proceeding to determine whether the fact that both lawyers' firms represent a number of the American banks that are designated by the Government as victims of Zarrab's Iran sanctions violation actions.

The fact that Zarrab has taken the extraordinary step of seeking a political, or "national security" solution to his situation, rather than rely upon his dream team of defense attorneys, who are among the best in the Eastern United States, indicates that he most likely fears the outcome of a trial. If, however, Giuliani and Mukasey fail to achieve an end run around the justice system, through some sort of agreement with the senior leaders of Turkey, that would result in his release, he may be forced to choose between a plea, which would most likely involve his testimony against additional defendants, and a very long prison sentence.

It is fair to assume that the other conspirators, all of whom were affiliated with the Zarrab-Zanjani-Monfared Iran sanctions evasion syndicate, directly or indirectly, are paying close attention to the proceedings.



 


Wednesday, April 19, 2017

HOW MANY THOUSAND BLANK PASSPORTS FROM DOMINICA HAVE BEEN SOLD IN SYRIA ?


Ambassador from Morocco, Mohamed Benjilani and Dominica PM Roosevelt Skerrit

When I first heard the information, which came from an individual inside the government of Dominica, I frankly did not believe it, but when a second trusted source confirmed the details, I decided that the story needed to be told, as it now taints the validity of all passports from Dominica, whether presented for identification purposes, or at bank account opening, or at the closing of a real estate transaction. It also represents a clear and present danger of the use of these passports, by designated global terrorist organizations, located in the Middle East.

On January 29, 2016. The Ambassador to Dominica (as well as the other English-speaking countries of the Caribbean),  of the Kingdom of Morocco, Mohamed Benjilany, visited Dominica, and met repeatedly with the Prime Minister, Roosevelt Skerrit. On that day, and on a subsequent visit that the Ambassador made to Dominica, he allegedly acquired blank, official Dominica passports, My sources advise that the total number of passports he took possession of could be as high as 10,000, but in any event one must assume that several thousand passports were involved.

For those readers who now assume that the passports were either from the country's controversial  Citizenship by Investment (CBI),  or economic passport program, or the more opaque diplomatic passport scheme, it was neither. These are reportedly standard issue Dominican passports, which raises the question of whether the Minister of Foreign Affairs, Francine Baron, was involved in what was obviously an illegal transfer of restricted material, in violation of international law.

the only other individuals with sufficient authority to order the release, from secure storage, of this quantity of passports also must now come under scrutiny. They are the Prime Minister, Roosevelt Skerrit, and his personal counsel, Attorney Anthony Astaphan. Which one authorized the illegal access and sale of these passports ? How much was he or she paid ?

The potential impact of what was obviously an illegal sale, for cash, of the national patrimony of Dominica, cannot be underestimated. At least 2000 of these passports are known to have been shipped to Syria, and the presence of ISIS, Al-Qaeda  affiliates, and other hard-line Islamist groups in the Syrian conflict means that any one, or more, of these terrorist organizations could now be in possession of these passports, through which they could enjoy visa-free travel to the nations of the Commonwealth.

Terrorists could also use these passports to relocate to Dominica, where the hopelessly corrupt government would not be able to bar them from entry, and permanent relocation.  After all, they possess legitimate travel documents. The possibility that a radical group could obtain control of Dominica should not be discounted, and they may already have an ally in government. Let us not forget the lessons of Grenada, and Dominica's Prime Minister has made no secret of his anti-American, pro-Cuban, and pro-Venezuelan politics. 

From this point on, international bankers, and immigration arrival inspectors at airports and borders, should verify that the holder of a Dominican passport, actually is a Dominican .Was he born in Dominica, and is that shown on his passport, as well another identification document. Is his racial category consistent with that of native Dominicans ? Where and when, and by whom, was this passport issued ? Can he answer a simple question about the names of Dominica's elected officials, past and present ?

If a member of a radical organization uses a Dominican passport to commit a terrorist act in the West, perhaps then the global community will step in and engage in regime change, but in the meanwhile, bankers and law enforcement agents must now operate upon the presumption that a Dominican passport is bogus, until and unless you can qualify the holder as a legitimate citizen of the Commonwealth of Dominica.







Tuesday, April 18, 2017

MOSSACK AND FONSECA SUE THEIR INSURANCE COMPANY FOR DENIAL OF COVERAGE



The imprisoned name partners of the Panama City law firm of Mossack and Fonseca have filed a suit against their insurance carrier, after it denied the firm coverage on a policy, due in part to the accusations of money laundering, and after the insurance company declined to provide addition specifics, regarding denial of coverage on its policy. The firm did not announce the lawsuit; it was spotted by journalists in Panama who were covering the government's continuing investigation of the law firm, who reportedly artfully concealed, and laundered, drug profits, illicit bribe proceeds, tax evasion funds, and many other types of illegal wealth, on a global scale.

The law firm has long asserted that public release of the Papers was a violation of attorney-client privilege, but in the opinion of most legal authorities, and the law in many jurisdictions, the privilege does not apply when the attorney and clients are jointly engaged in criminal activities; it is known as the crime-or-fraud exception.

Mossack and Fonseca, asserting that it has suffered reputation damage, due to the release of the Panama Papers, and subsequent criminal investigation, brought the action, seeking $8m in damages, plus costs and fees. Allegedly, the firm's business has declined by 50%, since the Panama Papers scandal broke; it has laid off or terminated most of its employees. Many of its far-flung low-profile remote offices, located in other tax havens, as well as onshore jurisdictions, where it sought clients, have closed.

Whether the insurance company was justified in denying coverage on the policy raises issues of both law and fact, and we will be closely following it, and other related events, as the criminal case against the  principals of Mossack and Fonseca progresses. All counsel's efforts to have their clients released on bond have failed, due in part to the discovery that the law firm was destroying evidence on a grand scale, even secreting shredded internal documents in a private residence, to avoid detection and seizure.

Monday, April 17, 2017

ATTORNEYS ENGAGED BY ZARRAB'S TURKISH BANKER ALSO UNDER THE MICROSCOPE FOR CONFLICT OF INTEREST


The two experienced criminal defense attorneys, hired by Mehmet Hakan Atilla, the Turkish banker with aiding Reza Zarrab evade US sanctions on Iranian oil, are also being examined by the Court, to ascertain whether they must withdraw from the case, upon the grounds of Conflict of Interest. New York attorneys Victor Rocco and Thomas Thornhill are both members of a firm that has represented some of the victim banks, as well as the Republic of Turkey.

The Court has yet to rule on whether Rudolph Guliani and Michael Mukasey will be disqualified, on grounds of Conflict of Interest. The Government's prior efforts to cause the removal of existing defense counsel for Zarrab were unsuccessful.

Atilla remains in pretrial custody, with no bond hearing set. The superseding indictment that included him in the Zarrab case will most likely result in a delay in the scheduled August trial date.

Sunday, April 16, 2017

COURT RULES AGAINST WAKED ORGANIZATION IN ITS SUIT AGAINST OFAC



The US District Court for the District Court for the District of Columbia has entered a summary judgment, in favor of OFAC, the defendant, and against the Waked plaintiffs,  in a case where the plaintiffs accused OFAC of violating Due Process, and the Administrative Procedure Act (APA). The Department of Justice refers to their organization as the Waked Money Laundering Organization, and accuses it of laundering Colombian and Mexican narco-profits, through Panama.

The Waked family, one of whom has been charged with money laundering, and extradited from Colombia, have been named by OFAC, as Specially Designated Narcotics Traffickers (SDNT), and as a number of their corporate entities have also been sanctioned, which has resulted in major economic issues in the Republic of Panama, as some are major commercial businesses, with a large number of employees.

After a failure to have the sanctions against the plaintiffs removed, and to have their motion for reconsideration heard thereafter, the plaintiffs brought this action, asserting that the failure of OFAC to give them information not unclassified or non-privileged, violated their Due Process rights, as well as the Administrative Procedure Act.

Some observers have noted that the suit was most likely an attempt to obtain information about the potential criminal liability of the plaintiffs, and others in their organization, through civil discovery; there is not provision in the Federal Rules of Criminal Procedure, requiring such disclosures pre-indictment, or even generally during most ongoing proceedings,  and the suit was allegedly designed to obtain information, through the "back door," so to speak.

Whether the filing of such a claim, by a criminal money laundering organization, against whom the Government reports there is overwhelming evidence, is indicative of complete and total arrogance, on the part of the plaintiffs, is another issue we intend to cover in a future article. Are their sanctions available to punish, and even deter, such conduct, by foreign nationals ?

The District Court found that the plaintiffs were afforded sufficient procedural due process, under the circumstances, and that OFAC had followed its own rules and procedures, under the APA, and entered summary judgment. the plaintiffs have filed a Notice of Appeal, so we have not heard the last of the Waked plaintiffs, on these issues.


SEC OBTAINS SUMMARY JUDGMENT AGAINST PONZI SCHEMER ILLARRAMENDI FOR $25m




A US District Court judge has awarded the Securities & Exchange Commission a summary judgment*, against the Venezuelan Ponzi schemer, Francisco Illaramendi, in the amount of $25m,as and for disgorgement of illicit gains, plus a penalty of $1m. the defendant already has a Restitution order filed against him, in his criminal case, of $ 370m.

Illarramendi, who will not be released from Federal Prison, until his sentence is completed, in 2024, ran two unregistered hedge funds, in the State of Connecticut, serving the pension fund of PDVSA, the Venezuelan oil monopoly. His trading was based upon the ability to earn a profit regarding the official versus unofficial value of Venezuelan Bolivars, in US Dollars, When he sustained a $5m loss, he began paying prior investments with funds from new ones, in the classic Ponzi scheme manner.

Readers who are interested in this story can find a number of articles on this blog, covering the Federal criminal case against Illarramendi. They may be access by using the blank white search box, at the top of the page, or the one on the right-hand side.
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*Securities & Exchange Commission vs. Francisco Illarramendi, Case No.: 3:11-cv-78 -JBA (D Conn).

Thursday, April 13, 2017

US APPEALS COURT HOLDS THAT ANTIGUA IS NOT LIABLE TO STANFORD PONZI VICTIMS


 The Fifth Circuit Court of Appeals has held that the Foreign Sovereign Immunities Act bars Stanford International Bank Ponzi scheme victims from bringing suit against Antigua and Barbuda, a foreign state. The decision reversed a ruling by the US District Court for the Northern District of Texas.

The Stanford victims successfully argued, to the trial court, that the commercial activity exception allowed civil suits brought by them, as well as the argument that Antigua had waived sovereign immunity, but the 5th Circuit disagreed, reversing the lower court decision, on both issues. Readers who wish to review the arguments made by both sides, and the Court's reasoning in arriving at its decision, may review the complete text of the reported decision here.  The style is Joan Gale Frank, et al vs. The Commonwealth of Antigua and Barbuda, Case No.: 15-10717 (5th Cir. 2017).

PANAMA'S SUPERINTENDENT OF BANKING ORDERS LIQUIDATION OF BANK LINKED TO MOSSACK FONSECA AND TO ODEBRECHT SCANDAL



The Superintendent of Banking(SBP) of  the Republic of Panama has ordered the liquidation of FPB Bank, Inc., one of the financial institutions that allegedly moved the bribe payments for Norberto Odebrecht SA, the Brazilian construction company at the center of a hemispheric corruption scandal. The fact that the bank was also involved with the "Panama Papers" law firm, Mossack & Fonseca, was also reportedly a factor in the liquidation order.

If you read Spanish, the complete text of the SBP advisory can be seen here.
 
 

Tuesday, April 11, 2017

ICIJ WINS PULITZER PRISE FOR PANAMA PAPERS




The International Consortium of Investigative Journalists (ICIJ) has won the Pulitzer Prize, for Explanatory Reporting, for the Panama Papers, the giant leak of offshore financial records, that exposed a global array of crime and corruption, and detailed the Panamanian law firm that was gatekeeper to a vast flow of  murky offshore secrets.

The Pulitzer Prize, which is awarded " for a distinguished example of explanatory reporting, that illuminates a significant and complex subject, demonstrating mastery of the subject, lucid writing, and clear presentation, using an available journalistic tool, " brings an honorarium of $15,000.

PANAMA'S BANKING REGULATOR TO SEIZE 30% OF BALBOA BANK DEPOSITORS' FUNDS


The case of Balboa Bank & Trust illustrates the dangers posed, to foreign nationals, who place money in Panama's banks. The bank, which lost its OFAC license, and now must be reorganized and sold off, was solvent at the time its was sanctioned by OFAC, for being under the control of the Waked money laundering organization, but its clients will not be receiving 100% of their funds on deposit; Here's why.

The Superintendency of Banking will be taking thirty per cent, from each account, a disturbing development which we have seen occur during prior bank closures. Panama has no government-sponsored deposit insurance program, and given the fact that many banks engage in lucrative, but illegal, money laundering operations for clients, the risk of loss of a depositor's funds is substantial. When assessing Country Risk, the safety of client bank deposits is one of the primary factors compliance officers examine, as the potential loss of a foreign corporation's accounts is enough to deter the opening of any operation in the Republic of Panama.

There are rumors that the most probable buyer of the bank is a prominent Panamanian family, but its identity has not been disclosed. This presents a new problem, as many of the country's most powerful, and wealthy, families are either linked to, or directly involved with, organized crime, specifically what has been referred to as the Syrian organized crime syndicate, the second- or third-generation descendants of groups of Middle Eastern origin.


 This syndicate owns, or controls, a number of Panama's largest financial institutions, and routinely offer substantial bribes to government officials, to obtain official approval of their purchases of regulated entities. When the identity of the purchaser is known, we shall supplement and follow up on the information on this blog.



 

Sunday, April 9, 2017

SUPERSEDING INDICTMENT FILED IN ZARRAB CASE AGAINST TURKISH BANKER ARRESTED IN NEW YORK



The Acting US Attorney in New York has filed a Superseding Indictment, in the Reza Zarrab Iran oil sanctions violations case, adding the recently arrested Turkish banker, Mehmet Hakan Atilla, who was taken into custody on March 27, 2017.

The charges against Atilla are;
(1) Conspiracy to violate the International Emergency Economic Powers Act (IEEPA).
(2) Bank fraud.

He could receive a maximum 50 years in Federal Prison, if convicted. The Criminal Complaint initially filed in the Atilla case indicated that there were two Cooperating Individuals, who gave testimony against the defendant, in addition to intercepted communications that were extremely damaging. As a banker at a major Turkish financial institution (Halkbank*), Atilla intentionally mislabeled and misrepresented, on documents, sanctioned goods shipped to Iran as food, which was exempt under humanitarian guidelines, and used UAE and Turkish companies to evade the appearance of sanctions evasions, when in truth and in fact, the beneficial party was Iran.



Any additional defendants added to the Zarrab case increase the probability that one or more will eventually enter into a plea agreement, to avoid a long prison sentence, and their subsequent deportation from the United States, and that more will be charges, based upon their cooperating testimony.
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*Halk Bankasi AS.

CLEARING HOUSE PROPOSAL TO CURTAIL SARS IS FATALLY FLAWED



Lately, we have been hearing much about the plans, of the banking industry trade group, The Clearing House, to put forth a proposal to minimize the Suspicious Activity Reports (SARs) filed by American financial institutions. While we understand that the costs of SAR filings, together with other compliance costs, have skyrocketed, as more and more SARs are filed by the banks, in what it says is an overabundance of caution, the plans does not work.

Here's why:

(1) Drastically reducing SARs, in favor of targeted filings, as directed in your  geographical area, by law enforcement agencies, simply will not work. The notification of trends is reactive, not proactive; by the time banks receive such notices, the activity listed has, most likely, been in operation for months, as it must be observed, analyzed, and disseminated, all of which takes up valuable time. Money laundering is, whether we like it or not, a dynamic, and very responsive, crime, and its participants constantly modify their operations, changing both how, and where, they conduct their covert cash movements. You cannot expect that a law enforcement notice is current enough to make a difference, on a real-time basis.

(2) Clearing House wants FinCEN, not the OCC, to be the regulatory police. FinCEN is, unfortunately, understaffed and under budget, and to expect it to take the place of a regulatory agency, who has years of experience, in the enforcement role, is to expect far too much.

Is there is real solution ? You bet there is. if US banks have truly effective KYC, and KYCC, programs, the filing of SARs would seriously decline, but we are not yet seeing either of them being created, and operated. When that happens, you will see a major decline in SARS, because when a bank knows its customers, as well as its customers' customers, it does not randomly file SARs, because it understands the conduct of the clients' business. Let's focus upon a real solution, and not follow a group seeking to cut compliance costs decide upon some well intentioned, but ineffective, plan that will only increase money laundering inside the United States, in my humble opinion, based upon by experience on both sides of the problem.

ARAB BANK'S BRIEF IN OPPOSITION IN US SUPREME COURT CASE



Due to the importance of Jesner vs. Arab Bank in the development of terrorist financing case law, we are making the Arab Bank's Brief in Opposition, filed in the US Supreme Court case, available, so that readers have the opportunity to review the issues the bank presented, in seeking to have the Court decline to hear the Certiorari petition. You may access the brief here.

Saturday, April 8, 2017

OFAC FAILS TO RENEW LICENSE OF PANAMA'S BALBOA BANK & TRUST



The Office of Foreign Assets Control, more commonly known as OFAC, has declined to renew the license it granted to Balboa Bank & Trust, a year ago, when it was sanctioned, due to its control by the Waked money laundering organization. If anything,  the refusal to extend the license is indicative of the seriousness with which the US considers the threats posed by the Waked organization, which laundered both Colombian, as well as Mexican, narcoprofits, through Balboa, as well as other legitimate businesses owned or controlled by the Waked family.

The bank was a well-known facility for drug money laundering, since its purchase, but the Government of Panama ignored incriminating information delivered to it, by whistle blowers and private intelligence analysts. Panamanians have reacted in anger, to the news that Balboa, without the ability to access the US banking system, will close forthwith. Panama has no central bank, and all international transactions transit through US banks.

Balboa: one of the Waked organization's holdings

Most Panamanians appear to be more concerned about the fact that approximately 2000 employees will lose their jobs, rather than the fact that Balboa was a longtime center for Waked money laundering operations. They consider any major new capital that enters Panama a boon to the economy, irrespective of whether it is legitimate or not, and the United States generally appears to have a "hands-off" policy, regarding the country's massive drug money laundering, conducted by its major financial institutions.


Friday, April 7, 2017

REZA ZARRAB, FEARFUL OF OUTCOME OF TRIAL, SEEKS DIPLOMATIC SOLUTION TO HIS IRAN SANCTIONS EVASION CASE

  Reza Zarrab, who faces as much as 75 years in a Federal Prison, sought to obtain a "diplomatic solution" to his criminal charges, as revealed in the correspondence to the District Court judge, and the Court's recent order. Both ex-USA Rudolph Guliani, and  ex-AG Michael Mukasey, apparently met with not only Turkish President Recep Erdogan, but also the new US Secretary of State, Rex Tillerson, in what must have been a futile effort to solve Zarrab's problems through political means.

The Court, which is trying to ascertain whether there are conflicts of interest, when Giuliani, and Mukasey represent Zarrab, due to the fact that their law firms represent banks that are victims, and that Giuliani's firm also represents the republic of Turkey, has asked for the details of who is paying their legal fees, and what is the scope of their legal representation.

Clearly, Zarrab is concerned about the probable outcome of his trial, for typically, the US Attorney's Office takes the time, in advance, to build a bulletproof case against defendants, and the only way that he can reduce his ultimate sentence is through cooperation with the Government, which means providing Substantial Assistance that will result in additional indictments, and the recovery of criminal proceeds.

This would impact a number of possible targets, in the Middle East, in the Caribbean, and even in East Asia, whom he would be offering evidence against, and even testifying against, in open court. Given that the diplomatic/political efforts of his new counsel do not appear to have worked, Zarrab now must face the real possibility of entering a guilty plea, cooperating, and seeking a short sentence, due to that cooperation. His partners, business associates, and the facilitators of his money laundering operation are probably closely monitoring the court proceedings.

FORMER NIGERIAN OIL MINISTER CHARGED WITH MONEY LAUNDERING ALSO HAD A DIPLOMATIC PASSPORT FROM DOMINICA


The Rogues' Gallery of dodgy Dominican diplomatic passport holders

When the former Minister of Petroleum of Nigeria, now charged with money laundering in her native country, was arrested in the United Kingdom, she tried, in vain, to use her diplomatic passport from Dominica, to escape arrest. it appears that the Dominican diplomatic passports, which have been purchased by a number of high-profile financial criminals, are not the "Get-out-of-Jail-Free Cards" that the users intended them to be. Apparently the word is now out, on non-Dominican nationals holding these dysfunctional Dominican diplomatic passports, that they are not to be honored as the real thing.

The Iranian oil sanctions evader, Alireza Monfared, successfully used his Dominican diplomatic passport, to evade arrest, last year, in Malaysia, but now these bogus documents have lost their legitimacy. 

PANAMANIAN BANK LINKED TO WAKED MONEY LAUNDERING OPERATION ASKS FOR EXTENTION OF OFAC LICENSE



Balboa Bank & Trust, and Balboa Securities, two Panamanian companies linked to the Waked money laundering empire, and sanctioned by OFAC, have requested that the US agency's license, which has permitted them to continue to operate, be extended, according to reports from Panama. The OFAC license is said to expire on April 7, 2017.



The Waked money laundering operation, which allegedly cleaned Colombian and Mexican drug profits, was well known to the authorities in Panama, as well as US law enforcement agencies, for at least a decade, but there were no efforts made to shut it down until last year.

Thursday, April 6, 2017

HERE IS PETITIONERS' BRIEF IN ARAB BANK CASE


 Readers who are following the Alien Tort Statute litigation, filed by terrorist victims, against the Arab Bank, may wish to read the Petition for a Writ of Certiorari, which was recently granted by the United States Supreme Court. You may review the complete text of the Petition here.

WILL EU BRING CRIMINAL CHARGES AGAINST MOSSACK AND FONSECA PARTNERS ?


 Eurojust, the European Union legal agency, is in Panama City this week, to confer with Kenia Porcell, Panama's Attorney General, and to collect additional evidence in the Panama Papers scandal. There is an unconfirmed report, said to have come directly from Eurojust staff, that the EU intends to indict Jurgen Mossack and Ramón Fonseca on criminal charges, arising out of their alleged tax evasion facilitation, laundering and banking of the proceeds of corruption, and hiding the identities of senior European PEPs, who were all Mossack clients.

While the two name partners remain in custody in Panama, due to a judicial finding that they are at risk of not only flight, to avoid prosecution, but due to their destruction of evidence, Panama observers, who know that they could, if they choose to testify, implicate senior members of the present government, and that they might evade justice in Panama, for that reason.

We welcome a European prosecution of, not only the letterhead partners, but other attorneys at that firm, who actually performed the ongoing tactical money laundering operations for Mossack Fonseca clients.

FIRE SALE: DOMINICA OFFSHORE BANK FOR SALE, CHEAP


 The Internet is always buzzing with offers, generally from brokers, to sell offshore business organizations, through which fraudsters may fleece legitimate investors, launder narcotics profits and the proceeds of corruption, and in general commit mayhem in the financial world. I note that one such vehicle is being advertised to the public of late: a Dominican offshore bank.

Claimed to be a turnkey operation on offer, the bank for sale is going for USD$1.5m, plus the purchaser must contribute $500,000 into recapitalizing the bank, as the seller intends to remove all hispurported $1m capital, prior to the sale. The bank, which is not named, but is believed to be one of the dozen or so on the government financial regulator's list (though some banks may be unlisted, or intentionally listed very belatedly), and, if you believe the broker, received $1m from the owner over the past year, who also spent another million, obtaining approvals, SWIFT codes, furniture, banking software, and engaging three staff members.

Therefore, if the outlay to date is $3m, why sell out so cheaply ? And why is the required recapitalization so small ? considering that the offshore bank, for sale, may be one of the two reportedly beneficially owned by Venezuelan nationals, or certain Russian organized crime figures, who are said to possess Dominican passports, it may not be such a bargain after all, as there may be baggage that a purchaser would be required to assume, such as a money laundering history. One wonders precisely how these dodgy characters were able to obtain a banking license in the first place.

Nevertheless, in the world of free enterprise, it is galling to see such a vehicle for financial crime, openly offered in the marketplace.  

Wednesday, April 5, 2017

US SUPREME COURT TO HEAR ARAB BANK CASE


The United States Supreme Court has agreed to accept the Certiorari petition filed in one of the Arab Bank cases. Originally, a US District Court in New York held that the Arab Bank, a Jordan-based financial institution, violated the Alien Tort statute, by providing material financial support to Palestinian terrorists, who killed and wounded individuals in the Middle East, between 1995 and 2005. The bank paid the next of kin of terrorists who died during attacks upon unarmed civilians, which has encouraged subsequent terrorist acts in Israel, including the wounding and killing of Americans who were in Israel, or in the West Bank (Judea & Samaria).

The bank's conduct, during the decade-long litigation, was dilatory and abysmal. The landmark decision appeared to open the door to litigation, in US courts, by victims of terrorism, against banks who assisted terrorist organizations.

The Second Circuit Court of Appeals reversed the trial court ruling, holding that the statute was only applicable to individuals, not corporations, but its decision appears to be in conflict with those of other Federal Appellate Circuits. The fact that the US Supreme Court has agreed to hear the case means that at least some of the justices believe that they need to consider the issue, to resolve whether there is corporate liability, for terrorism, under the Alien Tort statute.  

Tuesday, April 4, 2017

DOMINICA'S DARKER SIDE; ITS OFFSHORE BANKS HAVE DECEPTIVELY SIMILAR NAMES



Take a good look at the names of the offshore financial institutions licensed in the Commonwealth of Dominica, and you notice a disturbing fact: a number of the names are deceptively similar, or could be easily confused with the names of major banks in other countries, or well-established business entities. This is a tactic employed by financial criminals, who intentionally seek to mislead the targets of their fraud, or other illegal acts, by giving the victims false confidence in what is, in truth and in fact, a shell entity, with little or no assets or history. These names are not accidents, believe me.

Given that all names of applicants must be cleared by the Dominican government, prior to the granting of approval, I wonder why such deceptively similar names would ever be approved by any responsible official. Some of these banks are obviously set up for the purpose of financial crime. Were bribes paid to Dominican Financial Service Unit, to secure these names, or to other senior government officials ? Frankly, I cannot see any other means through which  these irregularities were accomplished.

If you want to see the names, and judge for yourself how obvious the scheme is, you may access the Financial Services Unit list of licensed offshore banks here.






Monday, April 3, 2017

DID PANAMA'S PRESIDENT THREATEN TO SCALE BACK US FACILITIES IN PANAMA, IF RICARDO MARTINELLI IS EXTRADITED FROM MIAMI ?



A reliable source within the office of Panamanian President Juan Carlos Varela has confirmed that Varela has reportedly notified the US Government that Panama no longer wants it to extradite its fugitive former president Ricardo Martinelli. Furthermore, Varela allegedly threatened the US with punitive action, that Panama will close a number of American facilities located in Panama City, should the extradition ensue. It was Panama that asked for Martinelli's extradition in September, 2016.

Many Panama watchers believe that Martinelli, if tried in a Panama courtroom, for the dozen offenses that he is accused of, will implicate Varela, in the Odebrecht bribery scandal, the laundering of David Murcia Guzmán's criminal proceeds, and several other criminal acts that Varela allegedly participated in, and received illicit compensation from.  Many of Panama's most corrupt government officials are worried about what Martinelli will disclose, if he is forced to defend himself in court; he definitely knows where all the financial corruption secrets are buried.



 

TRANSPARENCY INTERNATIONAL SAYS US STATE DEPARTMENT NONRESPONSIVE ON MARTINELLI EXTRADITION DELAY


The president of Transparency International has publicly noted that the United States State Department has failed to provide an acceptable response to three inquiries as to why Ricardo Martinelli, the fugitive former president of the Republic of Panama, has not been extradited, to face justice in his native country. Panama delivered an extradition request to the US in September, 2016.

Precisely how Martinelli, then accused of massive corruption, while in office, was even allowed into the United States, where laws prohibit entry of corrupt foreign leaders, remains an open question. Some observers believe that he has an arrangement with either a law enforcement agency, or an intelligence agency, which is interfering with a moral extradition, due to his prior delivery of information, on criminal activities in Panama.

The problem is that Martinelli's current high-profile lifestyle in Miami, while he stands accused in a dozen criminal cases, totally over $5bn in the proceeds of corruption, reinforces the global perception that some wealthy ex-leaders can enjoy their "retirement" in the United States, free of the rule of law in their own nations, and that some US government agencies are to blame.

Sunday, April 2, 2017

BESIDES VLADIMIR ANTONOV, HOW MANY RUSSIAN ORGANIZED CRIME FIGURES HAVE DOMINICAN DIPLOMATIC PASSPORTS ?

Vladimir Antonov, Dominican diplomatic passport holder and offshore banker
The current estimate is that 200-300 Russian nationals hold Dominican passports, reportedly obtained through the Citizenship by Investment (CBI) program, but given that Vladimir Antonov, the offshore bank owner and fraudster had a Dominican diplomatic passport, we must ask the question; how many Russian organized crime figures hold those prized diplomatic passports from Dominica ?

This may be the true reason that the Commonwealth of Dominica flat out refuses to identify its diplomatic passport holders. the Minister for Foreign Affairs excuse for non-disclosure, that diplomacy must be conducted in secret, has no factual basis, because the foreign "diplomats" do no engage in ANY diplomacy, but a lot of international business, which they facilitate through their diplomatic position, which is yet another violation of the 1961 Vienna Convention on diplomacy.

If Dominica was to disclose the identities of its dodgy Russian diplomatic passport holders,  we might get a glimpse into their money laundering activities in the East Caribbean, including, of course, in Dominica's opaque offshore banks. Russian money laundering in the region, in a year when illegal Russian activities, designed to impact the United States and Europe, in national elections, will receive special attention from law enforcement agencies. Does Dominica really want to become the new center of American law enforcement attention in 2017 ? If it does, look for indictments of Russians, and their Dominican enablers, the seizure of bank accounts, and the resulting total avoidance, by North American tourists, of a country seen to be a nest of vipers. 

 

Saturday, April 1, 2017

POLITICIANS' EFFORTS TO OBTAIN FAVORABLE SETTLEMENT FOR REZA ZARRAB APEARS TO HAVE FAILED

Rudolph Giuliani; unable to outflank the US Attorney

Efforts, by two senior American political figures, working for Reza Zarrab, to fashion a favorable result for him, by seeking to arrange a deal, between the US & Turkey, appear to have completely failed, and most likely antagonized the US Attorney prosecuting the Iran sanctions evasion case, in the process. This information, which was gleaned by reviewing correspondence, between the prosecutors, the defense attorneys, and the Court, reveals a back-channel meeting, between the President of Turkey, and Rudolph Giuliani and Michael Mulkasey, which attempted an end run around the US Attorney for the Southern District of New York; it appears to have been unsuccessful.

Both Giuliani, the former Federal prosecutor and NY Mayor and Mulcasey, a former Federal Judge, and US Attorney General, were also reportedly meeting with certain American officials, obviously in the executive branch, and trying to craft some sort of international deal, which would meet the approval of Turkish President Recep Erdogen, and favor Zarrab in a big way.

Not only did their attempt fail, to date, but it excluded the US Attorney's Office in New York, who probably sees this effort as a back door attempt to minimize, Zarrab's sentence, and probable required cooperation, in the indictment of additional individuals, who aided and abetted him in evading global sanctions on Iranian oil, and in laundering the proceeds of their criminal enterprise. A settlement, between the US & Turkey, could result in Zarrab's transfer to Turkey, and zero assistance to US law enforcement. It is believed that prosecutors intend to seek a long sentence for Zarrab, which he can only reduce through rendering Substantial Assistance, in the indictment of others, or actions which would result in the US recovering major criminally-derived assets and wealth. Will there be additional indictments ? Obviously yes, if the US Attorney has anything to say about it.

A smoky, backroom deal, that would allow Zarrab to go free, is not in the best interests of the United States, and how two of America's most respected lawyers could get involved in orchestrating it, representing a major sanctions evader and money launderer, is hard to understand, and you can bet that the Federal prosecutors handling the case are unhappy about their circuitous attempts to accomplish it, and even more determined to prevail at trial.

CONCERNS ABOUT EU MOVES ON SPAIN'S NEW DESIGNS ON GIBRALTAR IN TRADE NEGOTIATIONS



Brexit trade negotiations, between the United Kingdom and the European Union, have given rise to fears that the EU, due to strong Spanish claims, will demand that the UK give in to its demands for joint sovereignty with Spain, regarding Gibraltar. Although two referendums have demonstrated that 99% of the island's people wish to continue to be ruled by Great Britain, Spain is said to have asked that joint sovereignty be made a condition for further trade negotiations. Britain has long opposed any Spanish claims, relying upon the Treaty of Utrecht, which gave Gibraltar to the UK, in a global settlement of the claims of both countries, in 1713.

Gibraltar, which is one of the most stable offshore financial centers in Europe, could be subject to Spanish taxation, should Spain acquire any degree of sovereignty over the British Overseas Territory, which would directly threaten the island's existence as a financial center. UK politicians, as well as senior elected officials in Gibraltar, have strenuously expressed their opposition to any change of status of the longtime British rule over the Rock, as it is known.  

Thursday, March 30, 2017

VENEZUELA DISSOLVES ITS CONGRESS, RAISING COUNTRY RISK TO THE HIGHEST LEVEL



The Supreme Court of Venezuela has dissolved the National Assembly, the last elected branch of government that contained any elements of the opposition. The Court ruled that it, and President Maduro, will now assume the duties of the Assembly, which the Secretary-General of the Organization of American States (OAS) has said is a step on the road to dictatorship.

With this step, Venezuela has clearly placed itself in the category of unsuitable, when it comes to Country Risk. Any financial exposure, from parties outside the country, now carried extreme levels of risk, and since recovery, through the government-controlled court system discriminates against foreign companies and nationals, any new financial intercourse should be avoided, lest total loss occur at maturity, as legal remedies in the event of default will not be available.

WILL PANAMA'S PRESIDENT PARDON MARTINELLI ASSOCIATES IN ODEBRECHT SCANDAL ?



Persistent rumors have been flying around Panama City this week, saying that Panamanian President Juan Carlos Varela intends to pardon a number of former President Ricardo Martinelli's close associates, ex-cabinet members, and possibly even family members, from any criminal charges filed against them, in the massive Norberto Odebrecht SA construction bribery scandal. Varela is often himself listed as a recipient of bribe money, so pardons of suspects in the Odebrecht case may be issued by the president for his own protection.

Martinelli's two grown sons, who were the alleged recipients of millions of dollars which was frozen in their Swiss banks accounts, may evade prosecution, if they are granted pardons. Whether the Panamanian people object to these actions is not known, but most are sick of the widespread corruption, which results in increased costs of everything, as bribe payments are added to the final cost of construction projects.

Is is doubtful that the former president will himself be pardoned;  he faces at least a dozen other criminal cases, pending against him in the capital. The US State Department has studiously ignored Panama's extradition request against Martinelli for months, leading many to believe that he is, or has been, a confidential informant for American law enforcement, or its intelligence services, like his predecessor, General Manuel Noriega.

LAWYER FOR MOSSACK FONSECA SAYS BRIBE MONEY IN MOSSACK ACCOUNTS WERE ADMINISTRATIVE FEES



In a statement that will certainly be regarded as shameful, the attorney represented the imprisoned law partners of Mossack and Fonseca has asserted that funds found in MF accounts that were bribe money in the "Cash Wash" scandal of Odebrecht, were "administrative fees." How millions of dollars, where were obviously bribe payments, meant to insure that the Brazilian constructions company obtained huge governmental contracts in Panama, are fees is an insult to the intelligence of  Panamanians.

The court continues to refuse to release Mossack, Fonseca, and MF partner Edison Teano, on bail, finding that they are flights risks, and pose a danger of destroying additional evidence, as they have done in the past. Money laundering charges are filed and pending, but the investigation is continuing.

Tuesday, March 28, 2017

REZA ZARRAB BRINGS IN THE BIG GUNS, FOR POSSIBLE PLEA NEGOTIATIONS



Correspondence from both sides, in the Reza Zarrab Iran sanctions evasion case, indicating that the Government believes two additional new attorneys, coming in to assist, may present still more Conflict of Interest issues, due to the fact that their firms have represented, or still represent, financial institutions the Government asserts are victims of Zarrab's illegal sale of Iranian oil for gold scheme. Wait until you hear who those two attorneys are.

First, the Government disclosed to the Court that Rudolph Giuliani, the former US Attorney, and ex-Mayor of the City of New York, and Michael Mulcasey, the Attorney General of the United States in the Bush Administration, and himself a former Federal judge, were representing Zarrab, and thus there were Conflict of Interest issues that the Court needed to adjudicate. These are two noteworthy additions to the defense team.



Then defense counsel, in a follow-up letter, denied any conflict, and indicated that the new counsel would not be participating in trial preparation, or trial itself. It also appears that they may not even be filing appearances for the defendant. So what are they coming in for ?

The answer can be found in the Government's second letter to the Court;

  "In this case, the Government has been expressly advised that Mr. Giuliani and Mr. Mulkasey have been retained by the defendant, and have been involved in, efforts to explore a potential disposition of the criminal charges in the matter."March 27, 2017 Letter from US Attorney's Office to the Court, at Page 2.



We recently wondered, in this blog, whether the lack of record activity in the case indicated a possible move to seek to settle the matter, through a plea negotiation; Apparently, this is now more than pure speculation on my part. A plea agreement generally involves cooperation with law enforcement, and may rise to the level of Substantial Assistance in the indictment of additional defendants, and/or the seizure of assets that are the proceeds of crime. Whether there will be many individuals charged is the question in the minds of most observers; we shall see whether it comes to pass.  One Turkish banker, linked to Zarrab's illegal operation, was arrested in New York this week. Did Zarrab supply information ? Was an indictment of the banker the sealed file posted on the court docket this week ?

Meanwhile, the Court has set another schedule of submissions, to determine if there truly is a Conflict of Interest, regarding these two new attorneys.