155 - Not getting away with it...

The Bank of New York Mellon now has a bit of a problem. Their subsidiary - Ivy Asset Management - has been caught in internal communication (chalk up another victory for computer forensics) trash-talking Madoff's operation and deciding that it would be better to stay in Madoff investments rather than withdrawl despite the evidence that he's a fraud.

Words fail to describe the idiocy that permeates this case.

http://www.ag.ny.gov/media_center/2010/may/may11a_10.html

ATTORNEY GENERAL CUOMO SUES BANK OF NEW YORK MELLON UNIT FOR DECEIVING CLIENTS IN CONNECTION WITH MADOFF-RELATED INVESTMENTS

Internal E-Mails Reveal Ivy Asset Management and Its Co-Principals Deliberately Misled Clients~Ivy’s Years of Fraud Cost Hundreds of Investors Over $227 Million and Drained Dozens of NY Pension and Welfare Funds

NEW YORK, NY (May 11, 2010) - Attorney General Andrew M. Cuomo today filed a lawsuit against Ivy Asset Management, LLC (“Ivy”), its former Chief Executive Officer Lawrence Simon, and its former Chief Investment Officer Howard Wohl, for deliberately misleading clients about investments tied to Bernard L. Madoff. The suit alleges that Ivy and the two principals kept their clients in the dark about damaging financial information about Madoff so Ivy could bring in millions in advisory fees.

Ivy is a New York-based investment adviser that is wholly owned by Bank of New York Mellon. Between 1998 and 2008, Ivy was paid over $40 million to give advice and conduct due diligence for clients with large Madoff investments. The lawsuit alleges that while conducting this due diligence, Ivy learned that Madoff was not investing funds as advertised. However, internal e-mails reveal that Ivy did not disclose this information to clients for fear of losing revenue from fees. As a result, Ivy’s clients lost over $227 million after Madoff’s Ponzi scheme collapsed. Among the victims were hundreds of investors as well as dozens of New York union pension and welfare plans.

“Ivy and its former co-principals saw the trouble with Madoff coming around the bend, but instead of guiding their clients through the financial waters, they sold them down the river,” said Attorney General Cuomo. “These defendants violated their basic responsibility as investment advisers by putting their own financial interests ahead of their clients. They shamelessly profited off of their own clients’ impending misfortune and we are holding them accountable for their actions.”

The damaging information that Ivy discovered about Madoff and then failed to disclose includes:

• In 1997, Ivy learned that there were not enough options to support Madoff’s purported trading strategy. Specifically, the volume of Standard and Poor’s 100 Index options (“OEX”) available would only support half of the amount of assets Ivy believed Madoff had under management. This strongly suggested that the trades Madoff had been reporting were not actually being made.
• Between 1997 and 1998, Madoff gave Ivy three vastly different explanations as to where and with whom he traded OEX options, all of which were inconsistent with Ivy’s observations and understanding of OEX options.
• Ivy received information from industry contacts indicating that Madoff was misusing client assets to fund his broker-dealer business instead of investing the money as he claimed he was doing.

Internal documents obtained through the Attorney General’s investigation reveal that Ivy, Simon, and Wohl knew that investing with Madoff was too much of a risk:

• An internal Ivy memorandum from 1997 about Madoff states, “[t]his is a clear example of our inability to make sense of Madoff’s strategy, and one where his trades for our accounts are inconsistent with the independent information that is available to us.”
• When writing to a subordinate in 2002, Wohl wrote “Ah, Madoff, You omitted one possibility - he’s a fraud!”
• When listing managers who should be recommended to a prospective client in 2003, Wohl wrote, “Madoff (NOT!).”

Internal e-mails reveal that Simon and Wohl intentionally failed to disclose their doubts about Madoff to their clients with heavy Madoff-related investments:

• On December 16, 1998, the day after Madoff gave Ivy his third explanation about his option trades, Wohl recommended to Simon that Ivy withdraw all of the funds they personally managed from Madoff, including some of their own money, writing:
  “I’m concerned that he [Madoff] now admits that he does not execute all of the index options on the exchange that there are ‘unknown’ counterparties that if these options are not paid off he’d lose less than 100%. It remains a matter of faith based on great performance - this doesn’t justify any investment, let alone 3%.”
• In response, Simon argued that Ivy should not withdraw the investment it had placed with Madoff because that could lead Ivy’s clients to withdraw their money from Madoff as well, which would significantly impact their total revenue, writing:
  “Amount we now have with Bernie in Ivy’s partnerships is probably less than $5 million. The bigger issue is the 190 mil or so that our relationships have with him which leads to two problems, we are on the legal hook in almost all of the relationships and the fees generated are estimated based on 17+% returns …. [to be] $1.275 Million… Are we prepared to take all the chips off the table, have assets decrease by over $300 million and our overall fees reduced by $1.6 million or more, and, one wonders if we ever “escape” the legal issue of being the asset allocator and introducer, even if we terminate all Madoff related relationships?”

The suit further alleges that Ivy, Simon, and Wohl deliberately misled clients with heavy Madoff-related investments:

• In 1999, Ivy sent letters to clients falsely stating that, “we have no reason to believe there is anything improper in the Madoff operation.”
• Between 1998 and 2004, Ivy sent numerous letters to their heavily Madoff-invested clients falsely listing Ivy’s only concern about Madoff to be an “ability to manage what must be an enormous pool of capital with such consistently outstanding results.”

The lawsuit charges Ivy, Simon, and Wohl with violating New York’s Martin Act for fraudulent conduct in connection with the sale of securities; violating Executive Law 63(12) for persistent fraud in the conduct of business and for persistent illegality; and breaching their fiduciary duty in connection with the advice they gave to their clients.

Attorney General Cuomo’s lawsuit seeks payment of restitution, damages, and penalties from Ivy, Simon, and Wohl, as well as the disgorgement of all fees that Ivy received. The lawsuit also seeks to bar Simon and Wohl from acting as investment advisors.

The lawsuit was filed in New York State Supreme Court in Manhattan and is available at www.ag.ny.gov.

This investigation is ongoing.

This investigation is being conducted by Senior Enforcement Counsel Roger Waldman, Assistant Attorney General Kate Burson, and Assistant Attorney General Shmuel Kadosh, under the supervision of Special Deputy Attorney General for Investor Protection David A. Markowitz and Executive Deputy Attorney General for Economic Justice Maria Vullo.

154 - Going after the wife

A fine example of a financial intelligence unit employing rudimentary information to investigate the alleged improprieties of a government tax official. No massive technology investment nor elaborate investigative techniques required, just common sense.

http://www.thejakartapost.com/print/254737

Bahasyim named money laundering suspect

Hasyim Widhiarto , The Jakarta Post , Jakarta | Sat, 04/10/2010 9:09 AM | Headlines

The Jakarta Police have officially named former tax official Bahasyim Assifie, who made headlines when it was said he was linked to a high-profile tax brokering case, a suspect in a money laundering case.

City police spokesman Sr. Comr. Boy Rafli Amar said Friday the police investigation had found Bahasyim had transferred a total of Rp 64 billion (US$7.10 million) of “suspicious funds” to accounts belonging to his wife and daughter.

“The suspect claimed that the money was a fee taxpayers paid him when he was working as a tax official,” Boy said following police questioning of Bahasyim for several hours.

According to Boy, Bahasyim transferred Rp 35 billion and $1 million to the account of his wife and Rp 19 billion to his daughter.

When the police investigators froze their bank accounts in late March, Boy said they had found the money was left untouched, reaching Rp 66 billion due to an accumulation of Rp 2 billion worth of interest.

“As of [Friday], our investigation found 47 suspicious transactions related to the accounts and we will keep investigating the suspect on those transactions,” he said.

The police, Boy went on, also investigated Rp 2.1 billion in an account belonging to Bahasyim’s other daughter, but had decided to exclude it in their upcoming investigation as they did not find this transaction suspicious.

The Financial Transaction and Reports Analysis Center (PPATK) detected suspicious bank deposits made in the names of Bahasyim’s wife and children early last year.

During his 34-year tax office career plus two more years at the National Development Planning Board, it is reported that Bahasyim never received more than Rp 10 million in monthly salary.

Bahasyim’s fortune includes two houses in affluent Menteng area, Central Jakarta, and several other luxury houses located in Kalibata, South Jakarta, Depok and Bekasi, the PPATK said.

The money-laundering watchdog submitted its findings to the National Police in February last year but the case was not followed up. The watchdog reminded the police late last year of their findings, but said they were ignored.

The police’s reluctance rendered speculation that Bahasyim’s dubious funds were being accepted by law enforcers to terminate the investigation, as with the high-profile tax brokering case involving tax official Gayus H. Tambunan.

Gayus’ Rp 28 billion worth of suspicious funds, also detected by the PPATK, was allegedly paid to police to halt investigation.

The Jakarta Police’s commitment to investigating the Bahasyim case followed pressure from the Judicial Anticorruption Taskforce.

On Friday, Boy retracted the statement he made Thursday. Previously, he claimed that the police investigators did not meet Bahasyim for questioning. Later, he revised that the police had questioned Bahasyim three times since last month.

Separately, Bahasyim’s lawyer, John K. Azis, said his client had fulfilled police summons on his own accord, rebutting speculation that he was attempting to avoid police investigation.

“Pak Bahasyim followed media reports and widespread allegations that he had embezzled taxpayers’ money,” he said. “He felt uncomfortable about it and initiated to meet the police.”

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.

153 - Two of the best

"Two strokes of the rotan" is an interesting sentence for the misdeeds of a financial consultant. The rotan (or "rattan") cane can inflict a memory to last a lifetime. Regulators in countries other than Malaysia should consider it a part of their enforcement regime. Victims of recent Ponzi schemes have asked for worse....

http://thestar.com.my/services/printerfriendly.asp?file=/2010/4/10/courts/6028575.asp&sec=courts

Jail and rotan for consultant

By NURBAITI HAMDAN

nurbaiti@thestar.com.my

KUALA LUMPUR: A freelance consultant was sentenced to three years’ jail and two strokes of the rotan by the Sessions Court after he pleaded guilty to a slew of financial misdeeds.

The wrongdoings included misusing fake documents, 11 charges of money-laundering and two charges of criminal breach of trust.

Md Sukor Razali, 45, from Pandan Jaya had earlier claimed trial to the charges but changed his plea before judge Rozana Ali Yusoff.

The consultant from Oberthur Card Systems (M) Sdn Bhd had owned, disposed of and used money totalling RM2.3mil from the company to buy a cashier’s order and transferred it into three accounts of different companies – an offence under Section 4(1)(a) of the Anti-Money Laundering and Anti-Terrorism Finan cing Act 2001.

He committed the offences at Al-Rajhi Banking and Investment Corporation (M) Bhd at Wisma Selangor Dredging in Jalan Ampang here between March 13 and May 27, 2008.

Md Sukor also pleaded guilty to two charges of criminal breach of trust involving nine cheques amounting to RM3mil that were entrusted to him by Oberthur, an offence under Section 409 of the Penal Code.

He also pleaded guilty to a charge under Section 471 of the Penal Code for using a fake document to open another current bank account for Oberthur.

He committed all three offences at Al-Rajhi Bank main branch at Wisma Selangor Dredging between Feb 26 and March 28, 2008.

Defence counsel Azman Zakaria said during mitigation that the accused was a father of four children aged eight to 16 years, and was the sole breadwinner for the family.

He added that Md Sukor had saved the court’s time by pleading guilty after five prosecution witnesses were called to testify.

Rozana ordered the accused to serve jail time for 11 charges of money-laundering concurrently.

The sentence for money-laundering is to be carried out after Md Sukor has served time for the criminal breach of trust and fake document offences totalling two years in jail and two strokes of the rotan.

DPP Mohd Farez Rahman prosecuted for the money-laundering charges, while DPP Hamidi Mohd Noh prosecuted for the other charges.

© 1995-2010 Star Publications (Malaysia) Bhd (Co No 10894-D)

152 - The Infiltrator

Robert Mazur has written a book entitled, "The Infiltrator". It's a gripping tale of how he and United States Customs brought down a major money laundering operation run for the benefit of the cocaine cartels of the late eighties. Even more impressive is his contribution towards the fall of the Bank of Credit and Commerce International ("BCCI"), otherwise known as the Bank of Crooks and Criminals International.

Anyone involved in the profession of financial crime risk management should read this book. The others who enjoy thrillers and the fact that truth is often odder than fiction should do the same.

151 - Object? Then Create Your Own

If the FATF continues to march to the sound of one drummer - the United States - then it runs the risk of alienating its many members, most of whom are committed to fighting money laundering by employing objective mechanisms and processes.

The FATF has been steered in too many directions that coincide with the political objectives of a very few. Examples include:

1. Designating Iran for special sanction as a money laundering and terrorist financing hub, yet the nations of the most ardent funders of terrorist activity - including Saudi Arabia, Kuwait and other "allies" for the "War on Terror" - remain unscathed.

2. Including weapons of mass destruction ("WMDs") in the FATF mandate when this is clearly a matter for intelligence services.

3. Ignoring hotbeds of money laundering activity because of a country's support for another political hotbed issue. In other words, old school politics.

If the FATF veers too far from its original intent, others may decide to take matters into their own hands. Ecuador may have trouble leading the pack. Others won't.

"I wouldn't want to join any club that would have me as a member..."

- Groucho Marx

Ecuador To Propose Latam Group To Fight Money Laundering

QUITO (Dow Jones)--Ecuador will propose that the Group of Rio create a Latin American body to fight money laundering, President Rafael Correa said over the weekend.

The Correa proposal is an answer to Ecuador's inclusion on a list of nations with deficiencies in their ability to curb money laundering and terrorist financing.

"What arrogance! And why? Because we have relations with Iran. That's it," Correa said during his weekly media address.

Last week the Financial Action Task Force, or FATF, said Iran, Angola, North Korea, Sao Tome and Principe, Ecuador, Ethiopia, Pakistan and Turkmenistan have those deficiencies.

On Friday the U.S. Treasury Department said it supports the call to increase efforts to combat money laundering and terrorist financing.

"We will take a vigorous protest to the Group of Rio, as well as important initiatives, such as making up our own group to fight against the drug trafficking, money laundering and terrorist financing, without depending on the tutelage of powers outside of the region," Correa added.

Ecuador's Private Banks' Association has said it strictly adheres to norms referred to by the FATF.

Earlier, Foreign Minister Ricardo Patino said the country "completely rejects this perverse insinuation" from FATF.

The Financial Action Task Force's placing of Ecuador on its list of "noncooperative" countries in the battle against money laundering and terrorist financing will have a negative effect on the price of Ecuadorian bonds by reducing the willingness of bondholders to continue to hold them, Credit Suisse Group (CS) said Monday.

"This should also have a negative effect on foreign direct investment and, combined with the most recent default, will likely limit even further the country's ability to tap markets and/or obtain significant multilateral financing in the foreseeable future," it said.

The Group Of Rio is an international organization of Latin American and some Caribbean states.

Argentina, Mexico, Bolivia, Brazil, Chile, Colombia, Ecuador, Venezuela, Nicaragua, among others are in the group.

-By Mercedes Alvaro, Dow Jones Newswires; 5939-9728-653; mercedes.alvaro@dowjones.com

150 - Political Money Laundering Explained

An excellent explanation of money laundering within the American political system by the Alabama Policy Institute. Over six hundred Political Action Committees (PACs) in Alabama alone?!?

Democracy in action, Southern-style.

http://www.alabamapolicy.org/gary_blog/print.php?id_art=343

Alabama Senate Should Keep Their Promise to Ban PAC-to-PAC Transfers

February 20, 2009

Viewpoints by Gary Palmer

Just because something is legal does not mean it is ethical. In Alabama, it is legal to engage in political money laundering so it’s no wonder the state ranks 49^th in the nation for campaign finance disclosure. Overall, Alabama gets a grade of ‘F’ on the latest report card on state disclosure laws published by the Campaign Disclosure Project. The grade and ranking are well justified.

In Alabama, no voter can really be certain who is really influencing the candidates on the ballot on Election Day. Supposedly, state campaign finance laws require full disclosure of the source of contributions to political candidates. But because the state also allows unlimited transfer of political contributions among political action committees (PACs), millions of dollars are being invested in political candidates by big money special interests completely out of sight of Alabama voters.

PACs in and of themselves are not the problem. In fact, PACs serve a useful purpose. Small business owners or individuals who can not make sizeable contributions to help elect good people to office can form a PAC which allows hundreds or even thousands of people to pool their contributions so their voices can be heard.

The problem with PACs under Alabama’s current campaign finance laws is that wealthy individuals and powerful special interests that care nothing about good government have established literally hundreds of PACs for the purpose of selecting candidates who are beholden to them and hiding their campaign contributions from Alabama voters. Powerful special interests such as Alabama Education Association and gambling interests disguise contributions by passing money through other PACs with names that give no hint to the voter as to the real source of the money behind a candidate or the agenda behind the money.

For instance, in 2006 the Gannett News Service reported that Alabama gambling kingpin Milton McGregor gave $603,000 to the Alabama Voice of Teachers for Education (A-VOTE) which is the education union PAC run by Paul Hubbert. A-VOTE then passed $603,000 to another education union PAC, the Fund for Alabama’s Children and Education, which then sent $503,000 to Alabamians For a Better Plan.

In 2008, Hubbert ran education union PAC money through several other PACs in an attempt to defeat two Republican State School Board candidates who had both supported ending the corrupt practice of “double dipping” – legislators holding jobs or contracts with the two-year colleges while also being paid for serving in the Alabama Legislature. Some estimates indicate that in the primary and general election, Hubbert and the education union may have run over $500,000 through other PACs in an attempt to stack the State Board of Education with pro-double dipping members.

Clearly, hiding the source of campaign contributions from voters is wrong. In fact, the issue is so obviously wrong that during the 2006 election both the Democrats and Republicans promised that banning PAC-to-PAC transfers would be a top priority. Yet, going into the third legislative session since that election, the Democrat-controlled State Senate has killed every attempt to pass any legislation that would truly ban the despicable practice of shuffling campaign contributions through transfers.

In the current legislative session, the Democrats and Republicans in the Alabama House of Representatives have once again kept their campaign promise to ban PAC-to-PAC transfers by passing Rep. Jeff McLaughlin’s (D-Guntersville) bill by a vote of 98-0. They passed a similar bill in both the 2007 and 2008 legislative sessions only to see the Democrats in the State Senate substitute another bill that, for intents and purposes, legalized a different form of the practice of hiding the money from voters.

The substitute bill would have allowed transfers to political parties and principle campaign committees with no limit on the number of principle campaign committees and no requirement for full disclosure of the identity of individuals and/or interest groups providing the money.

While the Senate Democrats’ substitute bill would have banned transfers between PACs, it would not have banned transfers to PACs from political parties or from principle campaign committees. In reality, this bill would open the door for hundreds of new organizations to form, in addition to the 600-plus PACs that already operate in Alabama.

Given that Alabama is now ranked fourth in the nation in public corruption, you would think that Alabama politicians would have some motivation to lower the ranking by bringing real transparency to our elections. One step in the right direction would be the passage of a ban on all transfers of political money that conceal the identity of the contributor.

The people of Alabama have a right to know who is funding candidates for office because knowing who is funding the candidate will tell us who is really influencing our state government.

Gary Palmer is president of the Alabama Policy Institute, a non-partisan, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families, which are indispensable to a prosperous society.

February 20, 2009

Note: This column is a copyrighted feature distributed free of charge by the Alabama Policy Institute. Permission to reprint in whole or in part is hereby granted, provided that the author and API are properly cited. For information or comments contact: Gary Palmer, Alabama Policy Institute, 402 Office Park Drive, Suite 300, Birmingham, Alabama 35223, (205) 870-9900, e-mail garyp@alabamapolicy.org. To subscribe or unsubscribe to this column, please e-mail joannel@alabamapolicy.org.

NEW API SEMINAR

API is pleased to offer an educational seminar entitled “Foundations for American Leadership.” For more information, please visit www.alabamapolicy.org or contact Jo Anne Lindley at 205-870-9900.

149 - Determining Suspicions

Mr. Shah had his money frozen and, as a result, incurred enormous costs. Banks would do well to digest the court's ruling on what constitutes a reasonable suspicion under anti-money laundering legislation, described as "draconian" by the author, and rightly so.

This argument will play out in courts across the globe, as banks can wield tremendous impact by freezing funds on the basis of a "reasonable" suspicion. Woe befalls the bank whose suspicions are indefensible and who is deemed negilgent by a court.

After all, in this economy, why would a bank not be the apple of the court's eye?

http://www.lawsociety.org.uk/newsandevents/news/view=newsarticle.law?NEWSID=426167

Shah v HSBC – civil liability in money laundering

Tuesday 16 February 2010

Following the Court of Appeal's judgement in the case of Shah v HSBC earlier this month, the legal press has been filled with dire warnings that solicitors will have to justify every report they make, with client's given free reign to sue for damages when a transaction is held up awaiting consent.

A closer reading of the judgement would suggest that the situation may not be quite that bad.

Solicitors who appropriately consider concerns of money laundering and ensure that their clients are given proper legal advice as to their own legal position under money laundering legislation should notice little difference in practice.

The facts of the case

Mr Shah transferred funds from his Credit Agricole account to his existing HSBC account. He advised HSBC that there had been a problem with identity fraud and so he was transferring the funds for a short time while the identity issue was resolved.

A few months later he asked HSBC to transfer the funds back to a Credit Agricole account and for other funds to be paid to a creditor.

In both cases he was told that this would be delayed while the bank complied with its UK statutory obligations.

The bank had made a suspicious activity report (SAR) and received consent some days later for the transfer, while the second instruction was cancelled by Mr Shah.

Mr Shah had assets in Zimbabwe and Zimbabwean officials became concerned about the decision by the bank not to release the funds.

About a month and a half after the first SAR had been submitted, Zimbabwean officials demanded an explanation from Mr Shah about the funds. Mr Shah spoke with the bank at this time and was told that he had been under investigation but that this was now completed.

Mr Shah's solicitors sought a further explanation but the bank refused. The Serious Organised Crime Agency (SOCA) advised the solicitors that there was no criminal investigation of Mr Shah.

No further information about the handling of his accounts was provided to Mr Shah and the Zimbabwean authorities proceeded to seize $331 million of Mr Shah's assets.

Mr Shah alleged:

• irrationality
• negligent self-induced suspicion
• mistake
• a breach of duty of care to act promptly and
• a breach of duty to keep him informed as agent.

What the court decided

The court confirmed the test of suspicion as set out in the cases of Da Silva and K Ltd. For the purposes of the Proceeds of Crime Act, a suspicion does not have to be on reasonable grounds, just that the possibility has to be 'more than fanciful'.

The key point to remember, however, is what the suspicion is about. You must hold a suspicion that a person is engaging in money laundering.

It is not sufficient simply to suspect that the client is unusual or that the transaction seems 'fishy'.

While what is colloquially referred to as ‘the smell test' is a useful tool for fee earners; as money laundering reporting officer (MLRO), you must suspect that existing criminal property is involved in the transaction or in a person's possession, before you can form a suspicion of money laundering.

Following Anwoir's case, there are two ways you may form a suspicion of existing criminal property:

• If you know or suspect that a specific type of criminal conduct, such as fraud, tax evasion, drug trafficking, is occurring and you suspect such conduct has generated property.
• If there are such a cluster of warning signs which cannot be satisfactorily explained so that the manner in which you are asked to handle the funds gives rise to an irresistible inference that the funds must be criminal in origin.

The court concluded that if the bank suspected money laundering then Mr Shah had little prospect of success for the actions for irrationality, negligently self-induced suspicion or mistake, because of the low threshold test of suspicion,.

However, the court ruled that a client should be able to require the bank (or law firm) to prove that the suspicion held was of money laundering, rather than a general suspicion that the client posed a reputational risk or that the transaction was simply 'fishy'.

With respect to the breach of a duty of care to act promptly, the court pointed out that even if consent had been sought by the bank to hold the money initially, further consent would be needed to transfer the funds and this could only occur once instructions to transfer the funds had been received.

The court dismissed this aspect of the appeal.

With respect to the question of failing to keep the client updated, the court was of the view that particularly once the moratorium period was completed, the risks of tipping off or prejudicing an investigation must diminish and the common law duty of an agent to account to their principal must begin to regain prominence.

The exact point at which the client is entitled to more information and whether that would have avoided the loss suffered were issues to be considered in a trial, not through summary judgement.

It seems one of the important reasons for the Court of Appeal in allowing the appeal, albeit on limited grounds, was to ensure that there was some judicial oversight of these very draconian laws.

Meeting civil claims effectively

When considering making a suspicious activity report, it is good practice to document why you suspect there is existing criminal property and what acts you suspect constitute money laundering.

The judgement suggests that you will not have to prove that these were true or that they were reasonable, you will merely have to show that you held those suspicions.

The nature of transactions conducted by solicitors mean that while time is normally of the essence, there will often be time to make a report on a suspicious transaction and obtain consent prior to the time for completing the transaction.

Ensuring fee earners advise you of concerns promptly will help you consider making reports in a timely manner and minimise disruption to retainers.

The scope of the tipping off provisions and the prejudicing an investigation provision has been narrowed since December 2007. Solicitors are able to speak with their client about money laundering laws, explain the client's position under those laws and in appropriate circumstances give them advice on how to obtain consent for the completion of transactions.

Where a client is fully advised of their own legal position, they are less likely to be able to proceed on a claim relating to a lack of information. A solicitor does not need to explain their own obligations under POCA to fully advise the client on the client's position.

148 - Shutting Down the Black Market

Anti-money laundering legislation is very useful for tin pot dictators when confronted with a black market for their currency. The failings of the government's central bank and/or monetary policy has created black markets throughout history, especially in Latin America.

For President Hugo Chavez, imposing anti-money laundering rules upon a black market currency exchange ticks several boxes:

(1) "We're fighting the good fight as told to us by governments around the globe. Aren't we a compliant nation?"

(2) "Our central bank's incompetence is not exposed by open air markets for currency, gold and other stores of value! It's merely money launderers who engage in such financial black magic!"

(3) "Once we shut down a physical building, the black market currency exchange problem is solved. They'll never move next door or down the road to continue operations! Viva la revolucion!"

http://www.vheadline.com/readnews.asp?id=88335

Venezuela closes illegal gold trading and money laundering racket

Venezuelanalysis (Kiraz Janicke): The Venezuelan government has moved to close and expropriate the historic La Francia building, alleged to be a centre for illegal gold and money trading, near the southwest corner of Plaza Bolivar in downtown Caracas, following orders by Venezuelan President Hugo Chavez during his weekly television show Alo Presidente last Sunday.

In addition to La Francia, Chavez also ordered the expropriation of five other commercial buildings, some of which were already vacant, bordering Plaza Bolivar as part of a plan to recover the historic centre of the city.

La Francia, where about 90 jewellery stores are located, is notorious for its scores of unauthorised brokers and agents who trawl the surrounding streets offering to buy and sell dollars, euros, gold and illegally mined gemstones. Tourists frequently report being robbed or swindled by the money traders.

Milena Bravo, rector of the University of the Oriente (UDO), which has owned La Francia since 1969 and receives BsF 300 000 per month in rent from the tenants protested the government measure arguing it was illegal. However, Venezuelan law allows for expropriations with compensation in the interests of "public utility."

In turn, Mayor of the central Caracas district of Libertador, Jorge Rodriguez, challenged the rector to explain the dilapidated state of La Francia, which is classified as a heritage building and to clarify what the building was being used for, pointing out that many of the tenants did not have legal title or leases, or licences to be carrying out the activities they were involved in.

National Assembly deputy, Adel El Zabayar, alleged that the activities in La Francia have a "strong influence on what we call the parallel foreign exchange market, from there begins the source of speculation the purpose of which is sabotage."

Venezuela introduced foreign exchange controls in 2003 after a politically motivated oil industry lockout and capital strike that attempted to overthrow the democratically elected Chavez and saw billions of dollars flow out of the country. Since then Venezuela has experienced billions of dollars in illegal capital flight through the parallel market, where the dollar currently trades at 1.5 times the official rate.

Noel Alvarez, the current president of Venezuela's business chamber FEDECAMARAS, which led a failed coup against Chavez in 2002, said business sectors had declared an "emergency" following the measure which they described as an attack on private property.

A scuffle also broke out between some bystanders supporting the measure and some workers concerned about losing their jobs as the mayoralty of Libertador took control of the building on Tuesday. Approximately 1,500 employees are estimated to work in the building.

However, Rodriguez assured that a census of the workers was being carried out and steps would be taken in order to guarantee job security. "That same Sunday I gave the instruction to the director of urban control of the mayoralty of Caracas in order to carry out a census of workers and invite them to a meeting in order to achieve all the necessary agreements," he told state television channel VTV.

147 - Divorce is the Bane of Many a Money Launderer

Another example of divorce claiming a successful money laundering operation? What's more dangerous - the financial intelligence unit or a disgruntled spouse?

Divorced readers may not provide a rhetorical reply.

Couple admit multi-million pound money laundering operation

9:21am Tuesday 9th February 2010

By Wiltshire Times Reporter

A husband and wife from a village near Trowbridge ran a company which laundered millions of pounds for illicit gambling in North America, a court had been told.

Net Payment Solutions, which was operated by Gavin and Louise Lazarus, was used for shifting huge sums to and from Canada and the USA.

Now the company, based in Steeple Ashton, has had more than a million pounds confiscated after being prosecuted for money laundering.

And a judge at Swindon Crown Court also imposed a nominal fine of £250 on the company, at a hearing on Monday.

Kerry Musgrave, prosecuting, said Gavin Lazarus, 39, was the director of the firm and his 37-year-old wife Louise, from whom he is now estranged, was the company secretary.

She said Net Payment Solutions was set up early in the decade with the assistance of Maurice Rose, a member of the couple’s extended family.

The company ran a number of bank accounts in Euros and US dollars with Lloyds TSB but in 2005 the bank became suspicious and closed them down.

She said the couple were advised by their accountant as well as friends and family that it was for fear of money laundering.

But they continued to operate as before, she told the court, having transferred their business to another bank.

Miss Musgrave said they would have been aware that what the company were doing was wrong as the money came from illicit gaming.

She said between the end of June 2005 and the start of July 2007 about $16m was paid into the accounts and $14.5 went out.

During that time she said the couple were allowed to withdraw $400 a month.

She said the major transactions were frequently for five figure sums which could never be construed as the stakes or winnings from small time gambling.

Much of the money came from and went to companies the couple had never heard of in North America which it is thought were owned or run by Maurice Rose.

Miss Musgrave told the court the public interest in prosecuting the company was to seek an order under the Proceeds of Crime Act.

She said if the firm was fined the court could confiscate the £1,313,684.33p which was still in the bank when the courts froze it.

The couple, who both gave the court an address on High Street, Steeple Ashton, pleaded guilty to money laundering in their capacity as the company.

Charges against them personally were dropped when the company pleaded guilty to the offence.

Alex Daymond, for Gavin, said that is a nominal fine were imposed the couple may put the cash into the company to settle it.

However there is no power to force the company, which has had its assets confiscated, to pay the fine such as the threat of a jail term.

Judge Douglas Field fined the company £250 and ordered the confiscation of the £1,313,684.33p which is the sum in the frozen company account at current exchange rates.

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146 - TF Identification Criteria

Bad news - spending wads of cash on drinking, drugs and women is now a potential sign of terrorist financing activity. The following international cities are now designated hot-beds of terrorist financing activity - Amsterdam, London, Paris, Frankfurt, Dresden, Berlin, Marseilles, New York, Toronto, Chicago and any other metropolis with more than 100 red-blooded males.

Toronto 18 member calls terrorism 'BS'

Last Updated: Wednesday, January 27, 2010 | 12:31 PM ET Comments7Recommend9

The Canadian Press

A man found guilty in the Toronto 18 case says terrorism is "BS."

Shareef Abdelhaleem, 34, took the stand at his trial in Brampton, Ont., on Wednesday and testified that he has always denounced terrorism.

Abdelhaleem was found guilty last week of participating in a terrorist group and intending to cause an explosion, but the defence is arguing that he was entrapped into taking part in the plot to blow up Toronto landmark buildings.

His lawyer asked him to define terrorism and Abdelhaleem said there are no rules and civilians get killed, which he said "is all BS."

Abdelhaleem also testified he was a "little behind" on his taxes because he "didn't like paying them," but the last year he filed them the software developer made $357,000.

His lawyer asked what he spent his money on and Abdelhaleem replied: "trips, clothes ... drinking, drugs [and] women."

Read more: http://www.cbc.ca/canada/toronto/story/2010/01/27/toronto-18.html#ixzz0dpsclHDb

145 - Smuggling North Instead of South

Stories abound of drug smuggling north from Mexico into the United States and cashing smuggled in the reverse direction, finally making its way into Mexican banks. It would appear that America's neighbour to the north is not just a friendly nation but perhaps a bit of a sink as well.

For those of us in the Canadian financial crime risk management industry, the article below comes as a complete.... cough.... cough... surprise!

http://www.ynetnews.com/Ext/Comp/ArticleLayout/CdaArticlePrintPreview/1,2506,L-3839907,00.html

Israeli wanted in US on drug charges nabbed

Police arrest 50-year-old Haim Lavi, charged with drug trafficking, money laundering offense in US. Prosecution to request Lavi be declared extraditable

Aviad Glickman

Following an extradition request by American authorities, police arrested 50-year-old Israeli citizen Haim Lavi, who fled to Israel from Canada after being indicted for various drug-related offences and money laundering in the United States.

Lavi was charged with federal crimes of conspiring to distribute Ecstasy pills, conspiring to launder the profits made from drug trafficking, and laundering the money made from drug deals.

In the coming days the division for international affairs at the State Prosecutor's Office is slated to file a petition to the Jerusalem District Court to rule that he may be extradited.

In addition, the prosecution, represented by Attorney Talia Atar, is to request his remand be extended until a decision is made on his extradition.

According to the extradition request, in 2000, US customs agents posed as a gang of drug dealers and purchased 5,000 Ecstasy pills from Lavi.

The request also states that Lavi was charged with money laundering. He would allegedly use a truck he owned to transfer large sums of cash from the United States to Canada, where he would then transfer the money to bank accounts around the world.

According to the request, an undercover American agent asked Lavi to launder $50,000 for him. Lavi ended up laundering only $20,000, claiming that he was robbed before the full sum could be transferred to a Cayman Islands bank account.

Lavi's partner confessed to the allegations made against him in 2002, but Lavi, who was a resident of Canada, with an extradition request issued against him, fled to Israel and was only captured on Wednesday. Lavi has spent the past six years living in Petah Tikva.

144 - At Presidential Level

The former President of Guatemala has been allegedly up to no good. Unfortunately, he chose the United States as his entry point for illicit funds he acquired through nefarious means.

One possible consequence of an increased anti-money laundering compliance regime is the negative effect upon Taiwan, Republic of China, in its efforts to see diplomatic legitimacy. In the past, it would resort to corruption and cheque-book diplomacy in order to be recognised in various international forums. After all, as the Peoples Republic of China did not engage in diplomatic relations with any nation that recognised Taiwan on the international stage, certain lesser developed countries would sell their political allegiance to the Taiwanese for vast sums of either personal or "foreign-aid" funds.

Now the Taiwanese purse string controllers must contend with American AML legislation and financial intelligence. Time to become a little more professional in their mercenary financial dealings...

Manhattan U.S. Attorney Unseals Money Laundering Charge Against Former President of Guatemala

JAN 25 -- PREET BHARARA, the United States Attorney for the Southern District of New York, PATRICIA J. HAYNES, Special Agent in Charge of the New York Field Office of the Internal Revenue Service ("IRS"), and JOHN P. GILBRIDE, Special Agent in Charge of the Drug Enforcement Administration's New York Field Division ("DEA"), announced the unsealing of an Indictment charging ALFONSO PORTILLO, the former President of Guatemala, with conspiring to launder millions of dollars he embezzled from the Government of Guatemala through bank accounts located in the United States. PORTILLO remains at large. The United States is working closely with Guatemalan authorities on this matter. According to the Indictment unsealed today in Manhattan federal court:

PORTILLO served as the President of Guatemala from January 14, 2000, to January 14, 2004. In that capacity, he embezzled tens of millions of dollars worth of public funds, a substantial portion of which he laundered through American and European bank accounts.

PORTILLO misappropriated public money in at least three different ways:

First, in 2000 and 2002, PORTILLO embezzled approximately $2.5 million dollars provided by the Government of Taiwan's Embassy in Guatemala. In 2000, the Taiwanese Embassy issued three checks totaling $1.5 million, drawn upon a New York bank account created for the purpose of a Guatemalan program designed to purchase books for school libraries, Bibliotecas ParaLa Paz ("Libraries for Peace"). PORTILLO endorsed these checks and caused them to be deposited in a bank account in Miami, Florida. None of the money from the Government of Taiwan was applied towards the Libraries for Peace program; almost $1 million of the donation was ultimately diverted, through a series of transactions and transfers intended to conceal the source and origin of the funds, to bank accounts in the name of PORTILLO's former wife and daughter at Banco Bilbao Vizcaya Argentaria ("BBVA") in Paris, France. The money transferred into the BBVA Accounts was further laundered through financial institutions in Luxembourg and Switzerland, among other places.

Second, in 2001, PORTILLO embezzled approximately 30 million Quetzales (equivalent at that time to approximately $3.9 million) from the Guatemalan Ministry of Defense. PORTILLO arranged for this money to be delivered to one of Guatemala's national banks, Credito Hipocaterio Nacional ("CHN"), to which PORTILLO previously had appointed as the bank's president a coconspirator ("CC-1"). With the assistance of CC-1, PORTILLO directed the disbursement of the military funds to, among other things, finance a private land deal, disguise a loan to an associate, and issue checks to a company controlled by another co-conspirator. That co-conspirator then transferred, through a Miami bank account, a portion of that money to the BBVA accounts controlled by PORTILLO's former wife and daughter. Finally, from approximately 2000 through 2003, PORTILLO misappropriated funds from the publicly financed reserves of CHN.

For full story please visit us at www.dea.gov .