Articles of Interest

Wednesday, August 12, 2009

Articles of Interest 101 - Going "Old School"

The FBI got their man. Diego Montoya Sanchez has pleaded guilty to a variety of charges in Miami. Federal authorities in the United States believe his organisation – the Norte Valle drug cartel – smuggled USD10-billion worth of cocaine over a 14 year period. That amount of dirty money would keep professional money launderers very busy.

Once prohibited by the Taliban, opium production and refining into heroin is finding new supporters amongst Islamic religious fanatics, as the cash produced by illegal drugs that kill others on the streets of various cities around the globe can provide plenty of cash to fill AK-47 magazines in Kandahar and elsewhere through the the hoped-for Caliphate. Opium eradication is seen as political suicide by NATO commanders trying to establish trust with the local Afghan populace.

Despite the recent “Three Amigos” summit between NAFTA members, Mexico continues a steady decline into narco-state status. Drugs are sent north in exchange for cash and guns heading south. Corruption is endemic. The drug cartels own politicians, parties and government institutions. Though their American market is filled with battered consumers, it would appear that demand for narcotics remains ever resilient.

In the realm of money laundering, history is repeating itself. The financial crisis related to credit default swaps, collateralised debt obligations and collapsing inter-bank credit markets seems of little interest for those who earn their substantial crust from illicit agricultural production supply chains.

The only change in this area appears to be the expense budgets of financial institutions and law enforcement to combat this existential threat.

“Indeed, history is nothing more than a tableau of crimes and misfortunes.”

- Voltaire (1694 - 1778)

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LEADER OF COLOMBIAN DRUG CARTEL
AND FORMER FBI TOP-TEN FUGITIVE PLEADS GUILTY TO DRUG, MURDER

AND RACKETEERING CHARGES

WASHINGTON – Diego Montoya Sanchez, 48, one of the leaders of the Norte Valle Colombian drug cartel and a former FBI Top Ten Fugitive, pleaded guilty today in Miami to drug trafficking, murder and racketeering charges, the Justice Department announced.

The pleas were announced by Acting U. S. Attorney Jeffrey H. Sloman for the Southern District of Florida, Acting U.S. Attorney Lev L. Dassin for the Southern District of New York, Assistant Attorney General Lanny A. Breuer of the Criminal Division, FBI Executive Assistant Director Thomas J. Harrington and Acting Administrator Michele M. Leonhart of the U.S. Drug Enforcement Administration.

Montoya Sanchez appeared before U.S. District Judge Cecilia M. Altonaga in Miami, where he pleaded guilty in two pending federal cases. In the first case, which was indicted in the Southern District of Florida by the U.S. Attorney’s Office, Montoya pleaded guilty to one count of conspiracy to import more than five kilograms of cocaine into the United States and one count of obstruction of justice by murder.

In the second case, which was indicted in the District of Columbia jointly by the U.S. Attorney’s Office for the Southern District of New York (SDNY) and the Criminal Division’s Narcotic and Dangerous Drug Section (NDDS), Montoya Sanchez pleaded guilty to one count of conspiracy to engage in a pattern of racketeering activity. The SDNY/NDDS indictment was transferred to the Southern District of Florida for the guilty plea.

Following the decline of the Cali Cartel in the mid-1990s, the Norte Valle Cartel emerged to become Colombia’s most prolific cocaine trafficking cartel. Based upon FBI estimates, at its peak the Norte Valle Cartel was responsible for 60 percent of the cocaine exported from Colombia to the United States. According to the SDNY/NDDS indictment, between 1990 and 2004, the Norte Valle Cartel exported more than 1.2 million pounds, or 500 metric tons, of cocaine worth more than $10 billion from Colombia to the United States.

According to the statement of facts submitted in conjunction with today’s hearing, Montoya Sanchez was a high-level Colombian drug trafficker for more than two decades. In the mid-1980s, Montoya Sanchez ran cocaine laboratories that served many significant traffickers. In the late 1980s, Montoya Sanchez expanded his organization’s operations into smuggling plane loads of cocaine from Colombia to Mexico. According to the statement of facts, by the early 1990s, Montoya Sanchez had switched to maritime smuggling. During the course of the next 15 years, Montoya Sanchez’s organization routinely smuggled cocaine loads between 1,000 and 6,000 kilos at a time using go-fast boats and fishing boats, among other methods.

By the late 1990s, Montoya Sanchez and Wilber Varela emerged to become the Norte Valle Cartel’s two leading kingpins. Mounting tensions between the Montoya and Varela organizations led to a two-year war between the organizations in which each targeted the other’s members for murder. The Montoya-Varela war, which lasted from fall 2003 until fall 2005, resulted in hundreds of deaths, including those of innocent civilians.

At today’s hearing, Montoya Sanchez admitted that his organization’s practices included using violence and murder against people his organization feared were cooperating with law enforcement. Montoya Sanchez specifically admitted to the August 2003 murder of a one-time organization member who was believed to have been cooperating with authorities.

In May 2004, the FBI added Montoya Sanchez to its list of ten most wanted fugitives. On Sept. 10, 2007, Colombian authorities mounted an operation on a believed Montoya hide-out at a ranch in a rural area outside of Zarzal, Valle del Cauca, Colombia, and captured Montoya Sanchez hiding in a creek-bed approximately 700 yards from the ranch. Montoya Sanchez was extradited from Colombia to Miami on Dec. 12, 2008.

Jeffrey H. Sloman, Acting U.S. Attorney for the Southern District of Florida, stated, “From the prosecution and conviction of the leaders of the Cali Cartel, to the conviction of Ze’ev Rosenstein and an Israel-based Ecstasy network, to today’s dismantling of the Norte Valle Cartel, the Southern District of Florida has had a long and successful history in the war on drugs. We will continue to focus our energy, and the expertise of our prosecutors, to help our law enforcement partners stem the tide of drugs flooding our streets and poisoning our society.”

“Diego Montoya Sanchez was the leader of a dangerous, violent drug organization,” said Thomas J. Harrington, Executive Assistant Director of the FBI. “Outstanding cooperation between Colombia and the United States was key to his capture, the capture of others, and the effective dismantling of the North Valley Cartel. The FBI and its law enforcement partners, both here and overseas, will continue to work together to eliminate other international organized crime threats.”

“The prosecution of Montoya Sanchez is a milestone in the efforts to dismantle the Norte Valle Cartel, one of the world’s most powerful and dangerous drug-trafficking cartels,” said Acting U.S. Attorney Lev L. Dassin for the Southern District of New York. “Montoya Sanchez’s arrest and extradition marked the end of his long campaign of violence and corruption. We are grateful to our partners at the DEA and in the Colombian government for their tireless work in this investigation.”

“Montoya Sanchez’s path to the top of the Norte Valle Cartel was marked by decades of the extreme violence. That path has now ended in a prison cell, where the man who personally helped direct multi-ton shipments of addictive and destructive narcotics into American cities and towns will be held for his crimes,” said Assistant Attorney General Lanny A. Breuer of the Criminal Division. “This conviction is a major victory in the joint effort by Colombia and the United States to disrupt and dismantle these drug trafficking organizations, made possible through extensive cooperation with our partners in the Southern District of Florida, the Southern District of New York, the DEA and the FBI.”

“This notorious leader of the extremely violent Norte Valley Cartel is where he belongs: behind bars for murder, drug trafficking and racketeering,” said Acting DEA Administrator Michele M. Leonhart. “Due to the skilled and brave work by the men and women of DEA and the Colombian National Police, justice has been served for the many victims of his cartel’s extreme violence and the tons of cocaine that ended up on American streets. Now he is in prison, no longer able to use his power to destroy others or benefit from his ill-gotten gains.”

Montoya Sanchez is the fourth member of his family to be convicted as part of the case out of the Southern District of Florida. In January 2009, Montoya Sanchez’s brother, Eugenio Montoya Sanchez, pleaded guilty to one count of conspiracy to import more than five kilograms of cocaine into the United States and one count of obstruction of justice by murder and was subsequently sentenced to 30 years in prison. In November 2005, Montoya Sanchez’s brother, Juan Carlos Montoya Sanchez, and his cousin, Carlos Felipe Toro Sanchez, both pleaded guilty to one count of conspiracy to import more than five kilograms of cocaine into the United States. They were sentenced to terms of 262 and 235 months in prison, respectively.

According to the plea agreement, Diego Montoya Sanchez agreed to serve a 45-year prison term for the crimes outlined in the court documents.

The Southern District of Florida indictment is being prosecuted by the U.S. Attorney’s Office and was investigated by the FBI. The SDNY/NDDS indictment was the result of a multi-district investigation and is being prosecuted jointly by SDNY and NDDS, and was investigated by the DEA. The Criminal Division’s Office of International Affairs and Judicial Attaches in Colombia provided significant assistance in both cases. U.S. law enforcement received invaluable assistance in its prosecution of Diego Montoya Sanchez from the Government of Colombian, the Colombian National Police and the Colombian Army.

Monday, August 10, 2009

Articles of Interest 100 - Offshoring Analysis

Two gentlemen in China acted as a front between those seeking anonymity and legitimate Chinese financial institutions. One would assume that the analysis of remittance records from 77 accounts was conducted by the Chinese financial intelligence unit. Yet it is more than likely that the RMB7.2-billion was sent to Vietnam in the form of USD, the currency of choice in Vietnam, therefore the spotting of the transactional activity could have been at the American correspondent banks for the Chinese “legal” banks mentioned below.

Could AML compliance for USD transactions completely devolve into a set of circumstances whereby international banks simply rely on suspicious transaction reporting by their providers of USD clearing to FinCEN and then international Mutual Legal Assistance Treaties (MLATs) for domestic reporting and the filing of charges?

“The world is full of willing people, some willing to work, the rest willing to let them.”

- Robert Frost (1874 - 1963)

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http://news.xinhuanet.com/english/2009-08/10/content_11856685.htm

Police break up transnational money-laundering ring in south China

NANNING, Aug. 10 (Xinhua) -- Police in south China say they have broken up an underground bank that illegally sent 10 billion yuan (1.46 billion U.S. dollars) of laundered criminal cash abroad since 2004.

Qin Yongjun, spokesman for the public security department of Guangxi Zhuang Autonomous Region, said Monday that eight of the 11 people arrested were Vietnamese.

"The two chief culprits of the gang based in Fangchenggang city, bordering Vietnam, were Ruan Zhizhong, a Chinese, and Ruan Shichai, a Vietnamese," said Qin.

The gang opened accounts at legal banks in Guangxi, Guangdong and Fujian provinces to launder money and electronically transfer it abroad, mainly to Vietnam, Qin said.

Remittance records of the 77 accounts opened and managed by Ruan Zhizhong alone showed that he illegally transferred 7.2 billion yuan on more than 10,000 occasions from November 2004 to March 2008.

The gang charged a certain fee for each transfer, said Qin.

A total of 200 police raided the underground bank in Fangchenggang in May this year and seized 70 deposit books, 590 bank cards, two cars, six computers and 680,000 yuan of cash. They also froze 327 banking accounts involved in the money-laundering case with book value of 47.5 million yuan.

Wednesday, August 5, 2009

Articles of Interest 099 - Habeas corpus

I’m not certain that stuffing a safety deposit box with cash qualifies as money laundering, as you are not changing the nature nor the form of the criminal proceeds. Even more disturbing is the heavy-handed approach of law enforcement in raiding all safety deposit boxes, regardless of owner. Safeguards were established well in advance of the raid, yet the precedent is Orwellian.

Canada Border Services Agency (CBSA) can confiscate cash at the border from any individual and return it only when the owner justifies its origins as legitimate. In other words, seized cash is presumed guilty and must prove its innocence. The Canadian government acquires more seized cash from CBSA than from the anti-money laundering investigations of the Royal Canadian Mounted Police (RCMP).

Habeas corpus is not just a quaint catch phrase but a fundamental pillar in functioning democracies founded on the principle of the rule of law. Those tasked with crafting AML laws and regulations should be reminded how Bruce Springsteen perceives any encroachment on civil liberties.

“Blind faith in your leaders, or in anything, will get you killed.”

- Bruce Springsteen (b.1949) during a concert in 1985

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http://www.guardian.co.uk/politics/2009/aug/02/metropolitan-police-freedom-privacy-controversy/print

Chamber of secrets

It was the biggest raid in Metropolitan Police history, involving 500 officers and the discovery of more than £35m in cash. But when the officers broke open 6,717 safe deposit boxes in June last year they didn't realise they were unlocking a controversy over the right to freedom and privacy. By Simon Garfield

Simon Garfield
The Observer, Sunday 2 August 2009
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Nigel Mawer is a large policeman with heavy responsibilities. As acting commander of the Metropolitan Police Specialist Crime Directorate, in recent years his work has encompassed internet fraud protection, child abuse, the cash-for-honours enquiry and the identification of victims after the London bombings. In June 2008, he commenced another spectacular investigation, called Operation Rize - a series of raids on London's privately owned safe deposit boxes. The operation involved almost 500 officers and cost more than £1m, and as he describes the intricacies of its planning, a process that took 18 months of surveillance, you might believe Mawer had seen too many Gene Hackman films. You might also believe something you may not have thought since the age of four: that police work is fun.

Mawer's office computer at New Scotland Yard contains a document which summarises the results of the raids: guns, cocaine, cannabis, forged passports, all denominations of cash, gold, gold dust, jewellery, Dutch paintings, forged banking material and counterfeit bonds. There were also unusual things, such as a builder's hammer, chisel and a pipe wrench wrapped in a cloth, contained in a box that hadn't been opened for 10 years.

The cash amounted to more than £35m. The contents led to ongoing investigations into money laundering, drug dealing, tax fraud, paedophilia, burglary and possession of firearms - almost 1,000 cases in many countries - and Mawer estimates it may take up to 10 years to complete all his intended prosecutions. Operation Rize is the most complex series of raids in Metropolitan Police history, and despite relatively few convictions to date, it may turn out to be one of its most successful. By targeting the smallest of things - a metal container often no bigger than a cereal box - the police claim they have revealed and disrupted a huge world of criminality. But only now, a little more than a year after the raids, is the full story of Operation Rize beginning to emerge. Some of it is indeed a Gene Hackman movie; other parts may suggest something less engaging, and more Orwellian.

The Hampstead Safe Depository located at 575 Finchley Road looks a little like banks before they became concerned about image - dull and foreboding. It sits near the turn-off for the North Circular and M1, the end of a commercial parade that also offers an estate agent and a convenience store. Beyond its glass doors there is a small entrance hall with a sofa where a visitor may wait before visiting their box in the storerooms below, and as they sit they are observed by CCTV. It is a calm place; it is difficult to imagine it under armed police siege.

Mawer and his colleagues had been suspicious of the place for a while - they talked of it as a "key crime enabler". Traditionally, a safe deposit box has always been a place where anything may be kept undeclared from public view, and traditionally the police have always regarded such places with suspicion. "If you're a criminal you can store your pension in there," Mawer says. In recent years, the big banks have gradually closed their safe deposit facilities, finding them not only unprofitable, but also hard to justify in the face of the government's increasingly stringent money laundering regulations. But the private depositories have flourished accordingly, not least Safe Deposit Centres Ltd (SDCL), set up in 1986 with the promise not only of secure premises and a large range of storage options (beginning with an A4-size shallow box for around £100), but also the prospect of discretion and full insurance cover for contents. "If you looked at their original website they basically said, 'No questions asked'," Mawer tells me. "They also offered a money service bureau, post point and safe depository - all the services that criminals actually need. From a laundering perspective it's fantastic. You can move money and change money, you can access it and it's a mail drop as well if you want that to be your business address. So it's quite a nice enterprise..." SDCL set up in Hampstead, and then expanded to Edgware and Mayfair. The more people felt they had to protect or hide, the better they did.

To control the flow of illegality, the managers of safe depositories have been obliged by the Financial Services Authority (FSA) to register their business and report any suspicious behaviour by their customers. But this has only been law since December 2007. The Metropolitan Police has for several years also maintained its own outreach programme with safe depositories, attempting to build up a trusting relationship. Mawer says that although some companies have been accommodating, SDCL was less so ("probably the worst response we got"), and had failed to register with the FSA or report any suspicious activity. His department first approached SDCL three years ago, and began surveillance of its three premises not long afterwards. Solicitors for SDCL refute Mawer's claim, stating that the company has always followed clear industry guidelines.

Operation Rize is a meaningless title, merely the next codename from an automatically generated list at New Scotland Yard. "What was really unfortunate," Mawer says, "was that it turned out to be a town in Turkey, and we didn't know that. They were very upset that we tainted their town." "Now we're doing rocks," says DCI Mark Ponting. "And musical instruments - like Operation Glockenspiel." But the name Operation Rize has since become famous for something else: it marked a legal precedent.

Mawer's ambitions - "We wanted to open every box" - would have been regarded as impossible only three years before, but a change in the law worked in their favour. The Proceeds of Crime Act (2002) allowed for a raid to be conducted on an entire set of premises if enough evidence could be gathered to show that at least some of it was harbouring criminal activity; no longer would a warrant be required to search every room or office, or in this case every box. But because the police could have no advance knowledge about each box holder's property, legitimate or otherwise, the raids would represent an unprecedented development of police practice: to a large extent their actions would be based on guesswork.

The first step was to convince a judge at Croydon Crown Court that the raids would be in the public interest. "This wasn't just a fag-packet job," Ponting told me. "We used all the techniques you'd expect: 24-hour manned surveillance, CCTV, surveillance of the owners, and in the course of that the comings and goings of the box holders." The police gathered evidence on about 200 box holders over 18 months, about a third of whom were suspected of illegal activity. A statistician then extrapolated these findings for the judge, who needed to be convinced that a stringent policy was in place to ensure innocent box holders would be reunited with their property as swiftly as possible.

The warrant application ran to several hundred pages; when it was granted, three weeks before the raids occurred, many other logistical challenges arose. The police had to establish their legal position in the event that claims were made against them by box holders; a secure storage facility had to be found to house an estimated £100m worth of assets; a hotline and information campaign was arranged to handle thousands of enquiries. Then there was the difficulty of breaking into the boxes, and the operation began resembling yet another film, this time by Guy Ritchie. After trying several techniques on dummy boxes, the police chose the sort of angle grinder you would buy at a DIY store, and cut straight lines by the side of the hinges; each box took about two minutes to open. (Another option, drilling the lock, would prove quicker, but would also destroy evidence; if a key was later found in a suspect's possession, it would be the surest way of linking someone to a box's contents.)

Secrecy within the police was another issue. For most of the 500 officers involved, the details of the operation were only revealed when they gathered at an army briefing room on 2 June, the morning of the raids; previously they were only aware they would be required to work the day or night shift for up to a fortnight. A large proportion of the Met's armed officers were required at the three sites and in the transport of money from the premises. "It would have been rather embarrassing if people had turned up with guns and walked in and emptied the depository while we were there," Mawer says. "And very embarrassing if our lorry got robbed en route to the secure store."

They began breaking in at about 3.30pm.

The boxes took 11 days to empty, but such was the haul that a detailed inventory of contents wasn't completed until November. The opening of every box was conducted under a strict protocol. Each of the officers wore forensic suits, with their actions videoed from above and the side. Once the box was removed and checked for explosives, it was levered open and the contents laid on a table for a draft listing; exact quantities of money would only be counted once the contents were labelled, bagged and removed to the secure storage. "The searching conditions were appalling for those officers doing those 12-hour shifts," Mawer recalls. "The lights baking hot, June was a hot month anyway." But at least the work was eventful: "I can remember being in the premises and someone opening a box and saying disappointedly, 'Oh gosh, it's only half-full of money.' You can get quite blase about it."

All told, 6,717 boxes were opened. Of these, 3,549 were seized. The owners of 849 boxes are subject to further enquiries, while the contents of 2,677 have since been restored. As of 23 June 2009, £24.73m has been "detained" pending further investigations and £4.24m has been received by the Inland Revenue. (Of the boxes that were restored, 764 were suspected of having tax irregularities connected with them; a proportion of box owners immediately admitted underpayment of tax, and agreed to pay their stored cash to the Revenue ahead of any criminal proceedings.)

Ponting says that only now is his team concentrating on "top-level" money laundering investigations and the links to drugs dealing. To date, only 45 arrests have been made, and 13 charges brought, but for public relations purposes he has compiled an eye-catching list of successful prosecutions and pending investigations. Some are unnerving, a few are baffling, and others faintly comical.

There is the case of Gavin Leon, 44, whose box was held under a false name at Hampstead Safe Depository and contained a 9mm Glock pistol, cocaine, MDMA and cannabis; he pleaded guilty and was imprisoned for five years for possession of a firearm and a total of 45 months for drugs offences. There was the case of Yaset Berhane, 27, whose box at Park Lane held £122,000 in cash, some of it in marked notes from a drugs sting mounted some months before by the Sussex Police; he was sentenced in March to three years for drug trafficking and two years for money laundering. David Wilson, 38, already under investigation for supplying drugs, was sentenced to two years. Operation Rize revealed £100,000 in a safe deposit box at Edgware, since confiscated, that would have been available on Wilson's release from prison.

Then there was the case of an unnamed person who had £950,000 in a box in the Edgware depository, believed linked to the taxi industry. There were two men arrested after their box at the Park Lane depository revealed an envelope with indecent photographs of children and discs of digital images. There was a box at Hampstead containing £150,000 held by a woman who claimed the money derived from incapacity benefits, although she was later arrested for her part in a London vice ring.

There were the large bags of gold flakes and small nuggets that took two officers to lift, and stolen Dutch paintings that are still being investigated, alongside historical artefacts believed to be from the Middle East. At Hampstead, a box containing a chisel and other builder's tools had no registered owner: "There is clearly a story behind these items; to retain it within a secure facility heightens the suspicion." The majority of the finds came from boxes no larger than a laptop case, but some were stored in lockers containing holdalls and plastic bags. Ponting's list also contained items found at further raids on suspects' homes, such as more drugs, more forged documents, and elephant tusks valued at £40,000.

The day before I met Ponting he had received details of a successful conviction involving a man with several identities. "Only 18 months," he said, "but in the box the individual had a Nigerian passport in his name with a photograph on, a Spanish passport, different name but same photograph, Norwegian passport, different name same photograph, UK passport same name same photograph, Lebanese birth certificate in his name, UK provisional driving licence in a different name. Also, about £100,000, and we've identified six properties in the UK, USA, South Africa and Spain, which are all restrained, so he can't move the money...

"The reality is, whatever you think would be in there is in there," Ponting says. "Everything. Every conceivable form of criminality... Let's be honest, it's been an absolute success."

Others would disagree. The world that Operation Rize uncovered was more than just a repository of criminality; it was also a world of domesticity. Because of the premises' locations, a large proportion of the boxes had Jewish owners, and contained many items of jewellery, gold and other family heirlooms brought to England at the time of the Holocaust; there was also a trend to leave considerable quantities of cash. London's Asians and other minority groups also used the SDCL's premises for secure temporary storage.

The Serious Crime Directorate maintains it has always regarded the return of legitimate property in Operation Rize as its first priority, but this is not how its results are judged. The disruption caused to almost 2,000 box holders with legitimate contents involved not only the effort required to reclaim their own goods, but also an unusual burden of proof. Having filled a box with any items without question over the past two decades, it was now up to the owners to show they were not acting beyond the law. Ponting told me he was "desperate" to reunite seized property with its rightful owners, and that his department made strenuous efforts through local media and community groups to alert people to the correct procedure. "Is what they've got in [the box] reasonable and is the explanation reasonable and is it corroborated? If it is, you've got it back."

But the process of restoration has not always been straightforward. "We anticipated all the calls from innocent box holders wanting their contents back," says Mawer. "But what we didn't anticipate was all the bad guys calling us up, too. 'I'm going on holiday this weekend and I need my passport.' And when you opened the box up there wasn't even a passport in it. There was a phenomenal amount of people who were concerned about the contents who were desperately trying to lie to us to get it back. It swamped the call centre. If it had only been legitimate calls we would have managed."

Mawer is fond of one particular call his office received regarding the return of jewellery. "It was needed for a wedding in India that weekend, so we fast-tracked the box and got it to the family in time. But there's a network out there, so every single other person who also had jewellery in a box also came in and said that they also had a wedding in India that weekend." (Owners received no compensation for the disruption, but were offered free storage for a year on police premises.)

As so often with criminal activity, the chief beneficiaries of Operation Rize may be the lawyers. Several firms have been engaged by box holders to assist them in the restoration of their property or defend themselves against allegations that their contents are suspicious. "There are a lot of very angry people," one solicitor told me on the condition of anonymity. "When you start renting a box you have to fill out a simple form and produce some ID, and you don't expect to have to prove the contents are yours perhaps years later. If you have a quantity of cash which you have saved legitimately, it can be very hard to remember exactly how you came by it."

And so Operation Rize has turned from a dramatic large-scale raid into an issue of daily freedoms. Solicitors will now argue the civil liberties case in court, questioning to what extent a law-abiding public should suffer in the name of diligence and safety. While disruption is tolerated at airports and the entrance to public buildings, how should we check new encroachments lest they become the norm? In the case of Operation Rize, they may reasonably argue that public disruption and cost has been a secondary consideration in pursuit of money laundering. "We know we've had a significant effect on serious and organised crime both nationally and internationally," Mawer told me, but he admits this is a hard thing to quantify.

When the Daily Mail ran a story about Operation Rize a few days after the raids in June 2008, its website asked readers for their comments. They were varied. "The ultimate in big brother," concluded Allan from Poole. "What next, raid everyone's houses in the excuse of searching for criminals? Surely they should have needed a warrant for each box. After spending two years investigating they should know who they are going after. This country gets scarier and scarier every day." Janet from Bromley commented on a "brilliant job - well done to the police, who are doing this fantastic work which hopefully will deter these greedy crooks." Tyler Dobson from Austin USA thought "Orwell is alive and well in the UK," while S Nisbet from Seaton wrote, "Now this is in the open, I'm just waiting to hear from the Human Rights mob and Cherie's chambers cashing in with more court cases at our expense..."

So where should one put one's valuables now? For an organisation that depends on secrecy and concealment to work effectively, the police force has always frowned upon institutions and individuals who do likewise, and has always regarded those in possession of large amounts of cash as the probable beneficiary of illegal activity. But we live in turbulent times, and since the run on Northern Rock in September 2007, those who for a lifetime have kept money in the banks and building societies have looked for other, less volatile possibilities; with negligible interest rates for savers, the safe deposit box has become a realistic option.

Perhaps Operation Rize has destroyed this possibility, or perhaps it has made legitimate storage safer. The FSA has sharper teeth since the raids exposed wrongdoing; there is talk of installing cameras even in the private rooms where customers open their boxes. "We've changed the face of the industry," Mawer says. (In June's birthday honours, he was awarded the Queen's Police Medal.) "The question is, where will the criminals go next? Some will keep it under the mattress. Some will bodypack it out of the country, and you've also got things like the Big Yellow self-store."

But at the Hampstead Safe Depository everything appears to be running smoothly again, and it is believed to be complying with FSA regulations. Its solictors say they "are fully co-operating, and will continue to do so, with the current investigation." Its three directors, arrested on suspicion of money laundering, are bailed until their appearance at a London police station in the second week of September.

The visitor to the Finchley Road premises today is greeted by a young woman who runs through the business of renting a new box with some enthusiasm. The first door will be opened by a security guard, the next by your swipecard and pincode, she explains. There are two unique keys to your box, and if you lose one you forfeit the £100 deposit as a replacement is made; if you lose both, the lock will be drilled and a new one inserted, but that can get expensive. The place is open 362 days a year. You need a passport and a recent utility bill. The smallest available boxes have gone up in size and price - a 305 x 480 x 60mm document box now costs £30 per month or £180 per year plus VAT. Beneath the gaze of many cameras, the assistant walks downstairs to explain how the keys work, and the boxes are all pristine.

At the end of my visit she gives me a leaflet showing prices and opening times, but it was a little out of date. At the top was a logo of a heavily barred gate guarded by two centurions, an image that might have come from a medieval colouring book. There was also a paragraph that had been scribbled out about the provision of "free and low cost insurance up to £30,000" (they now offered no insurance at all). And then there was the old slogan beneath the company name. "Convenient confidential safekeeping" it read - none of it as true as it was.

guardian.co.uk © Guardian News and Media Limited 2009

Tuesday, July 28, 2009

Articles of Interest 098 - "I am one of the largest investors..."

Paul Greenwood and Stephen Walsh were arrested in the United States on February 29th, 2009, accused of running a fraudulent commodities trading and investment advisory scheme. On July 24th, 2009, they were charged with a six-counts, including money laundering.

Greenwood and Walsh informed clients – some of whom were “sophisticated” endowment funds and institutional investors – that their “conservative” enhanced stock indexing investment program beat the S&P 500 Index over a ten year period. Given the fact that the two issued USD554-million in promissory notes to cover investment losses and outright theft from the corporate entity that fronted their misdeeds, their claims to have uncovered financial alchemy would appear to be unfounded.

Bernard L. Madoff refused to accept clients employed in the financial services industry. Harry Markopolos, a whisteblower who complained repeatedly to the United States Securities and Exchange Commission (SEC), testified to the United States House of Representatives Committee on Financial Services on February 4th, 2009.

Markopolos dissected Madoff’s alleged “split-strike conversion strategy” into its component parts and revealed that Madoff’s alleged investment returns were numerically impossible. Third-party feeder funds and other financial institutions who shovelled money at Madoff – including Fairfield Greenwich Group of New York and Spain’s Banco Santander – could not perform the same calculations, costing them billions.

If professional investors don’t take the time to find out what’s behind the fancy and complex names of various investment products or “strategies”, how can they cry foul if all crumbles about them?

At what point does caveat emptor compel regulators and the judiciary to ignore the pleas of “wronged” professional investors who didn’t do their math homework and inject a little realpolitik into the global financial system? At what point do investment professionals actually take responsibility for their actions (or lack thereof)?

“I am one of the largest investors in America. I know these things.”

- Robert Citron, former Treasurer, Orange County, California, and convicted felon, to Merrill Lynch in 1993 about warnings from Merrill that Orange County’s derivatives positions faced catastrophe if interest rates rose. Interest rates subsequently rose. Orange County lost USD1.7-billion and declared Chapter 9 bankrupcy on December 6, 1994.

You can view a historical archive of Articles of Interest at http://manchestercf.blogspot.com

Tuesday, July 21, 2009

Articles of Interest 097 - Bulgarian Bentleys

According to the CIA, Bulgaria’s GDP per head is USD12,900. A short while ago, Bulgaria’s tax authorities decided to investigate the 105 Bentley owners - http://www.bentleymotors.com/models/model_overview/default.aspx – to determine their sources of income. At an average price of USD270,000 in Bulgaria, that’s many years’ salary for the average car driver.

The Bulgarians are now chasing after a Bulgarian-born alleged fraudster linked to the sale of auction-rate securities, a sector of the investment market where TD Ameritrade refunded customers to the tune of USD456-million.

Perhaps Tzolov drove a Bentley in Sofia?

“I spent a lot of money on booze, birds and fast cars. The rest I just squandered..”

- George Best, Football club manager

You can view a historical archive of Articles of Interest at http://manchestercf.blogspot.com

http://www.novinite.com/newsletter/print.php?id=105974

Bulgaria Launches Money Laundering Probe against Fugitive NY Broker

2009-07-20 16:03:14

Bulgaria's State Agency for National Security (DANS) has been ordered the collection of information about the activities, property and assets in Bulgaria owned by former Credit Suisse Group broker Julian Tzolov.

Bulgaria-born Tzolov was declared a fugitive by US federal prosecutors in June pursuing alleged fraud involving auction-rate securities.

The probe is to check allegations of money laundering against Bulgarian Julian Tzolov and his colleague Eric Butler, both formerly of Credit Suisse Securities (USA) LLC, who have been accused of engaging in an alleged fraudulent scheme.

The two are believed to have obtained higher commissions by selling clients higher-risk auction-rate securities backed by mortgages, when those clients wanted to buy lower-risk securities backed by student loans.

Julian Tzolov was caught by Spanish authorities in the middle of July with the assistance of the Federal Bureau of Investigation, after fleeing jurisdiction.

Tzolov and Eric Butler, both formerly of Credit Suisse Securities (USA) LLC, have been charged with conspiracy, securities fraud and multiple counts of wire fraud.

All rights reserved, 2001-2009 (c) Novinite Ltd.
You are permitted to use any of the articles in this message only if you kindly quote the source - Sofia News Agency (novinite.com).

Monday, July 20, 2009

Articles of Interest 096 - Ruthless

Another ruthless @#$% shaking down his community and his own family. Yet it would appear that nobody checked to see if he was indeed a qualified and registered investment advisor.

“Cowards die many times before their deaths;
The valiant never taste of death but once.”

- William Shakespeare (1564 - 1616), "Julius Caesar", Act II Scene 2

You can view a historical archive of Articles of Interest at http://manchestercf.blogspot.com

http://www.theglobeandmail.com/news/national/family-of-earl-jones-call-on-the-investment-broker-to-come-forward/article1224071/

Family of Earl Jones call on the investment broker to come forward

'We want to express our profound regret for the pain and suffering he has caused and state our own sense of deception,' statement says

Montreal — The Canadian Press Last updated on Monday, Jul. 20, 2009 08:37AM EDT

The wife and daughters of a financial planner who allegedly bilked clients out of millions of dollars say they are devastated.

In a statement released to the media Sunday through a media relations firm, wife Kimberly and daughter
Kristine of Montreal investment broker Earl Jones say they too have experienced anger, despair and
disillusionment.

“We want to express our profound regret for the pain and suffering he has caused and state our own sense of deception,” they say in the statement.

“The Earl Jones we knew was a loving husband, devoted father and grandfather and a respected member of the community. The Earl Jones who has been revealed in recent days is a man we can scarcely believe exists.”

His daughter says she fears she will never recover the funds she entrusted to her father and that the family was unaware of his business activities and will co-operate fully with authorities.

“We are anxious for Earl to come forward and provide and explanation,” they write. Quebec's securities regulator alleges between $30-million and $50-million is missing from accounts run by Jones.

Jones, who has been missing since last week, has not been charged and there is no warrant out for his arrest. Some of the alleged victims are now turning to food banks.

Thursday, July 16, 2009

Articles of Interest 095 - Lowering the bar?

Miguel Martinez was, until very recently, a member of the New York City Council. Now he has pled guilty to three charges, one of which was money laundering. It would be interesting to determine whether such “small fry” are considered “Politically Exposed Persons” (PEPs) by financial institutions and supervisory agencies.

Will his bank face sanction for potentially not delving down to the municipal level? Will this lower the bar even further in the classification of those deemed PEPs? Small town mayors? Student council representatives?

“It has been said that democracy is the worst form of government except all the others that have been tried.”

- Sir Winston Churchill, (1874 – 1965)

You can view a historical archive of Articles of Interest at http://manchestercf.blogspot.com

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http://cityroom.blogs.nytimes.com/2009/07/16/martinez-ex-councilman-pleads-guilty-to-fraud-and-money-laundering/?pagemode=print

JULY 16, 2009, 11:57 AM
Ex-Councilman Admits Fraud and Money Laundering

By RAY RIVERA
Michelle V. Agins/The New York Times

Miguel Martinez served on the City Council from 2002 until this week.
Miguel Martinez, a member of the New York City Council whose once-promising political career ended when he abruptly resigned this week, pleaded guilty on Thursday morning to three felony counts involving the misuse of public money intended for nonprofit organizations.

Each of the charges carries up to a maximum of 20 years in prison, but under a plea agreement with the United States attorney’s office in Manhattan, prosecutors have recommended that he serve 57 to 71 months. The sentencing was scheduled for Oct. 21.

The details of the schemes were unclear Thursday, but more information was expected at a news conference scheduled by the United States attorney’s office for Thursday afternoon.

Mr. Martinez, a Democrat, unexpectedly resigned Tuesday from his seat representing the Washington Heights and Inwood sections of Upper Manhattan.

In court, Mr. Martinez told a federal judge, Paul A. Crotty, that throughout his time on the Council, beginning in 2002, he stole about $106,000, a large portion of which was intended for nonprofit groups, including $15,000 intended for the Washington Heights Art Center and $40,000 for the Upper Manhattan Council Assisting Neighbors. Mr. Martinez also admitted that he had approved fraudulent invoices submitted to his office in exchange for $51,000.

“I was able to engage in these schemes because I was a New York City councilman,” Mr. Martinez said.

Mr. Martinez pleaded guilty to one count of conspiracy to commit mail fraud by depriving citizens of their right to honest government, one count of mail fraud and one count of money laundering. Though prosecutors had recommended the lenient sentence, Judge Crotty said he was not bound by that recommendation.

Wednesday, August 12, 2009

Articles of Interest 101 - Going "Old School"

Monday, August 10, 2009

Articles of Interest 100 - Offshoring Analysis

Wednesday, August 5, 2009

Articles of Interest 099 - Habeas corpus

Tuesday, July 28, 2009

Articles of Interest 098 - "I am one of the largest investors..."

Tuesday, July 21, 2009

Articles of Interest 097 - Bulgarian Bentleys

Monday, July 20, 2009

Articles of Interest 096 - Ruthless

Thursday, July 16, 2009

Articles of Interest 095 - Lowering the bar?

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Wednesday, August 12, 2009

Articles of Interest 101 - Going "Old School"

Monday, August 10, 2009

Articles of Interest 100 - Offshoring Analysis

Wednesday, August 5, 2009

Articles of Interest 099 - Habeas corpus

Tuesday, July 28, 2009

Articles of Interest 098 - "I am one of the largest investors..."

Tuesday, July 21, 2009

Articles of Interest 097 - Bulgarian Bentleys

Monday, July 20, 2009

Articles of Interest 096 - Ruthless

Thursday, July 16, 2009

Articles of Interest 095 - Lowering the bar?

Articles of Interest

Search This Blog

Articles Listing

Corporate Information

ManchesterCF

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