Asset Search Blog : Asset Search & Hidden Assets : Lawyer & Attorney Fred Abrams : Tax Fraud, Asset Investigations

This "Asset Search News Roundup" focuses on "politically exposed persons", some of whom would launder corruption monies.

1. "Stolen Asset Recovery: Politically Exposed Persons, A Policy Paper On Strengthening Preventative Measures" was published in 2009 and it is available at the Stolen Asset Recovery Initiative's website.  The 2009 policy paper stated at page 17: "[I]f, as the World bank suggests, $1 trillion of corruption money is moving around the world each year, where is it? ....the money must be moving undetected through the banks and intermediaries and the current systems are failing to detect it". 
   
    
2. The Senate's permanent subcommittee on investigations held a hearing on February 4, 2010 about politically exposed persons from abroad hiding corruption monies in the United States.  At this hearing, the investigations subcommittee released its 330-page report "Keeping Foreign Corruption Out Of The United States: Four Case Studies".  A news release mentioning the hearing explained: "...that politically powerful foreign officials, and those close to them, have found ways to use the U.S. financial system to protect and enhance their ill-gotten gains".  

Copyright 2010 Fred L. Abrams

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This "Asset Search News Roundup" contains a copy of the indictment filed against Minneapolis auto magnate Dennis Hecker.  It also discusses the securities fraud complaints pending in New York against Bank of America.
 

1. A press release from the U.S. Department of Justice announced that Mr. Hecker was indicted last Wednesday for allegedly hiding his assets.  "Has Auto Magnate Dennis Hecker Hidden His Assets?"  had described a few of Mr. Hecker's supposed fraudulent financial transfers and explained that Mr. Hecker had reportedly been under criminal investigation.
   
   Mr. Hecker's seven-count indictment accused him of concealing assets through money laundering in violation of 18 U.S.C. §1957.  The indictment additionally charged Mr. Hecker with allegedly violating 18 U.S.C. §1343 (wire fraud) and 18 U.S.C. §1349 (conspiracy to commit wire fraud).
   
    
2. As an October 19, 2009 Amended Complaint and a January 12, 2010 Complaint demonstrate, the SEC had filed securities fraud complaints in New York against Bank of America.  These complaints were over alleged non-disclosure about Bank of America's merger with Merrill Lynch and / or year-end bonuses paid to Merrill Lynch employees.
   
   The February 12th article "Fork It Over: Rakoff Wants the Scoop on Why Bank of America Fired Its GC " reported that the Court is contemplating a settlement of these SEC complaints.  Said article explained that Bank of America was also just sued in connection with its Merrill Lynch merger, by New York Attorney General Andrew Cuomo.  The New York Attorney General's securities fraud suit can be viewed here. 

Copyright 2010 Fred L. Abrams

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"High Risk Locations & An Asset Search" and "Domestic Shell Companies & An Asset Search" explain that Delaware-based shell companies can especially pose a money laundering risk.  My other articles related to this same subject are:

• Following The Money Trail From Poland To Delaware

• Warsaw Prosecutors Eye Possible Money Laundering At 50 Platowcowa Street
  

• Breach Of Trust By A Former Red Cross Secretary-General?
   
• Financial Fraud Trends For The Year 2010
   

Last month MoneyLaundering.com called me and expressed its interest in some of the foregoing.  It then wrote "Polish Investigations into Delaware Companies Highlight Vulnerabilities to Laundering",* which I am quoted in:

*Polish Investigations into Delaware Companies Highlight Vulnerabilities to Laundering, Copyright 2010 Alert Global Media, reprinted with permission.

(Edited February 14, 2010)

Copyright 2010 Fred L. Abrams

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The Wall Street Journal's February 4, 2010 article "Switzerland Freezes Freed Duvalier Assets", is about alleged illicit assets blocked in Switzerland.  The blocked assets have been maintained in Swiss bank accounts and are believed to originate from Haiti's public coffers.  These public coffers were reportedly looted by former politically exposed person Jean-Claude "Baby Doc" Duvalier, who fled Haiti in 1986. 

The Wall Street Journal article claims that foreign dictators no longer favor hiding assets at Swiss banks because of "tough" Swiss laws requiring banks to know the source of funds.  The Swiss laws the article seems to refer to are commonly called "customer identification" or "know your customer" rules.  Rules requiring banks to identify their customers have been adopted across the globe and are in effect in the United States, the United Kingdom, etc. 

Swiss banks specifically follow customer identification rules by requiring their customers to execute a "declaration of beneficial ownership" which is also known as a "Form A".  Swiss banks also routinely monitor customer accounts, consistent with international anti-money laundering standards.  A former Yale Law School visiting scholar discusses the use of "Form A's" and shares some of his views on Swiss banking, at "Customer Identification At UBS AG And Some Other Banks". 

 Copyright 2010 Fred L. Abrams

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The Court announced yesterday that there had been a settlement in the New Jersey case involving Former Premier Michael Misick of the Turks and Caicos Islands.  The settlement is mentioned at the Court's Order of Dismissal and by the current docket report. 

According to various court filings, the Former Premier could have been a beneficial owner of Hip Hop Weekly Magazine through his alleged interests in: My Way Productions 2 LTD. ("My Way"), Z & M Media LLC ("Z & M"), and the holding company for Hip Hop Weekly Magazine, Hip Hop Global  Media, LLC ("HHG"). (Cf. Defendants' Answer, Counterclaim and Third-Party Complaint at p. 26 ¶ 7) (claim that the Former Premier and his ex-wife LisaRaye McCoy were "real parties in interest").

The Verified Amended Complaint in the New Jersey case meanwhile, indicated at ¶¶7, 57, 75, 78, 80 and Exhibit "H",  that My Way or Z & M or HHG, might have been involved in making substantial capital contributions:

1. $798, 647. 57 capital contribution from My Way into Z & M;
2. $10,000.00 capital contribution from My Way into HHG;
3. $833,334.00 capital contribution from My Way into HHG and Z & M;
4. $260,000.00 capital contribution from Z & M to fund Hip Hop Weekly Magazine.
    

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By using customer identification or "know your customer" rules, banks try to prevent money laundering and other financial frauds.  This use of customer identification rules by banks is contemplated at the Fifth Recommendation of the Financial Action Task Force.  The Fifth Recommendation urges banks to diligently verify a customer's identity and to record the true beneficial ownership of bank accounts.

As reported at "Fighting Financial Fraud At UK Banks", the UK changed its banks' "know your customer" rules on December 15, 2007, by codifying them at Money Laundering Regulations 2007*.  U.S. banks too verify customer identities, but do so pursuant to 31 C.F.R Part 103.121.  Lawsuits alleging that two U.S. banks had failed to sufficiently identify their bank customers, are respectively described at: "Associated Bank Sued For Supposedly Ignoring Red Flags" and "Lawsuit Claims Wachovia Bank Facilitated Alleged Ponzi Scheme".

UBS AG and other Swiss banks also require customer identification at the time a bank account is opened.  The customers of Swiss banks execute a declaration of beneficial ownership, commonly referred to as a "Form A".  A July 13, 2001 "Form A" was used in the U.S. tax fraud case brought against Florida yacht broker Robert Moran.  According to the Plea Agreement in Mr. Moran's case, the July 13th "Form A" helped demonstrate that Mr. Moran had violated 26 U.S.C. § 7206 (1), (perjury on a return / false statements). 

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The securities fraud complaint in Nesbeth v. USMIO, Docket No: 09−cv−62042−WJZ, alleges that Wachovia Bank caused damage to the supposed victims of a Ponzi scheme. This complaint, (referred to hereinafter as "the Florida Complaint"), also asserts claims against: MasterCard Worldwide, Mr. David Smith of Jamaica, Overseas Locket Corporation formed in Jamaica, Former Premier Michael Misick of the Turks and Caicos Islands, etc.

The Florida Complaint alleges that Mr. David Smith had operated a Ponzi scheme which reportedly involved six thousand victims from the Jamaican community and might have caused $220 million in losses. Florida Complaint at  ¶¶31, 37 & 38.  The suspected illicit proceeds of the scheme may have been used to invest in businesses and possibly pay for: real property, a lavish cruise, valuable watches (i.e. portable valuable commodities), ornamental furniture and exotic automobiles.  Florida Complaint at ¶52. 

According to the Florida Complaint at ¶49, proceeds from the scheme had additionally been laundered through bank accounts, including one maintained at Wachovia.  Like the Wisconsin Complaint earlier provided at "Associated Bank Sued For Supposedly Ignoring Red Flags", the Florida Complaint essentially claims that a bank's anti-money laundering program / Customer Identification Program pursuant to 31 CFR 103.121 ¶ (b) (2) (i), failed.

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Governmental authorities sometimes use data mining and money laundering typologies to detect financial fraud trends.  An earlier financial fraud trend we will undoubtedly see in 2010, is beneficial owners hiding assets through nominee bank accounts.  Another likely continuing trend for 2010, is the use of Delaware-based shell companies to facilitate money laundering in some cases.

Financial investigators around the world know that beneficial owners may try to hide their assets by  using relatives, money managers, etc. as bank signatories on nominee bank accounts.  Beneficial owners may even use a "nominee incorporation service" to supply a bank signatory in order to circumvent customer identification rules at banks.  At "Fighting Financial Fraud At UK Banks", I mentioned this form of bank account abuse.

 

Shell companies which lack transparency and are based in Delaware, could also play significant roles in some financial frauds carried out in 2010.  As "Domestic Shell Companies & An Asset Search" indicated, Delaware-based shell companies can particularly pose a money laundering risk.  My article "Following The Money Trail From Poland To Delaware", provided the details of three different financial fraud investigations which focused on possible shell companies in Delaware.

Copyright 2010 Fred L. Abrams

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The Association of Certified Anti-Money Laundering Specialists is a private sector anti-money laundering credentialing organization and Colby Adams is a reporter affiliated with it.  Mr. Adams telephoned me this week to discuss my thoughts about abusive offshore tax avoidance schemes and The "John Doe" Summons Case, which was settled with UBS AG.

My comments on The "John Doe" Summons Case have just been published by MoneyLaundering.com / ComplianceAdvantage.com, as part of Mr. Adams' article, "Nearly a Year into Bank Secrecy Crack Down, Little Progress Seen": 

*"Nearly a Year into Bank Secrecy Crack Down, Little Progress Seen", Copyright 2010 Alert Global Media, reprinted with permission.

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The January 6th article "Three in al Qaeda drug case plead not guilty in NY" discussed suspected terrorist financing by some West African men.  According to a December 18, 2009 press release, the criminal case against these men involved the alleged transnational funding of Al Qaeda terrorists through narco-trafficking.

"Terrorist Financing, Money Laundering & Financial Intelligence Units" referred to another case of suspected terrorist funding.  It mentioned the Egmont Group's money laundering typology case numbered 06063:

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At first glance, there is nothing unusual about the lawsuit filed in New Jersey involving Former Premier Michael Misick of the Turks and Caicos Islands. The complaint in the lawsuit executed by the Former Premier, claimed that Hip Hop Weekly Magazine founders David Mays and Raymond Scott had misappropriated the magazine's cash.  

Mr. Mays and Mr. Scott separately alleged in their answer, counterclaim and third-party complaint, that the Former Premier had been an investor in the magazine and was basically one of its owners.  On March 23, 2010, there is a status and settlement conference scheduled in the lawsuit, as mentioned by the Court's last docket entry:  

"Target Of Corruption Probe Sues Hip-Hoppers For Supposed Fraud" meanwhile, explained that the Former Premier had been the subject of a public corruption probe by the Turks and Caicos Islands Commission of Inquiry.  The Inquiry issued its Redacted Final Report, which is fully available here.   This Final Report asserted that the Former Premier was known to have enjoyed a "Hollywood lifestyle" beyond his salary and allowances as a politician.  It also raised the critical questions: Had the Former Premier been a party to public corruption and could he have taken illicit monies?

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The "Asset Search News Roundup: January 26, 2009 " mentioned that Heartland Payment Systems was subjected to what might have been the biggest credit / debit card information theft in the U.S.  Mr. Albert Gonzalez was ultimately indicted for that privacy law violation / computer intrusion and other ones.  In fact, Mr. Gonzalez pleaded guilty to criminal charges respectively brought in New Jersey, New York and Massachusetts. 

As "Using Foreign Computer Evidence Against An Accused Hacker" indicated, Mr. Gonzalez had initially been accused of using multiple jurisdictions / cross-border elements to facilitate computer hacking, identity theft and money laundering.  A December 29th Department of Justice press release also apparently indicated that Mr. Gonzalez had used cross-border elements to commit his crimes. 

According to the December 29th press release, Mr. Gonzalez was an "international hacker" convicted because of "coordination across....geographical lines".  Page 7 paragraph (1) (c) of a November 20, 2009 plea agreement additionally suggests that Mr. Gonzalez used cross-border elements in his crimes.  It stated that he had leased or controlled computer servers in Latvia and Ukraine:

Copyright 2010 Fred L. Abrams

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My article "Money Laundering By Minneapolis Money Managers?" reports that a lawsuit against Patrick Kiley, Trevor Cook and other money managers, had raised the question of whether Associated Bank breached a duty to prevent suspected money laundering.  As I mentioned in that article, Associated Bank could have conceivably failed to follow a written Customer Identification Program under 31 CFR 103.121 ¶ (b) (2) (i).

After I wrote "Money Laundering By Minneapolis Money Managers?", two lawsuits were filed against Associated Bank raising these same issues.  The gravamen of said lawsuits, was that Associated Bank had supposedly been negligent in allowing suspected securities fraudsters to open and maintain a nominee bank account in the name of Crown Forex LLC.  Crown Forex LLC was reportedly a sham business entity and its Associated Bank account was possibly used as a laundering link to wash some of the proceeds of a suspected securities fraud.

The first of these lawsuits was briefly filed in Minneapolis federal court via a November 4, 2009, third amended complaint.  That Minneapolis lawsuit against Associated Bank, was soon voluntarily dismissed pursuant to a December 9, 2009 filing and the Court's December 10, 2009, Order.  The second lawsuit against Associated Bank, (Herman Grad vs. Associated Bank NA, Brown County Case #2009-CV-002949), is however, still pending in Wisconsin. 

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Today"s "Asset Search News Roundup" highlights hiding / smuggling cash at U.S.-Mexican border crossings and describes how fraudsters might select bank accounts to facilitate their financial frauds:

• On December 14, 2009 federal agents reportedly seized $300,000 in undeclared currency at a U.S.- Mexican border crossing in Arizona.  The $300,000 was allegedly hidden / smuggled in a suitcase in a vehicle occupied by two residents from Sonora, Mexico.
  
  The previous day, federal agents at a different border crossing in Arizona had seized $70,000 dollars possessed by another person from Sonora, Mexico.  According to a U.S. Customs and Border Patrol press release, the $70,000 was hidden in this spare tire of a 2008 Chevrolet Cheyenne: 

• "Concealing Cash By Laundering In Lithuania", mentioned two international gang members who were the subject of the Baltic Times article "Money Laundering Gang Detained".  These gang members had supposedly targeted bank accounts with no financial activity and then allegedly hijacked them for use as laundering links in a money laundering circuit.
  
  Others facilitate their financial frauds by contrarily selecting bank accounts which have lots of financial activity.  A December 15, 2009 press release explains that Lone Star National Bank former vice president Emma Vigil was convicted of bank fraud for her embezzlement.  Ms. Vigil had concealed the embezzlement at Lone Star National Bank by targeting customers who had "high balance and high activity accounts". 
   

Copyright 2009 Fred L. Abrams

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By claiming that proceeds of a judicial bribery scheme had been laundered from Italy into nineteen U.S. bank accounts, prosecutors sought asset forfeiture as described at "Using Multiple Jurisdictions To Launder Money".  That forfeiture case was mostly based on U.S. anti-money laundering laws which included 18 U.S.C. §1956 (Money Laundering) and 18 U.S.C. §1957 (Money Laundering of property from specified unlawful activity).

In two of the cases mentioned at "Following The Money Trail From Poland To Delaware", prosecutors from Warsaw and Koszalin had asserted that they too suspected money laundering.  In those cases the prosecutors sought the issuance of letters rogatory in Delaware by claiming that laundering could have occurred in violation off Article 299 of Poland's penal law.

Like the foregoing prosecutors, litigants in the private sector may also allege that an adversary has fraudulently concealed assets in violation of U.S. and / or foreign money laundering laws.  To cite just one example, the RICO plaintiff more fully described at "Divorce, RICO & An Asset Search", claimed that her ex-husband had laundered money in violation of 18 U.S.C. §1956.

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"Warsaw Prosecutors Eye Possible Money Laundering At 50 Platowcowa Street ", mentioned that a tip letter led prosecutors from Poland to seek a letter rogatory via the U.S. Attorney in Delaware on October 14, 2009.  The Warsaw prosecutors used this particular letter rogatory to try to elicit evidence about Prime Invest L.L.C. in Delaware and the purchase of the former "Evita" mineral water plant in Biskupiec. 

These prosecutors were investigating a possible violation of an anti-money laundering law codified at Article 299 of Poland's penal law.  Prosecutors from Koszalin, Poland also recently sought their own letter rogatory through a November 23, 2009 application by the Delaware U.S. Attorney.  Like the prosecutors in Warsaw, they too had presumably followed the money trail to detect assets which might be concealed by money laundering in violation of Article 299. 

According to their letter rogatory, the Koszalin prosecutors were apparently investigating Vlad Vladyslav Hubenko for a possible tax fraud and suspected laundering scheme.  Their letter rogatory mentioned a business entity known as "Hunter Universal LLC", which reportedly resides in Delaware:

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A list of asset concealment red flags is available at "Asset Search Indicia For Divorce, Debt Collection & Bankruptcy".  This list includes a beneficial owner's use of shell companies, foreign bank accounts, etc.

Even yet another red flag of asset concealment can be the transfer of assets without any economic benefit, as may happen when there has been a "back-to-back" loan.  As set forth in greater detail at "Laundered Assets", a loan is "back-to-back" when it is secretly fully collateralized and the borrower and the lender are one and the same.

The link chart below also published at "Laundered Assets", is replete with red flags.  Although it has been changed for privacy reasons, this link chart shows how one true beneficial owner hid his / her assets by using: a Liberian shell company; a foreign bank account in Curacao and a "back-to-back" loan disbursed in Amsterdam:   

Copyright 2007-2009 Fred L. Abrams

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On November 23rd the U.S. SEC commenced its enforcement action by filing the following civil complaint for suspected securities fraud against Minneapolis money managers Trevor Cook and Patrick Kiley:

As I last wrote in my  October 29th "Asset Search News Roundup", Mr. Cook and Mr. Kiley could conceivably also face money laundering charges.  If this happens, they would be following in the footsteps of other suspected Ponzi schemers who were named in SEC civil complaints and then criminally prosecuted for alleged money laundering or other suspected financial frauds.

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The General Inspector of Financial Control in Poland received an anonymous tip letter about alleged suspicious activity.  This tip ultimately related to Ukraine resident Sergly Savchuk;  Prime Invest L.L.C. of Florida and the Sesa Polska & Tecza Mazur limited liability companies of 50 Platowcowa Street, Warsaw:

The Warsaw Circuit Prosecutor's Office next started their financial fraud investigation of Sesa Polska and Tecza Mazur at 50 Platowcowa Street.  These Warsaw prosecutors presumably wanted to determine whether the Platowcowa Street companies, Prime Invest LLC and Mr. Savchuk, had laundered money in violation of Article 299 of Poland's penal law.

It soon became apparent that Prime Invest L.L.C was a suspected shell company that had maintained a bank account in Poland.  Mr. Savchuk might have also beneficially owned Prime Invest L.L.C. and had possibly used it in 2004 for the nominee purchase of the former "Evita" mineral water plant in Biskupiec. 

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A tax filing at the "Financials Page" of its website reveals that the Alavi Foundation had assets in 2007 with a fair market value of nearly $88 million.  Federal prosecutors meanwhile, filed an amended complaint last Thursday against The Alavi Foundation.  It sought asset forfeiture, as reported by Reuters, The New York Times and an FBI press release.

According to these news accounts, the gravamen of the amended complaint is that the nonprofit Alavi Foundation allegedly concealed the Iranian Government's true beneficial ownership of a N.Y.C. Fifth Avenue building. The Alavi Foundation may have done this along with Bank Melli and ASSA CO. LTD and ASSA CORP. 

As described at  "Bank Melli Accused Of Hiding Its Fifth Avenue Assets", Bank Melli, ASSA Co. LTD. and ASSA CORP. have all been linked to terrorist financing.  All three are currently the subject of Weapons of Mass Destruction sanctions programs and U.S. economic sanctions.

After the filing of the amended complaint, the Court also acted pursuant to 18 U.S.C. §981 and issued a Warrant of Seizure for Alavi Foundation monies maintained at Sterling National Bank:

Copyright 2009 Fred L. Abrams

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The Financial Action Task Force ("FATF"), is the bellwether for the fight against global money laundering and terrorist financing.  Its leading role is recognized by U.S. lawmakers in the Bank Secrecy Act at  31 U.S.C. §5311, which states:  

"FATF’s Forty Recommendations on Money Laundering and the ... Special Recommendations on Terrorist Financing are the recognized global standards for fighting money laundering and terrorist financing. The FATF has engaged in an assessment process for jurisdictions based on their compliance with these standards." 

By following the FATF's Forty Recommendations and Special Recommendations, governmental entities try to detect assets hidden by money launderers, identity thieves and other financial fraudsters.  Consistent with these Recommendations, the FATF just made its October 30th statement calling for greater transparency.  A higher degree of transparency could help uncover assets fraudulently concealed in financial institutions across the globe.

The FATF explained in its statement, that enhanced transparency was needed at financial institutions regarding customer due diligence; beneficial ownership; legal persons / legal arrangements (i.e. nominees); secrecy laws and cross-border exchange of information.

A few "Asset Search Blog" articles exploring these sort of topics are:

1. "Concealing Assets By Circumventing Customer Identification Rules"
    
2. "Beneficial Owners Concealing Their Foreign Bank Accounts"
    
3. "Nominees & Hidden Assets"
    
4. "Financial Discovery & Foreign Bank Secrecy Laws"
    
5. "Asset Search News Roundup: September 23, 2009"

Copyright 2009 Fred L. Abrams

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In "Forfeiture & The DEA's Asset Search" Donnie the former DEA Special Agent spoke about the effectiveness of asset forfeiture.  In that article, Donnie said: 'asset forfeiture... can stop those who supply pseudophedrine to the meth super labs and Mexican cartels'.  "A Strategy Of Seizing Sinaloa Drug Cartel Assets" also recently explained that asset forfeiture was a vital tool in the fight against the Mexican drug cartels.

Notwithstanding the benefits of an ethical asset forfeiture program, there can be occasional abuses.  Eight plaintiffs raise the issue of supposed improper seizure or asset forfeiture in James Morrow et. al. v. City of Tenaha Deputy City Marshal Barry Washington et. al., U.S. District Court for the Eastern District of Texas, Index No. 2:08-CV-288.  These plaintiffs claim in their civil rights lawsuit pursuant to 42 U.S.C §1983, that some law enforcement officers in or near Tenaha Texas, had essentially seized assets in a racial profiling scheme. 

Furthermore, an August 20, 2009 Memorandum Decision & Order reveals that the presiding judge intends to certify the plaintiffs' case as a class action lawsuit under Fed. R. Civ. P. 23(b)(2).  The plaintiffs who are African-Americans, assert they were driving in Tenaha Texas or on nearby state Highway 59.  They allege they were subjected to unconstitutional traffic stops and cash seizures based on their race or ethnicity. 

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The October 22, 2008 "Asset Search News Roundup" mentioned the problem of money launderers concealing assets through money mules.  The Federal Deposit Insurance Corporation issued its own alert last week about this same use of money mules:

A money mule making a wire transfer can however, be especially vulnerable to detection.  This is true because at the time of a wire transfer, financial institutions and governmental authorities can search for "red flags".  Thirteen of these red flags are identified by "Money Laundering Red Flags, Wire Transfers", which is from the BSA / AML Examination Manual published by the U.S. government's Federal Financial Institutions Examination Council.

Copyright 2009 Fred L. Abrams

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As a countermeasure against those bank customers who would use their bank accounts to fraudulently conceal assets, government regulators commonly require that banks apply customer identification or "know your customer" rules.  These rules are often geared toward identifying the true beneficial owner of a bank account and are analyzed at my articles "Beneficial Owners Concealing Their Foreign Bank Accounts" and "Fighting Financial Fraud At UK Banks".

Despite the use of customer identification / "know your customer" rules at banks, some bank customers still try to conceal their beneficial ownership of assets parked in bank accounts.  As outlined by "Nominees & Hidden Assets", beneficial owners sometimes misuse existing business entities like shell companies, to open financial accounts and circumvent a bank's customer identification procedures.

The Egmont Group of financial intelligence units, describes this very situation at one of its money laundering typologies, labeled as reference no. 08014.  It explains how "Mr. B" essentially used existing businesses in the form of shell companies, to "wash" assets through North American and European bank accounts used in a money laundering circuit.  My September 20, 2009 article "Money Laundering By Minneapolis Money Managers?" also discussed what might have been the use of a fictitious business entity to circumvent the U.S. customer identification rules codified at 31 CFR 103.121 ¶ (b) (2) (i). 

As more fully set forth in that article, a civil complaint in Minneapolis alleges among other things, that a bank account maintained by the "non-existent, non-registered [business] entity" called Crown Forex LLC, could have transferred the proceeds of a securities fraud.  Some of the allegations in that complaint are also believed to be the subject of a federal grand jury proceeding, according to the Minneapolis Star Tribune at: "Twin Cities investment advisers focus of probe".

Copyright 2009 Fred L. Abrams

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Five Minnesota money managers and a dozen business entities including The Oxford Private Client Group of the Van Dusen mansion in Minneapolis, have been sued by 57 investors for alleged securities fraud.  The Minneapolis Star Tribune wrote about the lawsuit in "Investment fraud suit grows more complex" and earlier on July 12, 2009. 

The investors' second amended complaint at part 1 and part 2 herein, pleaded causes of action for: fraud, conversion, civil theft, negligent misrepresentation, civil conspiracy, deceptive trade practices, breach of contract, and breach of fiduciary duty.  It asserted that the money managers had converted about $16 million belonging to the investors by inducing the investors to place monies in a foreign currency arbitrage program. 

This second amended complaint specifically claimed that some of the money managers had aired radio broadcasts to solicit investments for the foreign currency arbitrage program.  One money manager reportedly described this arbitrage program to two investors, by drawing what might be nothing more than a meaningless link chart:   

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The U.S. Department of Justice believes that seizing assets from Mexican drug cartels can generally help combat cross-border murder, kidnapping, robbery, etc.  Through the person of the Criminal Division's Assistant Attorney General Lanny A. Breuer, the Department of Justice reiterated its desire to seize the illicit assets of illegal narco-traffickers.

Assistant Attorney General Breuer stated at a July 22, 2009 conference, that U.S. asset forfeiture and money laundering laws gave authorities the necessary tools to trace and then seize illicit drug-related assets.  He stressed the importance of disrupting the finances of narco-traffickers because their existence was fueled by large sums of cash.  The Assistant Attorney General also said that prosecutors should conduct financial investigations and add asset forfeiture claims to indictments in their criminal cases. 

He additionally stated in a July 9, 2009 hearing before a committee of the U.S.House of Representatives, that: "... seizing the financial infrastructure of the cartels undermines their very existence".  During the Assistant Attorney General's July 9 and July 22 statements, he specifically mentioned Operation Xcellerator, which had targeted the Sinaloa drug cartel.  A May 17, 2007 news release also discussed Sinaloa narco-trafficking.  It.claimed that Ismael Zambada Garcia, (as a supposed Sinaloa trafficker), had laundered drug monies via the following financial network:

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In "Nominees & Hidden Assets" I emphasize the fact that some beneficial owners hide their assets through nominees (i.e. representatives).   I wrote "Nominees & Hidden Assets" because recognizing a beneficial owner's use of nominees can be critical to a successful asset search, debt collection proceeding, etc.  Other articles I have written separately show that people from a broad range of backgrounds might possibly use nominees to hide assets. 

"Three African Heads of State Sued For Hiding Assets" discusses President Denis Sassou-Nguesso, President Obiang Nguema and late President Bongo, all of whom had been accused of using nominees to hide assets in France.  "Laundering Holocaust-Era Art?" raises the issue of whether a former vice president and director of MoMA had used N.Y. art gallery owner Curt Valentin in 1939, as the nominee purchaser of Nazi-looted art transferred in Switzerland.

"A Divorce & Trade-Based Tax Fraud / Money Laundering" is about the trade-based tax fraud and money laundering scheme formerly facilitated through CNC Associates, Inc.--  which had been a nominee of California industrialist Mr. Gene Haas.  My August 11, 2009 "Asset Search News Roundup" additionally reports that former congressman William Jefferson had likely used various companies as nominees, in connection with his particular crimes. 

Finally, although I have mentioned the link chart below in my previous articles, I do so once again.  I now refer to it because the same highlights how one divorcing husband hid marital assets by using a nominee shell company along with "bearer shares".  Said link chart and the divorcing husband's formation of that nominee company, are more fully discussed at: "Bearer Shares & An Asset Search".

Copyright 2009 Fred L. Abrams

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Albert Gonzalez was arrested in the Southern District of Florida on May 8, 2008 pursuant to this warrant:

The arrest arose out of Mr. Gonzalez's alleged computer hacking / identity theft scheme which was later outlined in a May 14, 2008 New York superseding indictment.  This superseding indictment in U.S.A. v. Yastremskiy, et. al., 08-cr-00160, claimed that Mr. Gonzalez and his co-defendants had stolen credit card information through computer intrusions at Dave & Busters, Inc. restaurants.  Mr. Gonzalez and / or his co-defendants were accused of violating federal laws including but not limited to: conspiracy (18 U.S.C. §371); fraud related to computers (18 U.S.C. §1030); wire fraud (18 U.S.C. §1343 ); access device fraud (18 U.S.C. §1029); aggravated identity theft (18 U.S.C. §1028A); etc.  

Almost three months after the superseding indictment was filed against him in New York, Mr. Gonzalez was next indicted in Massachusetts.  According to the August 5, 2008 Massachusetts indictment in U.S.A. v. Albert Gonzalez, 08-cr-10233, Mr. Gonzalez had hacked computers which stored credit card information for BJ's Wholesale Club, DSW, OfficeMax, Boston Market and others.

Like the New York superseding indictment, the Massachusetts indictment accused Mr. Gonzalez of: conspiracy (18 U.S.C. §371); fraud related to computers (18 U.S.C. §1030); wire fraud (18 U.S.C. §1343 ); access device fraud (18 U.S.C.§1029); and aggravated identity theft (18 U.S.C. §1028A).  The Massachusetts indictment also essentially asserted that Mr. Gonzalez had hidden the proceeds of his hacking / identity theft scheme by money laundering through multiple jurisdictions.

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"An Asset Search, Tax Fraud & Divorce" mentioned that Brian, (a former high-ranking official at the Financial Crimes Enforcement Network, who had earlier been an IRS special agent), said: "Once a tax fraud investigation starts rolling along, nobody knows where it may end up". 

Today's "Asset Search News Roundup" is similarly about the numerous individuals just arrested because a money laundering investigation ended up uncovering suspected public corruption crimes in New Jersey.  As yesterday's Department of Justice press release basically indicated, federal investigators had initially focused on some money laundering circuits.  In these money laundering circuits, five rabbis had supposedly washed monies by using charities; and / or a Brooklyn Bakery; and / or other  "cash houses".

Cash couriers, (whom I referenced in my April 13 2009 Asset Search News Roundup), also reportedly helped wash the monies across borders, between Israel and the United States.  The money laundering investigation however, eventually expanded and led to the arrests of three mayors, a deputy mayor, two assemblyman and many others, for suspected public corruption crimes in New Jersey.

Copyright 2009 Fred L. Abrams

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Financial intelligence units, local law enforcement, prosecutors, etc. can visually analyze data through "link charts" like the one used by U.S. Treasury's Office Of Foreign Assets Control to depict the drug trafficking network of Medellin-based Francisco Antonio Florez Upegui:

(To Enlarge, Click On Image)

Chart: U.S. Treasury Office Of Foreign Assets Control

Governmental authorities use link charts to help discover associations or patterns in voluminous data.  Depending on the kind of investigation, a governmental authority may use a link chart to analyze: medical prescriptions, telephone toll records, cash deposits, border crossings and other things. 

Software with link charting features can even be used to help a government search for and forfeit illicit assets.  GoAML / goATR, is asset tracking software with this charting ability and is briefly mentioned at "Asset Forfeiture Goes Global".  Link charts may additionally be used in court to corroborate an aggrieved party's claim that an adversary has dissipated or hidden: marital, probate, business, or other assets. 

I relied heavily on link charts in one particular court filing to support my contention that a divorcing husband had concealed marital assets from his wife.  The divorcing husband in that case had hidden marital assets by laundering them through a "back-to-back" loan (i.e. a fully collateralized loan in which the borrower and the lender are one and the same).  He is also mentioned in my post, "Money Laundering, Marital Assets & Divorce".                           

Copyright 2009 Fred L. Abrams

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Politically exposed persons who are involved in public corruption schemes, sometimes use money laundering to hide bribes or other illicit proceeds.  Although not accused of money laundering, former Detroit city councilwoman Monica Conyers, was a politically exposed person suspected of accepting bribes.  Monica Conyers is also the wife of House Judiciary Committee Chairman John Conyers. 

The Detroit News and others reported earlier that Monica Conyers was under investigation for supposedly accepting jewelry and cash.  As was also widely reported, she recently pleaded guilty to a charge of conspiracy to commit bribery.  This bribery conspiracy was outlined in a second superseding information filed June 26, 2009.  According to Monica Conyers' plea agreement, her bribe-taking involved a wastewater treatment contract between Synagro Technologies Inc. and the City of Detroit. 

Unlike Monica Conyers, former Massachusetts state senator Dianne Wilkerson has pleaded not guilty to public corruption charges.  I first wrote about Diane Wilkerson in my November  5, 2008 "Asset Search  News Roundup".  As a second superseding indictment in U.S.A. v. Wilkerson, 1:08-cr-10345 mentions, Dianne Wilkerson is accused of violating 18 U.S.C. §1951 ("the Hobbs Act") and other federal laws.  The government is also seeking the forfeiture of Ms. Wilkerson's assets, pursuant to 18 U.S.C. §981 (a) (1) (C) and 28 U.S.C. §2461 (c).      

Furthermore, an FBI Special Agent's Affidavit relies on surveillance video / still photos to support the government's contention that Diane Wilkerson had taken bribes related to a state liquor license.  The government's still photos were highly publicized and one of them supposedly showed Diane Wilkerson on June 18, 2007 hiding a $1000 bribe in her bra.  The Special Agent's Affidavit at pp. 6-7, ¶ 15,  referred to some of these still photos as Exhibits "C" and "D":

 

 

 

 Photos: U.S. District Court File, U.S.A. v. Wilkerson

Copyright 2009 Fred L. Abrams

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U.S. persons can be obligated to disclose their beneficial ownership of foreign bank accounts in Schedule B, Part III of their individual tax returns and by filing a Form TDF90-22.1.  Some U.S. persons however, still engage in schemes to conceal their foreign bank accounts, as occurred in the case described by my post "Bearer Shares & An Asset Search". 

That particular case involved a divorcing spouse and his business partners who had hidden undeclared revenue by using money laundering along with bearer shares.  As is demonstrated by the following diagram, (which is more fully explained at "Bearer Shares & An Asset Search"), the divorcing spouse had hidden his beneficial ownership of a Cayman Island bank account:  

It is perhaps because these kinds of schemes do actually occur, that the Financial Action Task Force  promulgated Recommendation 5.  Recommendation 5 counsels banks to verify the beneficial ownership of a customer's bank account.  As "Fighting Financial Fraud at UK Banks" indicates, UK banks are required to identify beneficial owners, as mentioned by the Money Laundering Regulations 2007*.  (See also Notice MLR8, Crown Copyright 2008, at page 18 §7.8).  Bankers in Switzerland meanwhile, have their customers execute a declaration of beneficial ownership upon the opening of a bank account.  This declaration is commonly referred to as a "Form A".

The tax fraud prosecution of Florida yacht broker Robert Moran mentioned in my May 25, 2009 Asset Search News Roundup, involved such a "Form A".  According to page 2 of the Statement of Facts part of Mr. Moran's plea agreement, prosecutors had acquired Mr. Moran's "Form A".  It apparently revealed that Mr. Moran was the beneficial owner of monies hidden in Swiss bank accounts.  Mr. Moran had maintained his Swiss account in the name of a nominee-- the Panamanian corporation Winter Drive Investments S.A.  

* The Money Laundering Regulations 2007, is reproduced under the terms of Crown Copyright Policy Guidance issued by HMSO.

Copyright 2009 Fred L. Abrams 

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Identity theft can play a role in white-collar crimes ranging from money laundering to tax fraud.  Perhaps most interesting are the schemes which share identity theft and money laundering as common elements, like the one mentioned at "A Tax Fraud & Identity Theft From Miami".  Identity theft and money laundering are similarly alleged to have occurred in the case of U.S.A. v. Renee Gill Pratt, et. al. Criminal No. 2:08-cr-00140. 

The May 22, 2009 superseding indictment in Pratt, alleges that former Louisiana state representative and New Orleans city councilwoman Renee Gill Pratt participated in a RICO criminal enterprise which misappropriated government funds and concealed assets.  Said superceding indictment contains a total of thirty-four counts alleging money laundering, aggravated identity theft and other crimes, as mentioned by an FBI press release.

Identity theft is of course, not just limited to cases involving money laundering.  In U.S.A. vs. Torrella et. al. 3:07-cr-05775 for example, data brokers Emilio and Brandy Torrella pleaded guilty on May 20, 2008 to violating 18 U.S.C. §1028A (aggravated identity theft), among other things.  As my post "Pretexting During An Asset Search" explained, the Torrellas were accused with private detectives, of illegally obtaining confidential information from the I.R.S., Social Security Administration, pharmacies, medical offices and various state labor departments. 

The Torrellas had violated people's privacy rights and committed aggravated identity theft by making pretext calls, (i.e. eliciting information by using false identities / false pretenses in telephone calls).  They are now scheduled for sentencing before the Court on July 10, 2009. 

Copyright 2009 Fred L. Abrams  

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In Grosz v. The Museum of Modern Art, the plaintiffs allege that The Museum of Modern Art (MoMA") acquired three Holocaust-era paintings which had been stolen from expressionist and Dadist painter George Grosz.  These particular paintings have been possessed by MoMA since the 1940's or 1950's and are: "Republican Automatons", "Self-Portrait with a Model" and "Portrait of the Poet" a.k.a. The Poet Max Herrmann-Neisse.  The collective value of these paintings could be as much as $10 million, according to "German painter's heirs suing MoMA". 

The complaint in Grosz alleges that George Grosz was the first artist designated as an 'enemy of the state' by the Nazis. (Complaint at p. 3 ¶ 7).  Subsequent to their confiscation, some of his paintings had even been displayed in Munich at the Nazi's infamous 1937 "Degenerate Art" exhibition.  The complaint also essentially claims that George Grosz had been the victim of both Nazi persecution and unscrupulous art dealers who had laundered the title of  "Republican Automatons", "Self-Portrait with a Model" and "Portrait of the Poet". (Id., at p. 6  ¶ 13)  (paintings' true beneficial ownership obscured by sham transfers, "multilayered" deceptions, etc.).

The complaint for example, alleges that Dutch art dealer Carel van Lier, had stolen Grosz's "Self-Portrait with a Model" and "Republican Automatons" and had "sanitize[d]" (i.e. laundered) their title via a 1938 sham transfer to himself.  (Id., at p. 28 ¶138 & p. 6 ¶12).  The complaint similarly claims that "Portrait of a Poet" was stolen by the Nazis and then "flipped" to MoMA via N.Y. art dealer Curt Valentin.  (Id., at p.17 ¶76).  Allegations at page 13 ¶¶54 & 55 of the complaint also suggest that Mr. Valentin was possibly used by MoMA's then vice president and director Alfred H. Barr, Jr., as the nominee purchaser of Nazi-looted art at Galerie Fischer in Lucerne, Switzerland in 1939. 

MoMA is next expected to file its response to the Grosz complaint by June 4, 2009.  As my post "Holocaust-Era Art Restitution Revisited" however recently indicated, Mr. Valentin had in fact transferred Nazi-looted art to MoMA.  A June 30, 1942 letter from MoMA to U.S. authorities additionally suggests that MoMA had an especially good relationship with Mr. Valentin.  In this letter, MoMA / Aflred H. Barr, Jr. asserted that Mr. Valentin was loyal to the U.S. and "devoted to democratic ideals": 

Copyright 2009 Fred L. Abrams

(Last Edited October 10, 2009)

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Narco-traffickers who conduct their illicit activities across the U.S.-Mexican border may fall under the Foreign Narcotics Kingpin Designation Act (21 U.S.C. § 1901-1908, 8 U.S.C. § 1182) and Executive Order 12978 of October 21, 1995.  Assets are frozen under the Foreign Narcotics Kingpin Designation Act ("the Kingpin Act"), if they are subject to U.S. jurisdiction and belong to persons or entities designated as Specially Designated Narcotics Traffickers on the "Specially Designated Nationals and Blocked Persons" list.

This list was just changed on April 15, 2009 to reflect the Kingpin Act designation of the Mexican: Sinaloa drug cartel, Familia Michoacana and “Los Zetas".  The Amezcua Contreras Organization of Mexico is also on the Specially Designated Nationals and Blocked Persons list and was put there as early as December 2000.  According to an October 2, 2008 press release, the Amezcua Contreras Organization supplied precursor materials for methamphetamine production.  The Amezcua Contreras Organization is portrayed below:

Like those in the above image, Zhenli Ye Gon was accused of providing precursor materials for the manufacture of methamphetamine.  As mentioned by my post "Forfeiture & The DEA's Asset Search", Ye Gon had been arrested in Maryland on July 23, 2007 on methamphetamine drug and money laundering charges.  He had hidden $207 million in his Mexico City residence until law enforcement interdicted it on March 20, 2007.  The discovery of these monies was the "[l]argest cash drug seizure the world has ever seen", according to p. 166, Drug Enforcement Administration, 2003-2008.  Said $207 million is pictured below:    

  Copyright 2009 Fred L. Abrams

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Forced collection proceedings against a fraudster like Mr. Bernard Madoff can involve an extraordinary number of prospective plaintiffs with competing interests in the fraudster's assets.  In Mr. Madoff's case, some of these plaintiffs competing over assets might even include foreign governmental authorities seeking asset forfeiture because of Mr. Madoff's money laundering in the United Kingdom or perhaps elsewhere.

Another prospective plaintiff in Mr. Madoff's case, is Irving H. Picard, Trustee for the liquidation of Mr. Madoff's assets on behalf of thousands of victims, pursuant to the Securities Investor Protection Act and the Court's Order.  As "Madoff Trustee Seeks to Recover Assets in Gibraltar" reported, Mr. Picard just made a bankruptcy court filing seeking to retain special counsel to recover property in Gibraltar which belongs to Madoff.

Given all of the foregoing, I asked Swiss counsel to examine some of the complexities in pursuing forced collection proceedings against a fraudster like Mr. Madoff.  My discussion with Swiss counsel was based on the hypothetical that someone similar to Mr. Madoff had hidden assets in banks in Switzerland.  Swiss counsel's comments are as follows:

"Complex forced collection proceedings may combine several competing recovery actions involving civil, criminal and administrative recovery remedies. To add to the complexity, these actions may be originated in various jurisdictions.

To take a concrete example, I am currently representing a client who was the victim of a fraud perpetrated in a far-eastern country. A criminal action against the perpetrator of the fraud was conducted in this country. The proceeds of the crime were transferred by the fraudster to the US where the fraudster managed to escape.

The fraudster was arrested at the request of the far-eastern country and sat in jail for three years for extradition purposes. Ultimately, he was extradited to that country and has now been sentenced to several years’ imprisonment.

The defrauded client chose to file a complaint for fraud, intentional misrepresentation, active concealment and several other counts including a RICO action against the fraudster in a Californian court.

The US attorney sought from a district court, an arrest warrant in rem of several assets in the US and also of funds deposited in a bank in Geneva.

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The Wall Street Journal article "Madoff Used U.K. Office in Cash Ploy, Filing Says", states that Bernard Madoff is expected to plead guilty today to 11 felony counts arising out of his alleged Ponzi scheme.  That article also mentions that Mr. Madoff is accused of concealing assets by money laundering in the U.K.  Other recent reports about Bernard Madoff have been about whether he or his wife tried to hide / dissipate assets by transferring them.  Mr. Madoff for instance, may have tried to conceal some assets by mailing $1 million dollars in jewelry from New York to Florida, as mentioned by "Hiding Assets Through Portable Valuable Commodities". 

Meanwhile, Mr. Madoff's wife Ruth, might have also tried to conceal Mr. Madoff's assets by transferring some of them to herself.  According to a New York Times piece, Mrs. Madoff withdrew $15.5 million from a company partly owned by Mr. Madoff.  The withdrawal was actually in the form of two wire transfers to Mrs. Madoff, on November 25 & December 10, 2008.  The December 10 wire transfer had even occurred just one day before Mr. Madoff was arrested for his alleged Ponzi scheme.  These same wire transfers are specifically memorialized by the two documents below:

 

The N.Y. Times piece also mentions Mr. Madoff''s claim, that a N.Y.C. penthouse and another $62 million supposedly belong to Mrs. Madoff and are arguably not subject to governmental seizure.  "In Madoff asset search, wife's worth adds intrigue", similarly raises the question of whether Mr. Madoff is actually the true beneficial owner of these same assets allegedly belonging to Mrs. Madoff.  A beneficial owner anticipating seizure / forced collection proceedings may of course, make a fraudulent transfer to a spouse or ex-spouse, as described by Concealing Assets By Conveying Them and "Using Divorce To Dissipate Assets & Delay Creditors".

Depending on the circumstances, the Court could end up analyzing whether Mrs. Madoff was a wrongful transferee / involved in fraudulent transfers with Mr. Madoff.  In doing so, the Court might consider whether the November and December wire transfers to Mrs. Madoff were marked by "the badges of fraud".  As more fully set forth in "Badges Of Fraud In Debt Collection, Divorce & Bankruptcy", the badges include: knowledge of a creditor's claim; whether there was inadequate consideration; etc.  

Copyright 2009 Fred L. Abrams

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When assets are hidden in a foreign bank account or are otherwise offshore, domestic authorities might be able to seek asset forfeiture, discovery or other relief pursuant to a Mutual Legal Assistance Treaty ("MLAT").  Depending on the circumstances, MLAT's can particularly help domestic authorities trying to locate, (and then possibly forfeit), criminal proceeds which have been parked offshore.    

The United Nations Office on Drugs and Crime even offers a "Mutual Legal Assistance Request Writer Tool", which is depicted in the attached chart.  The first page of the U4 Anti-Corruption Resource Centre's publication "Mutual legal assistance treaties and money laundering", also describes the use of MLAT's.  Said publication mentions that MLAT's are important because  "corruption and money laundering cases are often and increasingly transnational".  The Internal Revenue Manual from the I.R.S. similarly discusses MLAT's at 9.7.10.2.1 (05-22-2006) Bilateral Treaties and the I.R.S. clearly relies on MLAT's as part of its fight against tax fraud.

Pursuing asset forfeiture, discovery or other relief pursuant to a MLAT can however, be challenging.  To cite just one example, Swiss counsel in Geneva and I just discussed difficulties the Swiss can face when seeking asset forfeiture / MLAT relief through the U.S. Department of Justice.  The problem arises from the fact that Swiss legal standards for showing the origin of criminal funds in an asset forfeiture case are less stringent, compared to those in the U.S. 

Swiss MLAT requests in asset forfeiture cases have in fact, been denied by the U.S. Department of Justice because these requests failed to sufficiently demonstrate under U.S. law, that the funds to be forfeited had criminal origins.  From a Swiss perspective meanwhile, those same asset forfeiture / MLAT requests were legally sufficient and entirely necessary under Swiss law.

Copyright 2009 Fred L. Abrams

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My post "Domestic Shell Companies & An Asset Search" explained that assets are sometimes concealed by shell companies used in a variety of financial frauds.  In fact, states like Nevada and Delaware are especially prone to the formation of shell companies lacking transparency.  Once such shell companies are established in Nevada, Delaware or elsewhere, they can be a means to open nominee bank accounts for a beneficial owner to hide his / her assets in.

Two federal cases pending in the he U.S. District Court for the Northern District of California, perhaps highlight how domestic shell companies might possibly be misused.  In the first of these cases, a December 18, 2008 criminal complaint was filed against Mr. AUSAF UMAR SIDDIQUI, alleging money laundering (18 U.S.C. §1957) from January 2005 to November 2008. 

Although Mr. SIDDIQUI had reportedly earned an annual salary of about $225,000 as Vice President of Merchandising and Operations at Fry's Electronics, Inc., he still supposedly defrauded Fry's out of tens of millions of dollars.  As a review of the criminal complaint against Mr. SIDDIQUI reveals, Mr. SIDDIQUI was accused of laundering kickbacks he received from Fry's Electronics' vendors.  Paragraphs "8" & "23" of the complaint, claimed that Mr. SIDDIQUI concealed his kickbacks through the shell company PCI INTERNATIONAL, LLC-- which Mr. SIDDIQUI allegedly operated from his residence. 

A San Francisco Chronicle article and Yahoo.Com news story from December 2008, both reported that Mr. SIDDIQUI had hidden about $65 million through a shell company.  The docket report in Mr. SIDDIQUI's case additionally reveals that Mr. SIDDIQUI was indicted on January 6, 2009 and charged with five counts of wire fraud (18 U.S.C. §1343) along with four counts of money laundering (18 U.S.C. § 1957 {a}).  The government is also seeking asset forfeiture under 18 U.S.C. §981(Civil Forfeiture), 18 U.S.C. §982 (Criminal Forfeiture), & 28 U.S.C. §2461(Mode of Recovery), as is fully set forth in Mr. SIDDIQUI's indictment.

According to the unproven allegations in a second Northern District of California case, (i.e. Eclectic Properties East, LLC et. al. v. The Marcus & Millichap Company), real estate giant Marcus & Millichap Compay may too have misused domestic shell companies. Plaintiffs' civil RICO complaint in that case alleges a fraudulent scheme involving 22 commercial properties in 4 states, which could have caused the loss of tens of millions of dollars.  According to that RICO complaint, the Defendants had sold properties after "artificially inflat[ing]" their value by using among other things, shell companies formed in Nevada and Delaware. (Plaintiffs' Complaint, at ¶¶ 2, 5, 56-64, 69, 83, 85 & 86) (allegation of fraud via "dummy" or shell companies).

Plaintiffs' RICO Complaint filed February 4, 2009, can be viewed below:

• Pages "1" - "51"

• Pages "52" - "112"

• Pages "113" - "176" (with supporting exhibits)

 Copyright 2009 Fred L. Abrams

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Financial Intelligence Units or other government agencies throughout the world have a keen interest in searching for illicit assets and then forfeiting them.  This global interest in asset forfeiture is perhaps marked by the growth of  "goAML" software from The United Nations Office on Drugs and Crime.  "GoAML" even includes "goATR", which is asset tracking software designed to help government agencies search for and forfeit laundered assets.

The extent a given government agency may go to search for or forfeit illicit assets however, can very much depend on the money laundering or other laws within its jurisdiction.  A Swiss federal authorities webpage for instance, cites the following criminal laws which are generally relevant to both Swiss money laundering and asset forfeiture:

1. Art. 305bis, Swiss Criminal Code (Money Laundering).

2. Art. 305ter, Swiss Criminal Code (Insufficient Diligence in Financial Transactions and Right to Report).

3. Art. 260ter,  Swiss Criminal Code (Criminal Organisations).

4. Art. 260quinquies, Swiss Criminal Code (Financing Terrorism).

5. Art. 69 to 72, Swiss Criminal Code (Confiscation).

6. Art. 102 and 102a, Swiss Criminal Code (Corporate Criminal Responsibility).

U.S. government agencies like the Department of Justice can of course similarly seize and / or forfeit illicit assets hidden through money laundering or otherwise.  Furthermore, the U.S. Department of Justice reported that property deposited during 2008 into The Assets Forfeiture Fund repository of seized assets, was valued at $1,327,604,903. 

Some asset forfeiture laws used by the U.S. Department of Justice to interdict assets are listed in my article,"Using Multiple Jurisdictions To Launder Money".  Said article describes the particular case of a judicial bribery scheme which originated in Italy and concealed assets in the U.S., among other places.   As "Using Multiple Jurisdictions To Launder Money" reveals, the U.S. Department of Justice sought asset forfeiture regarding that judicial bribery scheme, because of both U.S. and Italian laws:

• 18 U.S.C. §981 (a) (1) (A), (B) & (C)-- Asset forfeiture because of money laundering;

• 18 U.S.C. §984-- Asset forfeiture of identical property within one year of a laundering offense, etc;

• 18 U.S.C. §1956-- Money Laundering;

• 18 U.S.C. §1957-- Money Laundering of property from specified unlawful activity;

• 18 U.S.C. §2314-- Interstate or foreign transfer of property obtained by fraud;

• 28 U.S.C. §1345-- U.S. District Court jurisdiction where the Government is plaintiff;

• 28 U.S.C. §1355 (a)-- U.S. District Court jurisdiction over forfeiture proceedings;   

• Italian Criminal Code Articles 319ter and 321, Bribery in judicial acts.

Copyright 2009 Fred L. Abrams

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My September 26, 2008 Asset Search News Roundup mentioned that public corruption crimes can involve concealing bribe payments or other illicit assets.  This is perhaps why financial institutions sometimes check lists of "Politically Exposed Persons", (i.e. individuals holding high foreign public office, a.k.a. "PEPs"), in an anti-money laundering program.  These lists of "Politically Exposed Persons" are commercially available from World-Check's PEP Database, WorldCompliance's Global PEP List, etc.

The Wolfsberg Group and the Financial Action Task Force's "6th Recommendation" consider Politically Exposed Persons to be money laundering risks.  Page 10 of the Basel Committee's October 2001 publication "Customer due diligence for banks", similarly describes the problem of Politically Exposed Persons hiding assets through money laundering. 

Furthermore, according to an Associated Press article, ("Davos: Don't let crisis breed more corruption"), the Annual Meeting of the World Economic Forum just warned that the global financial crisis could lead to even more public corruption.  We may therefore experience an increased risk of Politically Exposed Persons using money laundering to hide bribe payments and / or other criminal proceeds.  

(Edited January 5, 2010)

Copyright 2009 Fred L. Abrams

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The Asia / Pacific Group on Money Laundering explains on its typologies webpage, that one way to hide assets is by purchasing portable valuable commodities like diamonds.  The typologies webpage further gives the example of a beneficial owner concealing assets by transferring diamonds to another jurisdiction.  One man who may have tried this kind of asset concealment method is Bernard L. Madoff.  As reported in "U.S. Government to New York Judge: Jail Madoff Without Bail", Mr. Madoff is alleged to have dissipated assets by mailing $1million dollars in jewelry to relatives and friends vacationing in Florida.

Another man believed to have hidden assets by using portable valuable commodities was recently discovered upon his arrival at N.Y.C's J.F.K. Airport from Tel Aviv.  A press release states that the 54-year-old U.S. resident employed by the jewelry industry, had concealed three diamonds worth more than $1.2 million in his pocket.  U.S. authorities had first found jewelry receipts in the man's baggage, then interviewed him and finally interdicted the concealed diamonds during a pat-down.  These diamonds pictured below, were seized pursuant to 19 U.S.C. §1497, (Penalties for failure to declare) and 19 U.S.C. §1595a (c) (1) (A), (Merchandise introduced contrary to law):

                                 Photo Courtesy of U.S. Customs and Border Protection

My October 15, 2008 "Asset Search News Roundup" similarly mentioned that UBS banker Stanley Birkenfeld had hidden diamonds in a tube of toothpaste while an airline passenger at Swiss-U.S. border crossings.  As more fully set forth by "UBS and the Diamond Smuggler", Mr. Birkenfeld had assisted UBS bank customers like billionaire Igor Olenicoff hide assets and / or evade U.S. taxes.  Besides using diamonds, Mr. Birkenfeld hid assets by using phony loans and purchasing artwork with secret Swiss funds. 

Copyright 2009 Fred L. Abrams

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My father attended Far Rockaway High School at the same time as Mr. Bernard Madoff and in fact, they were in the same graduating class.  He remembers from his high school yearbook "The Dolphin", that Mr. Madoff had lived in the Rockaways and was an ardent swimmer.  My father even showed me "The Dolphin", which contains a picture of Mr. Madoff in his youth.  The Far Rockaway of Mr. Madoff's youth however, has little in common with the offshore high-risk geographical locations Mr. Madoff might have concealed assets in.

As I briefly indicated in the most recent New York Times article "Madoff Spotlight Turns To Role  Of Offshore Funds", enormous sums of money may be hidden by using multiple jurisdictions and nominees.  This same conclusion is partly reached by the Financial Action Task Force, whose "Money Laundering FAQ" webpage states that: "Large-scale money laundering schemes invariably contain cross-border elements."   According to "Madoff Spotlight Turns To Role Of Offshore Funds", cross-border elements in Mr. Madoff's case might include offshore locations such as: the Cayman Islands, Bermuda, Ireland, Singapore and banks in Switzerland.

To interdict illicit assets possibly hidden by Mr. Madoff in these offshore locations, governmental authorities could be turning to U.S. Treasury Department's FinCen and other Financial Intelligence Units.  These Financial Intelligence Units may be using red flags to follow a money trail left by Mr. Madoff or his suspected nominees.  By recognizing red flags, Financial Intelligence Units or other governmental authorities might ultimately locate and forfeit assets beneficially owned by Mr. Madoff, which arise from his alleged $50 billion dollar Ponzi scheme.

(Edited January 15, 2009) 

Copyright 2008 Fred L. Abrams

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U.S. authorities are seeking the sanction of asset forfeiture in connection with a 36-story Fifth Avenue N.Y.C. building, alleged to be partly owned by Iran's Bank Melli.   "Assets Seized at Company Suspected of Funneling Money to Iran" and / or a U.S. Treasury Department press release, also report that Bank Melli is accused of concealing its 40% beneficial ownership of 650 Fifth Avenue.  Bank Melli and its related entities ASSA CO. LTD and ASSA CORP., have further been linked to terrorist financing and are named in the attached list of those subject to Weapons of Mass Destruction sanctions programs.

Bank Melli may have additionally disguised Iranian funds as construction "loans" for 650 Fifth Avenue and supposedly transferred rent monies to Iran, which were collected from 650 Fifth Avenue.  Based upon the above-mentioned articles and press release, Bank Melli possibly used the following money laundering methods in connection with 650 Fifth Avenue:  

i)  operating the parent corporation ASSA CO. LTD from the Channel Islands, a high-risk geographical location;

ii)  forming the domestic shell company ASSA CORP. as the New York subsidiary of ASSA CO. LTD.;

iii) using ASSA CORP. as the nominee purchaser of 40% of 650 Fifth Avenue;

iv) disguising Bank Melli monies as construction "loans" for 650 Fifth Avenue-- perhaps through "back-to-back" or other types of sham loans.

v)  transferring rent collected from tenants at 650 Fifth Avenue through multiple jurisdictions, including New York City, the Channel Islands and Iran. 

Copyright 2008 Fred L. Abrams

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The victims of a securities fraud, divorcing spouses, post-judgment creditors, etc. can have several remedies available to them if they need to recover assets hidden offshore.  One might even pursue an asset search or debt collection proceeding in the various offshore tax havens.  This is particularly true when a bank is used as a laundering “link” to hide funds in a money laundering circuit or assets have otherwise been hidden during a financial fraud. 

To cite just one example, I have previously filed letters rogatory / legal assistance requests with the Court in Geneva, (“the “Parquet du Procureuer général), because of suspected money laundering at two Swiss banks.  As mentioned at "An Asset Search With Letters Rogatory", these kinds of legal remedies can sometimes be used to elicit financial information from bank witnesses. 

Other forms of relief for those seeking to recover funds hidden offshore, can range from attaching a bank account to alerting a financial intelligence unit.  Local counsel in Geneva has explained these legal remedies which are available in Switzerland:

"As you probably know, Switzerland does not follow the common law doctrine. We do not adhere to the institution of discovery. The usual tools available to a claimant are therefore the filing of a criminal complaint, which is actually the most efficient way to get past the banking secrecy. Access to the information will be granted only if someone can be indicted. In exceptional circumstances a broader access to the information collected within the frame of the criminal investigation can be granted on a discretionary basis. 

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A beneficial owner's transfer of funds through banks in multiple jurisdictions, can be a red flag that assets have been hidden.  Purchasing large amounts of portable valuable commodities, hoarding cash, forming a shell company, etc, can also be red flags as mentioned by "Asset Search Indicia for Divorce, Debt Collection & Bankruptcy".  The weight that should be given to these red flags however, depends on the facts and circumstances in a particular case.

It is also true that the ability to recognize red flags can be critical to a post-judgment creditor, divorcing spouse, bankruptcy creditor, or other litigant searching for hidden assets.  Such a litigant could for example, use red flags at a deposition to develop a line of questions about assets, liabilities and net worth.  By recognizing red flags, a litigant might even more efficiently use the computer-based research described at "A Low Cost Asset Search".

As the list below also indicates, Financial Intelligence Units, U.S. Trustees, the IRS and U.S. banks, all rely on red flags to help uncover / interdict hidden assets:

1.  Financial Intelligence Units across the globe use red flags to detect assets hidden via money laundering, as more fully set forth by my above-mentioned post "Asset Search Indicia For Divorce, Debt Collection & Bankruptcy ".

2.  U.S. Trustees look for red flags to detect a debtor's bankruptcy fraud / the concealment of bankruptcy estate assets.  These specific red flags are described in the U.S. Trustee Manual at 5-10.7.2 Red Flags/Common Characteristics in Cases of Concealment and False Statements.

3. The IRS uses red flags to search for undeclared revenue and hidden assets.  The IRS Manual describes the same at 25.1.2.2 (01-01-2003), Indicators of Fraud.

4.  U.S. Banks are required to look for red flags as part of their anti-money laundering programs as mentioned by the Federal Financial Institutions Examination Council's BSA / AML Examination Manual.

Copyright 2008 Fred L. Abrams

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The Bank of Lithuania, (i.e. the central bank of Lithuania), announced its recent anti-money laundering measures at a May 15, 2008 board meeting.  The Bank's focus on money laundering might already be paying off.  The Financial Intelligence Unit for Lithuania for example, recently detained two international gang members for suspected money laundering.

According to a Baltic Times' article, these gang members had laundered over 10.43 million euros in illicit assets through multiple jurisdictions including Lithuania and Latvia.  They had allegedly concealed their 10.43 euros in bank accounts belonging to bank customers that were Latvian corporations. Based on said article, the gang members also controlled the bank accounts by sending twelve forged authorization letters. 

While a vice president at a global bank, "Mr. London" investigated countless financial crimes.  He has a high degree of knowledge about asset searches and financial fraud investigations.  When I asked Mr. London about the Baltic Times article, he explained:

"The article is very unclear.  I suppose they could have opened new accounts in the name of the companies at banks where the companies were previously unknown, and then utilised them.  The issue there is that in obtaining copy company documents in some locations (UK included) you get ALL the details of the directors, including dob addresses and SIGNATURES, thus facilitating impersonation.  I know that UK Companies House is re thinking the situation so to guard against such incidents by making some details less accessible (many Registries already block personal information from prying eyes)....

How they got away with it (for a short time at least) in Lithuania, i.e. by submission of forged authorities granting them signing rights was a well used route. ( BUT I was always wary here in similar situations of possible staff collusion, for how would they know what accounts to utilise?) Mail intercept maybe, but that is a long shot and criminals prefer something more definite to provide a result."

Copyright 2008 Fred L. Abrams

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Based on a March 2003 FinCEN Advisory, informal banking systems, (a.k.a. informal value transfer or alternative remittance systems), have been around since 5800 BC.  Such systems are abused by terrorists to transfer their funds, as more fully described by a presentation from the Organization for Security and Co-operation In Europe.  According to said presentation, the following are some informal banking systems from jurisdictions all over the world: 

1. hawala;
2. hundi;
3. hui kuan / fei-chien (a.k.a. "fei chi ien");
4. poey kuan (a.k.a. "phoe kuan");
5. hui.

While the above and other informal banking systems like the Mexican or Columbian Black Market Peso Exchange are most active in offshore geographical locations, they still of course continue to operate in the U.S.  In the U.S. for example, ordinary people sometimes send funds back home to their families through informal banking systems. Informal banking systems can however, additionally be used by an adversary to dissipate funds the subject of a divorce, bankruptcy, or other court proceeding. 

Such an adversary might for example, use an informal banking system to conceal any marital, bankruptcy estate, or other kinds of assets.  An adversary may make his / her financial transfers via an informal banking system especially because the same could easily go undetected in the pre-trial phase of a trial or the computer-based research described at "A Low-Cost Asset Search".

Transferring funds through an informal banking system might however, lead to the kind of criminal prosecution which occurred in "Operation Cash-Out".  As a press release explained, Operation Cash-Out involved 46 defendants in multiple jurisdictions including the U.S., Spain, Canada and Belgium.  One of those defendants was Mr. Mohammad Ahsan, who was recently prosecuted in U.S.A. v. Ahsan, et. al.  As mentioned by the Department of Justice, Mr. Ahsan was sentenced on September 22, 2008, to three years in prison because he had conspired to launder money through a hawala.

Copyright 2008 Fred L. Abrams

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Data mining predicts patterns through electronic data base technologies like statistical analysis and modeling.  Some U.S. law enforcement agencies data mine to predict the criminal patterns of money launderers, terrorist financiers or other criminals.  The U.S. Department of Homeland Security for example, mentioned the following four data mining programs in its February 11, 2008 Letter Report to Congress:

• "ATS": Automated Targeting System Inbound and Outbound Cargo Analysis, at Customs and Border Protection;

• "DARTTS": Data Analysis and Research for Trade Transparency System, at Immigration and Customs Enforcement;

• "FAS": Freight Assessment System, at the Transportation Security Administration;

• "NETLEADS": Law Enforcement Analysis Data System, at Immigration and Customs Enforcement.

Financial Intelligence Units such as U.S. Treasury's FinCEN, also specifically use data mining to combat financial crimes.  As mentioned as early as the May 2000 article "Treasury’s mining for crooks", FinCen has worked on data mining projects with the help of the following companies: Oracle Corp.; SPSS, Inc.; SGI; Visual Analytics Inc.; and Nautilus Systems, Inc.  FinCEN has also expressed its continued interest in data mining at pages 52 & 62 of its FY2007 Annual Report.

Among other things, data mining helps Financial Intelligence Units and government asset recovery agencies conduct asset searches / interdict illegal assets.  One way Financial Intelligence Units can interdict illicit assets, is to use goATR / goAML asset recovery software.  This kind of software analyzes financial transactions and may detect illicit assets subject to asset forfeiture proceedings.

Copyright 2008 Fred L. Abrams

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I first wrote about Donnie in my post,"Forfeiture & The DEA's Asset Search".  In that post, I mentioned that Donnie was a former Special Agent with the Drug Enforcement Administration who had gone to Iraq to train Iraqi Police.  Donnie recently left the Numaniyah National Police Training Academy to travel about an hour's drive southeast of Baghdad on a military convoy to Al Kut ( Camp Delta).  He had gone to Al Kut to work through a contracting company on a new job, similar to that of a Border Police Advisor. 


As part of his new job, Donnie will be sent to the Basrah Training Academy where temperatures can reach up to 140-150 degrees in August.  He will advise the Iraqi Department of Border Enforcement about its training course for recruits.  According to a Multi-National Force press release, the Department of Border Enforcement "training course is an eight-week course that involves instruction in military training, border patrols, checkpoint set up, vehicle searches, and detecting narcotic and human smuggling".


In addition to covering the above subjects, Donnie will teach how to interdict bulk-cash smugglers / illicit cash couriers, during border inspections.  As INTERPOL's First International Conference on Illicit Cash Couriers suggested, training border personnel to detect cash smuggling is critically  important.  This is true because criminals like money launderers and terrorists often use couriers to conceal and transfer cash through airports or other border crossings.  FOXNews.com reported on July 29 for example, that terrorists smuggle cash across Iraq's borders to help finance al-Qaida's operating budget in Iraq.

 
Copyright 2008 Fred L. Abrams

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"The UK should develop legislation and clearly enforceable implementing regulations to ensure that beneficial owners are identified and verified and that customer due diligence is required and ongoing, regardless of an already established relationship with the client."

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The following occurred over a four month period during 2002, and has been supplied by an investigator I have worked with.  Some of it has been changed / sanitized for privacy reasons: 
 

As part of his tax fraud, Mr. Wallace contacted a Cayman Island bank by mail in order to open a personal account with it.  He mailed account opening documents to it which included a copy of his U.S. passport and also supplied the names of references. According to these documents, Mr. Wallace lived in Miami and was a real estate developer.  Based upon all of the foregoing, the Cayman Island bank opened Mr. Wallace's personal account with a "O" balance.  Just six days later however, bank "X" in Panama wired $6.3 million to Mr. Wallace's Cayman account without any mention of the remitter. 


Mr. Wallace then went on a business trip to Central America for several months; so he rented his Miami home to "Chuck".  Although Mr. Wallace hadn't known at the time, Chuck was a small-time crook.  In fact, soon after Chuck took possession of Mr. Wallace's home, Chuck started stealing Mr. Wallace's mail.  One of the letters Chuck had stolen was written by "Bob", a personal banker from the Cayman Island Bank where Mr. Wallace maintained his account.  Bob had written to Mr. Wallace about a lucrative investment opportunity. 

Surmising from Bob's letter that Mr. Wallace had a sizable bank account, Chuck wrote to Bob pretending to be Mr. Wallace.  As the sanitized copy of Chuck's First Letter can only partly demonstrate, Chuck had assumed Mr. Wallace's identity in that particular letter by forging Mr. Wallace's signature.  To comfort Bob, Chuck's First Letter had also asked Bob for the minimum balance required to keep Mr. Wallace's account open. Chuck's "softening up" letter further suggested to Bob that Mr. Wallace's funds might soon be needed "at very short notice" for an alleged real estate deal in Mexico.  In the sanitized copy of Chuck's Second Letter, Chuck again pretended to be Mr. Wallace as he wrote to Bob at the Cayman Island Bank.  In his Second Letter, Chuck directed the wire transfer of Mr. Wallace's funds from the Cayman Island Bank to Chuck's own bank account in Mexico.


When Mr. Wallace next unexpectedly arrived at the Cayman Island Bank to make a cash withdrawal, he was shocked to learn that his account had been drained.  The Bank then showed Mr. Wallace "his" letters and explained that it had remitted his funds to Mexico just two days earlier because of "his" instructions.  Concluding that his identity had been taken over by Chuck, Mr. Wallace apologized for his error and immediately booked a flight bound for Miami.  Shortly thereafter, Mr. Wallace was arrested while fleeing from his Miami home after having killed Chuck there. 

Investigators from the U.S. next paid a visit to the Cayman Island Bank.  Although they had first thought that Chuck had been the true beneficial owner of the Cayman Island account, they discovered that Mr. Wallace was.  Investigators also learned that Mr. Wallace was not just simply a real estate developer involved in a tax fraud / abusive offshore tax avoidance scheme.  Instead, Mr. Wallace was actually a major illegal narcotics trafficker hiding the proceeds of his drug crimes through money laundering.  Investigators finally concluded that much of the foregoing had happened because the Cayman Island Bank had among many other things:

1. Inadequate customer identification procedures / know your customer rules;
    
2. Permitted Mr. Wallace's account to be opened by mail & also with a  "0" balance;
    
3. Neglected to contact a single reference mentioned in Mr. Wallace's account opening documents;
    
4. Failed to recognize suspicious activities like the wire transfer of the $6.3 million from Panama or Chuck's "softening up" letter.

Copyright 2008-2010 Fred  L. Abrams

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Nathan Vardi's Forbes.com article "Cash Is King", describes some of the ways funds can be transferred during money laundering:

• Wire Transfers
• Credit Cards
• Prepaid Cards
• Digital Currency (i.e. E-Gold)
• Cash

"Cash Is King" also briefly quotes me and mentions that cash is hard to trace.  Illicit cash can of course still be detected, particularly at border crossings, where the cash smuggler may pretend to be just an ordinary airline passenger or motorist.  Law enforcement use a variety of methods to detect cash smugglers, as set forth by the Financial Action Task Force in its February 19, 2010 report, "Detecting And Preventing The Illicit Cross-Border Transportation Of Cash And Bearer Negotiable Instruments (Copyright © FATF/OECD. All rights reserved)". 


As the Financial Action Task Force report mentions, law enforcement can detect smuggling through: canine units, personal interviews, declaration forms, x-ray and other screening methods.  The Financial Action Task Force also has its IX Recommendation, which describes the countermeasures effective against cash smugglers. Perhaps most surprising however, is the extraordinary amount of illicit cash which is sometimes hidden and subject to detection. 


For example, in my November 1, 2007 post "Forfeiture  &  The DEA's Asset Search", I described a conversation I had with a DEA retiree about the Zhenli Ye Gon case.  "Forfeiture & The DEA's Asset Search" explained how Ye Gon had been suspected of concealing over $207 million dollars of drug proceeds in his Mexico City home.  Based on paragraph 20 of the attached Special Agent's affidavit, that November post mentioned that Ye Gon had been accused of hiding over $200 million in compartments, false walls, closets and suitcases.

(Edited February 25, 2010)

Copyright 2008-2010 Fred L. Abrams

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A licensed private investigator from Arizona advised that he had a good track record in finding  hidden assets and / or locating bank accounts.  He however, contacted me wanting to know the best way to learn more about money laundering (18 U.S.C. §§1956 & 1957) and structuring / smurfing (31 U.S.C. § 5324).  One good way to learn about money laundering and other white-collar crimes, is to read money laundering typologies.  


As explained at the end of my post Terrorist Financing, Money Laundering & Financial Intelligence Units, money laundering typologies are sometimes used by law enforcement and regulators to develop countermeasures against emerging criminal trends.  Although "100 Cases from the Egmont Group" arises from data collected by the Egmont Group from the 1990's, it is still relevant today.  In "100 Cases from the Egmont Group" there are for example, descriptions of the following laundering methods:

• Concealment within existing business structures
• Misuse of legitimate businesses
• Use of false identities, documents or straw men
• Exploiting international jurisdictional issues
• Use of anonymous asset types

The Financial Action Task Force also publishes money laundering typologies.  Its February 29, 2008 Terrorist Financing Typologies Report, (Copyright © FATF/OECD. All rights reserved), explains some of the methods terrorists use to raise and then transfer illicit funds. In addition to the foregoing, the Egmont Group and the Financial Action Task Force publish many money laundering typologies at their websites.

"100 Cases From The Egmont Group" provided by The Egrmont Group's Website.

Copyright 2008 Fred L. Abrams

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• Table of Contents
  
• Pages  "1" to "20"
• Pages "21 to "40"
• Pages "41" to 60"
• Pages "61" to "80"
  
• Pages "81" to "100"
• Pages "101" to "118"

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• a high-risk geographical location to transfer funds (i.e. Aruba).
• multiple jurisdictions, such as Philadelphia and Aruba.
  
• offshore wire transfers.
• traveler's checks to convert cash.
• structured transactions to avoid Bank Secrecy Act reporting requirements.
• false identification.

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• "Drug Problem"
• "Dirty Dineros"
• "UnionBanCal's Drug Money Problem"
• "Blood Money"
• "Banking On Drugs"

"Union Bank failed to implement an adequate anti-money laundering program reasonably designed to identify and report transactions that exhibited indicia of money laundering, or other suspicious activity, considering the types of  products and services offered by the Bank, the volume of its business, and the nature of its customers."

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As the attached sanitized bearer share certificate suggests, bearer shares allow for anonymous share ownership.  A corporation that issues bearer shares has no central registry of their ownership.  The Financial Action Task Force additionally explains, bearer shares are: "negotiable instruments that accord ownership in a corporation to the person who possesses the bearer share certificate".  Via its 33rd Recommendation and Chapter 4, pages 15-16 of its Report on Money Laundering Typologies 2001-2002, the Financial Action Task Force also warns that bearer shares can be used to launder money.

I too have seen how bearer shares had likely been used to launder marital assets and evade U.S. taxes.  In that particular case, (the facts of which have been changed below for privacy reasons), the divorcing husband and his business partners had accumulated $18 Million in undeclared revenue while residing in the U.S.  The husband and his partners then secretly formed a shell corporation in Curacao, the Dutch Antilles, which they jointly owned through bearer shares. 


To prevent the interdiction of their bearer shares by domestic authorities, the husband and his partners retained a Dutch lawyer to hold the bearer shares in a trust.  As their trustee, the Dutch lawyer deposited the bearer shares into a stock custody account at a Rotterdam bank.  As the following diagram demonstrates, the husband and his partners finally deposited their $18 million in undeclared revenue in a Cayman Island bank account in the name of their Curacao shell company:

As described above, the husband and his partners hid their $18 million from the United States by using multiple jurisdictions which included Curacao, Rotterdam and the Cayman Islands.  The husband and his partners also concealed their beneficial ownership of the $18 million by using protective layers consisting of: bearer shares; a nominee shell company from Curacao; and an offshore bank account in the Cayman Islands.  Such layering is characteristic of money laundering and sometimes ends in the kind of tax fraud case filed by the U.S. Department of Justice against Mr. Walter Anderson.  As my post  "A $365 Million Dollar Tax Fraud" mentioned, Mr. Anderson used bearer share certificates and shell companies to conceal the undeclared revenue he had parked offshore.

(Edited January 10, 2010)

Copyright 2008-2010 Fred L. Abrams

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• Used a personal N.Y. bank account to disburse millions in loan principal to the Debtor, instead of an attorney escrow account as required by DR-1200.46 Joint Rules Of The Appellate Divisions.

• Introduced the Debtor to Offshore Lender.

• Jointly represented both the Debtor and Offshore Lender in the making of the loan.

• Prepared all the loan documents, such as the mortgages, promissory notes, etc.

• Not perfected a U.C.C. lien required by the loan, (although it would have secured millions / was a material condition of the loan).

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While "Roger" and I were walking near Bahnhofstrasse Street, Zurich, Roger suddenly stopped and had us duck into a corner shop. Once inside the shop Roger appeared to be looking for a particular item displayed in the shop's front window, although he was really scrutinizing the outside street.  He explained afterwards how it was necessary to check if we were being followed: "But first you must choose a side street or a main street where there are not many pedestrians or traffic, not a busy thoroughfare. You take mental pictures of everyone you think could be potential followers or surveillance cars as you continue along, before entering a store with windows which will permit you to survey the street".


Roger had a knack for locating offshore financial information because of his former work as an intelligence officer.  He and I were in Zurich on our way to meet my local Swiss counsel.  We were following the money trail of a financial fraudster who pretended in his U.S. court case to have a negative net worth.  Roger had brought with him the details of the fraudster's finances, which demonstrated that the fraudster had hidden tens of millions of dollars by money laundering through Switzerland.  Roger was about to share this information with me for the first time, at our meeting with the Swiss counsel.


In some cases, offshore financial information discovered during an asset search suggests that a foreign criminal law has been violated.  In Switzerland for example, one might conceivably violate criminal laws by lying about the beneficial ownership of a bank account, as mentioned in this legal memo from Swiss counsel:

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Parking assets offshore in one jurisdiction and then exercising control over them through another, sometimes indicates money laundering.  One example of how multiple jurisdictions were used to facilitate money laundering, is the case of  U.S.A. v. Proceeds of Crime Transferred to Certain Domestic Financial Accounts, Index # 07-CV-21791, U.S. District Court for the Southern District of Florida.  As mentioned by a July 16, 2007 press release, the Government commenced  the U.S.A. case in order to forfeit $110 million which had been part of a tainted $400 million court award in Italy.  According to both the foregoing press release and Reuters, the $400 million was tainted because the Italian Court awarded it after an interested party, (Mr. Angelo "Nino" Rovelli), had bribed its judges.


As an amended complaint in U.S.A alleged, Mr. Rovelli's wife Primarosa Battistella, had used Swiss bank accounts and three prominent lawyers, (Attilio Pacifico, Giovanni Acampora and Cesare Previti), to pay the bribes.  After Mr. Rovelli died in 1990, Ms. Battistella finally inherited the tainted $400 million in January 1994.  According to the amended complaint, she then had her accountant Mr. Pierfrancesco Munari, launder a substantial amount of it.  Mr. Munari had allegedly placed the tainted money in financial institutions and /or business entities which acted as laundering links in: the United States; the British Virgin Islands; the Cayman Islands; Guernsey; Jersey; Switzerland; Luxembourg; Liechtenstein; Singapore; the Cook Islands and Costa Rica. 


Some of the money laundered by Mr. Munari had allegedly been hidden in Florida via nineteen financial accounts. The government therefore asserted in U.S.A., that forfeiture was appropriate pursuant to the following:

• 18 U.S.C. §981 (a) (1) (A), (B) & (C)-- Asset forfeiture because of money laundering;

• 18 U.S.C. §984-- Asset forfeiture of identical property within one year of a laundering offense, etc;

• 18 U.S.C. §1956-- Money Laundering;

• 18 U.S.C. §1957-- Money Laundering of property from specified unlawful activity;

• 18 U.S.C. §2314-- Interstate or foreign transfer of property obtained by fraud;

• 28 U.S.C. §1345-- U.S. District Court jurisdiction where the Government is plaintiff;

• 28 U.S.C. §1355 (a)-- U.S. District Court jurisdiction over forfeiture proceedings;   

• Italian Criminal Code Articles 319ter and 321, Bribery in judicial acts.

After the judge in U.S.A. froze / restrained numerous financial accounts in July 2007, Ms. Battistella and other Rovelli family members eventually executed a settlement agreement consenting to the forfeiture of thirteen accounts.  As Mr. Munari's own settlement agreement further demonstrates, he too consented to forfeit an additional four accounts.  Although on November 21, 2007 the Court issued a Final Judgment of Forfeiture regarding the total of seventeen financial accounts, there may still be some unresolved issues.  According to Forbes.Com, a grand jury has been convened in Florida to examine whether Mr. Munari's money laundering scheme criminally involved: Wachovia; Citigroup; Merrill Lynch; Morgan Stanley; Lazard and others. 


Copyright 2007-2008 Fred L. Abrams

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An investigation of a high-risk geographical location can sometimes uncover assets which have been hidden through: nominees; shell companies; cash couriers; wire transfers; credit cards; informal banking systems, etc.  For example, one way the IRS focuses on high-risk locations like tax havens, is to compare the banking information it receives from the Financial Crimes Enforcement Network with the foreign bank disclosure taxpayers make pursuant to their Form 90-22.1, the Foreign Bank and Financial Account Report.  The IRS also makes U.S. residents with offshore credit / debit cards an audit priority pursuant to its Offshore Credit Card Program.


The State Department is similarly concerned with high-risk offshore locations as demonstrated by part of its 2007 International Narcotics Control Strategy Report, Major Money Laundering Countries.  U.S. banks too make geographic location a risk factor in their anti-money laundering programs.  As explained at page 21 of the Bank Secrecy Act / Anti-Money Laundering Examination Manual: "U.S. banks should understand and evaluate the specific risks associated with doing business in, opening accounts for customers from, or facilitating transactions involving certain geographic locations."


The Financial Crimes Enforcement Network also deems seven U.S. regions to be High Intensity Financial Crimes Areas because of their extraordinary vulnerability to money laundering.  Law enforcement may even commit additional resources to scrutinize financial transactions in such regions or in a High-Intensity Drug Trafficking Area.  As my post "Domestic Shell Companies & An Asset Search" further suggests, jurisdictions like Delaware, Nevada, Wyoming, and Oregon are additionally considered to be high-risk because assets are so easily concealed through shell companies formed there.


The isolated fact that a financial transaction has a nexus to a high-risk location does not however necessarily support the conclusion that assets have been concealed.  A judgment debtor, divorcing spouse, etc. should still be thoroughly investigated to ensure that an offshore or domestic high-risk location has not been used to hide assets.


Copyright 2007 Fred L. Abrams

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• a disparity between a shipped commodity's bill of lading and its invoice.
• a disparity between a commodity's value as recorded on its invoice and fair market value.
• the shipping of goods although there is no profit / economic benefit.
• a shipment with a nexus to shell companies.
• letters of credit related to a shipment that have been amended or extended repeatedly.
• the type of shipped commodity is inconsistent with the importer's / exporter's ordinary business activities.
  
• shipping to or from a high-risk geographical location (i.e. a jurisdiction especially vulnerable to money laundering).

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A beneficial owner will sometimes use a nominee (i.e. representative) to hide money with complete anonymity in a bank account.  As the website of www.offshoresimple.com explains, a beneficial owner may hire a nominee incorporation service to supply a bank signatory.   This suggests that a beneficial owner can use a nominee to circumvent the know your customer / customer identification procedures at a bank.  For example, through the bank signatory service offered by www.offshoresimple.com, a beneficial owner can use a nominee to:      

• Open / manage an offshore bank account.
• Act as an account's bank signatory.
• Supply a bank with the necessary customer identification documents.
• Execute the incorporation documents needed to form an offshore corporation.

The above-described use of nominee incorporation services is widespread.  As page 64 of the 2007 National Money Laundering Strategy mentions, nominee incorporation services that arrange U.S. bank accounts and shell companies are believed to annually launder as much as $36 billion just from the former Soviet Union.

Instead of retaining a nominee incorporation service, some beneficial owners hide assets by using friends or relatives as nominees.  According to his twenty-one count forty-four page July 26, 2005 indictment, Mr. Edwards for example, had stolen insurance premiums and then concealed them in nominee financial accounts in the names of his wife and two shell companies.  Mr. Edwards had also used his wife as the nominee purchaser of his mountain chalet and a  "palatial" home-- both of which were bought with stolen insurance premiums.


All of the foregoing had been part of Mr. Edward's insurance and tax fraud scheme which lasted from about January, 1999 through April 30, 2001.  Via his indictment, Mr. Edwards was charged with: mail fraud (18 U.S.C. § 1341 & 18 U.S.C. § 1342); wire fraud ( 18 U.S.C. § 1343); making false statements to a  financial institution (18 U.S.C. § 1014);  theft from a health care benefit program (18 U.S.C. § 669); money laundering (18 U.S.C.§ 1957 [a] & [b]); and tax evasion (26 U.S.C. § 7201). 

 
Mr. Edwards was specifically accused of collecting insurance premiums from various employers while unlicensed to do so.  Instead of providing thousands of employees with workers' compensation insurance, he converted their insurance premiums for his own use.  Between January 1, 2000 and April 30, 2001 Mr. Edwards also allegedly stole $2.5 million from his company Fidelity Group, Inc., which was a health care benefit group as mentioned by 18 U.S.C. § 24 (b).  Furthermore, when Mr. Edwards actually did apply for some workers' compensation insurance coverage, he allegedly understated payroll and the type / number of employees to fraudulently secure lower insurance premiums.


When Mr. Edwards administered an employer's self-insured health insurance plan, he also had  allegedly delayed or denied medical benefits the employees were entitled to.  Mr. Edwards indictment also alleged that he had filed a false joint Income tax return for 1999, by underreporting taxable income.  In 2000, Mr. Edwards also supposedly filed a false joint tax return by underreporting taxable income and paying just $724 in taxes.  He was additionally accused of failing to file any tax return for 2001, as was required. 


As the Court's June 26, 2006 Judgment demonstrates, Mr. Edwards ultimately pleaded guilty to four of the twenty-one counts mentioned by his indictment: two counts of mail fraud; one count of theft from a health care benefit program; and one count of tax fraud.  Pursuant  to his plea agreement, Mr. Edwards was sentenced to serve 150 months in prison and ordered to pay fines, make restitution, etc.  As Mr. Edwards' motion executed on August 13, 2007 however indicates, he seeks to vacate his guilty plea / sentence pursuant to 28 U.S.C. § 2255 by alleging ineffective assistance of counsel among other things.


Copyright 2007 Fred L. Abrams

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"I'm out of the asset forfeiture business and Title-III wiretaps too", Donnie remarked as we discussed the Drug Enforcement Administration's on-going effort to find hidden assets related to drug trafficking and other crime.  Donnie had retired from the DEA after serving twenty-one years as a Special Agent.  Now he was deployed to the Green Zone in Iraq to teach Iraqi police through the International Criminal Investigative Training Assistance Program of the Department of Justice.


Special Agents like Donnie often develop a great deal of expertise in conducting an asset search since asset forfeiture allows them to seize the proceeds of drug trafficking, money laundering, or organized crime.  For example, while Donnie had been stationed in El Paso Texas in 1988, (and also worked in Bolivia), he, another Special Agent, and the Mexican Federal Police seized $6-8 million in drug money.  By following the money trail, Donnie and his co-agent forfeited the $6-8 million because of its relation to their earlier seizure of 21 tons of cocaine in Sylmar, California.


My discussion with Donnie quickly drifted toward Zhenli Ye Gon's arrest in Maryland on July 23, 2007 on methamphetamine drug and money laundering charges. Ye Gon was accused of supplying chemicals used to manufacture methamphetamine through his pharmaceutical wholesale business based in Mexico City, Mexico.  According to a Special Agent's affidavit, the more than $207 million seized from Ye Gon's Mexico City residence was "hidden in various compartments, false walls, suitcases, and closets."  Also seized from Ye Gon's Mexico City corporate headquarters were $111,000 dollars; documents regarding domestic and offshore bank accounts; and wire transfer confirmations from Mexican money exchange houses to various banks.  As Ye Gon's criminal indictment In the U.S. District Court for the District of Columbia further indicated, the government sought to forfeit his money and other assets pursuant to 21 U.S.C. §§ 853 and 970.


Given all of the above, Donnie finally said: "Because of its impact on organized crime, asset forfeiture is one of the things that can stop those who supply pseudophedrine to the meth super labs and Mexican cartels.  Asset forfeiture works so well that it has even become a kind of gold rush".  I then thought about the $ 1,143,341,308 in net deposits for 2006 made into the Department of Justice's Assets Forfeiture Fund-- which is a repository for just some of the federal agencies that forfeit assets.


Copyright 2007 Fred L. Abrams

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A former Criminal Intelligence Specialist at Scotland Yard confirmed that the divorcing husband was hiding millions from his wife by using nominee bank accounts in Switzerland, among other things.  The husband's true beneficial ownership of these funds had been concealed by a nominee who had used shell corporations.  The evidence suggested that the nominee had engaged in money laundering for the husband.  The nominee might have also laundered organized crime monies.
 

The above information could possibly be used during a divorce to impeach the husband at a deposition about his alleged net worth and assets.  The Swiss bank information could also be used to frame a line of questions at a subpoenaed deposition of the nominee.  As partly demonstrated by the example of a changed / sanitized letter rogatory to Obergericht des Kantons Zürich, evidence might too be elicited from bank witnesses in Switzerland.  Such letters rogatory / legal assistance requests can sometimes play an important role in an asset search, as mentioned at "Asset Search Tips For Divorce & Child Support Cases".


As my local Swiss counsel advises, making a business of parking assets in Switzerland and concealing their beneficial ownership could possibly violate Art. 305bis Swiss Criminal Code: Money Laundering (English Translation).  In addition to 305bis, some of the Swiss laws relevant  to money laundering and / or hiding assets include:

• the Federal Act on Combating Money Laundering in the Financial Sector: Anti-Money Laundering Act, AMLA (English Translation).

• Art. 305ter Swiss Criminal Code: Insufficient Diligence In Financial Transactions and Right to Report (English Translation).

• Art. 260ter Swiss Criminal Code: Criminal Organizations (English Translation).

• Art. 260quinquies Swiss Criminal Code: Financing Terrorism (English Translation).

• Art. 69 to 72 Swiss Criminal Code: Confiscation (English Translation).

• Art. 102 and 102a Swiss Criminal Code: Corporate Criminal Responsibility (English Translation).  

Given all of the foregoing, there are a number of legal strategies that might be used in connection with the divorcing husband's assets hidden in Switzerland.  Among other things these strategies could include: enlisting the help of foreign investigators like the above-mentioned former Criminal Intelligence Specialist; retaining local counsel in Switzerland; and prosecuting letters rogatory / legal assistance requests.

(Edited February 1, 2010)

Copyright 2007-2010 Fred L. Abrams

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People don't typically think of the money laundering indicia when searching for hidden assets the subject of a: divorce; bankruptcy; commercial collection or other legal proceeding.  Such indicia can however be effectively used as part of an asset search even in situations where there is no money laundering.  In the United States, the indicia or red flags of money laundering are described at pages 19-23 and Appendix "F" of the Bank Secrecy Act / Anti-Money Laundering Examination Manual.  They are also described in Money Laundering Prevention, A Money Services Business Guide, at pages 16-24. 


Money laundering indicia are sometimes used outside of the United States.  For example, India's Financial Intelligence Unit relies on "broad categories of reason for suspicion"; the Belgian Financial Intelligence Unit ("CTIF-CFI") uses Money Laundering Indicators; the Swiss Federal Banking Commission has the Schedule: Indicators of Money Laundering ; and the Asia / Pacific Group on Money Laundering also uses such a list.  Recognizing the following money laundering indicia however, may lead to the discovery of assets concealed in a divorce, commercial collection or bankruptcy case:

• Domestic Or Foreign High-Risk Geographical Locations.
• Large Amounts Of Portable Valuable Commodities (Gold, Diamonds, etc.).
• False Invoicing In A Trade Or Business.
• Offshore Asset Protection Services.
• Offshore / Foreign Bank Accounts.
• Multiple Jurisdictions.
• Fraudulent Conveyances / Transfers.
• Shell Companies.
• Sham Trusts.
• Nominees.
• Bearer Instruments like Bearer Shares.
• Informal Banking Systems, (Hawala, Hui Kuan, etc.).
• Hiding Or Smuggling Cash.
• Offshore Credit Cards.
• Gambling Activities.
• Misuse Of Businesses (i.e. Commingling Personal With Business Assets).
• Structuring Bank Deposits, (a.k.a. "Smurfing").

(Edited 2/15/09)

Copyright 2007 Fred L. Abrams

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In the United States, the Financial Crimes Enforcement Network regulates the customer identification procedures, (a.k.a  "know your customer rules"), at banks.  In order to clarify these procedures, the Financial Crimes Enforcement Network issued guidance in January 2004.  These customer identification procedures codified at 31 C.F.R Part 103.121, demonstrate  that there is no discretion as to what information is needed when a new bank customer opens an account.  In the case of a customer who is a U.S. person for example, the minimum requisite information includes: a taxpayer identification number issued by the Internal Revenue Service (i.e. social security or employer identification number); date of birth; residential or business street address; etc.  After obtaining this kind of information, a U.S. bank must then verify it based on a "risk-based" approach.

The United Kingdom similarly has rules for checking the identities of its bank customers.  For example, the regulatory body for the financial services industry in the United Kingdom, (the Financial Services Authority or "FSA"), has published its know your customer rules in Discussion Paper 22, at pages 9-13.  This past July, the FSA also published a consumer leaflet mentioning these rules, "Just the facts about proving your identity".  The FSA's leaflet explains that UK law requires an identity check when a new customer opens a bank account and that checking identities helps prevent money laundering, identity theft and terrorist financing.  It further advises that: "Neither the FSA nor the law sets out how firms should check identity.  In most cases firms will follow guidance produced by an independent industry body, the Joint Money Laundering Steering Group".  According to the Joint Money Laundering Steering Group, a number of different documents can be used to prove identity such as a: passport; photo-style driver's license; letter from a social worker or care home manager verifying identity; etc.  As of August 31, 2006, the FSA had also replaced its Money Laundering Sourcebook with the guidance now found in its Senior Management, Systems and Controls Sourcebook, at SYSC 3.2.6 et. seq. 

There will however soon be regulatory change with respect to how a bank identifies its customers in the United Kingdom. This is true because the United Kingdom's new Money Laundering Regulations 2007* come into effect on December 15, 2007.  These regulations obligate banks to apply a standard of due diligence, (as determined by a risk-based approach), when they check a new customer's identity.  In many cases, banks will also be required to identify the true beneficial owner of funds.  Since the United Kingdom's rules for identifying bank customers are about to change, I wanted an expert's opinion.  I then called "Mr. London", who has vast experience in the methods used to hide assets as a former vice president of a major global bank in the United Kingdom.  Mr. London knew all about how banks checked their customers' identities, especially because he had been responsible for his bank's financial fraud and money laundering investigations.

During our phone conversation Mr. London expressed his belief that, (despite the prospective change in regulation), money laundering, terrorist financing and other financial fraud would likely continue to increase throughout the United Kingdom.  He also suggested that there was little standing in the way of a determined criminal because of the "complicity or misfeasance" of many banks and the use of nominees to open bank accounts.  Since crimes like money laundering and terrorist  financing often extend beyond just one nation's borders, I was left to wonder just what this meant for all of us.

*Money Laundering Regulations 2007, is reproduced under the terms of Crown Copyright Policy Guidance issued by HMSO

Copyright 2007 Fred L. Abrams

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Money laundering circuits sometimes operate in the U.S. through domestic bank accounts used as "laundering links".  It is also true that money laundering circuits washing vast sums of money, will typically do so through offshore bank accounts located in tax havens like Switzerland, Luxembourg, the Cayman Islands, etc.  Such was the case of one divorcing husband, (the depiction of whom is altered below for privacy reasons), who laundered his U.S. money between Switzerland and Germany.

Prior to the valuation / equitable distribution hearing in his divorce case, the husband alleged that he had a liability of $29 million owed to a prime bank in Germany because of an arm's-length business loan.  An investigation however revealed that his loan was back-to-back , (i.e. a fully collateralized loan in which the borrower and the lender are one and the same).  The husband had first secretly deposited $30 million into a Swiss bank account and next used that same $30 million to collateralize a Swiss bank guarantee for $29 million.  By then using that Swiss bank guarantee as full collateral, the husband persuaded a German bank to issue a personal bank loan to him for $29 million to be disbursed in Germany.


After the loan principal was disbursed to him in Germany, the husband intentionally failed to repay his $29 million debt due and owing to the German bank.  The husband's loan default meant that the German bank would collect $29 million transferred from Switzerland pursuant to the Swiss bank guarantee which had served as loan collateral.  As the link chart below suggests, the loan default in Germany was actually the very means used to wash the money the husband had earlier deposited in Switzerland:

 

(Click On The Link Chart To Enlarge)

The husband's financial transfers shown above had no economic benefit, as is usually the case where a back-to-back loan is used to hide assets.  Back-to-back loans however, are not only sometimes used to conceal marital assets during a divorce. They can also regrettably be used in a tax fraud to hide assets and income; by a debtor hiding assets from a creditor; or as a means to disguise monies which are the proceeds of a white-collar or other crime.

 

(Edited January 22, 2010)

Copyright 2007-2010 Fred L. Abrams

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The Financial Intelligence Units of the different jurisdictions in the Egmont Group, exchange information worldwide to track terrorist financing and fight crimes like money laundering.  Their exchange of information occurs pursuant to the Egmont Group's Principles for Information Exchange (June 2001) and Best Practices for the Exchange of Information (updated June 2004).  Sometimes Financial Intelligence Units ("FIU's") share information from a suspicious activity or suspicious transaction report filed by a bank or other entity.  This can happen especially because FIU's are the repository of the suspicious activity/transaction reports filed in their respective jurisdictions.  


As the World Bank's 2004 report "Financial Intelligence Units: An Overview" mentions, various jurisdictions define suspicious activity differently.  In the United States however, there are extensive rules about filing a Suspicious Activity Report.  Banks in the United States for example, are required by both 31U.S.C. §5318 (g) and 31 C.F.R Part 103.18 to file a Suspicious Activity Report with the FIU known as the Financial Crimes Enforcement Network.  As 31 C.F.R. Part 103.18 explains, a bank is generally required to file a Suspicious Activity Report within thirty days of a transaction which amounts to at least $5000 and: involves funds derived from crime; or disguises criminal activity; or evades reporting requirements; or has no apparent lawful purpose.  According to Guidance on Preparing A Complete & Sufficient Suspicious Activity Report Narrative, remembering the five "W's", (i.e. who, what, where, when, & why), is particularly helpful when supplying information in a Suspicious Activity Report to a FIU.
  

FIU's also study the methods used to launder money and then develop laundering "typologies" about them.  One such typology, Egmont Group Case Ref: 06058, shows how information about two suspicious trusts collected by the FIU of one country was passed on as a tip to a different country.  Yet another typology, Egmont Group Case Ref: 06063, demonstrates how a FIU analyzed wire transfers from Europe in order to spot two suspected members of a terrorist group involved in the 9/11 tragedy.  Finally, FIU typologies are used by law enforcement and regulators to track emerging criminal trends and develop countermeasures to financial crimes like money laundering. 

(Edited January 8, 2010)
Copyright 2007 Fred L. Abrams

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