Money Laundering

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This post describes a case in which illicit drug monies were concealed offshore and laundered via a Cayman Island bank account.  The case is also about tax fraud; identity theft and a murder.   I published the post earlier at the Asset Search Blog and have used the post as a handout at many of my speaking engagements.  It is an example of how financial fraudsters can operate.  Some of the facts below have been changed/sanitized for privacy reasons.  The following occurred over a four month period during 2002:

TAX FRAUD

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.

THE IDENTITY THEFT & MURDER

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 partly demonstrates, 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.
Continue Reading A Case of Tax Fraud, Identity Theft & Murder

Photo Of A Money TrailWhen vast sums of money are hidden in a bank account there is usually an electronic trace or other kind of money trail.  A skilled investigator may help detect the money trail, as suggested by my 2010 post Secreting Assets Without A Border Trace.  The post quoted “Roger” a former foreign intelligence officer who was working as a private investigator.  At the post, Roger discussed some asset concealment methods and investigative techniques for following a money trail.  As these concealment methods and investigative techniques are still being used, the relevant part of Secreting Assets Without A Border Trace is featured below.  This is also the 4th post in my series about what private investigators can and cannot do legally when searching for assets.¹

As a consequence of his U.S.-based Ponzi scheme, Bill the investment adviser was indicted for alleged violations of 18 U.S.C. § 1956 (money laundering); 26 U.S.C. § 7201 (tax fraud); 18 U.S.C. §§ 1341 and 2 (mail fraud); 15 U.S.C. §§ 78j(b) and 78ff(a) (securities fraud); and 15 U.S.C. §§ 80b-6 and 80b-17 (investment adviser fraud). The critical question now was: what had happened to the $35 million dollars lost by the damaged investors in Bill’s Ponzi scheme? After Bill insisted he dissipated this $35 million by gambling and on cocaine, prostitutes, etc., federal agents interdicted $1 million U.S. dollars hidden in a bedroom wall at Bill’s California home.

Among the other items the agents seized during their search of Bill’s home, were Bill’s passport, desktop computer, cell phone, bank statements and jewelry store receipts.  Some of these items revealed that Bill laundered $7.5 million of the damaged investors’ money through a nominee bank account opened in the name of a Nevada shell company.

Bill had eventually withdrawn this $7.5 million to purchase diamonds and other portable valuable commodities at Nevada jewelry stores He next traveled as an airline passenger to Zurich, Switzerland, according to his passport. To date, the only recovery from Bill’s Ponzi scheme has been the $1 million once hidden in his bedroom wall. Given all of the above, “Roger” explained how investigators could try to determine whether Bill had secreted any of the $35 million in a foreign bank account:
Continue Reading Private Investigators: Detecting Hidden Assets By Following A Money Trail

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The Rembrandt Shown Above Can Be Hidden Easily.  It Was Recovered By U.S. Troops During WWII in Munich, Germany.

Divorcing spouses, debtors, determined criminals or others may hide and secretly transfer art assets and cultural heritage property. The article below was written by Leila Amineddoleh Partner at Tarter, Krinsky & Drogin LLC where she specializes in art law. Ms. Amineddoleh teaches International Art & Cultural Heritage Law at Fordham University School of Law and St. John’s University School of Law. Her article explains that art and cultural heritage property can be used to conceal assets in a variety of ways.  The article covers these topics:

I.   Forgeries, Illicit Imports & Smuggling
II.  Valuating Art In A Divorce
III. Art Transfers By Terrorists & Other Criminals
IV. Suing Over Art

LEGAL CONSIDERATIONS FOR RECOVERING ART ASSETS & CULTURAL HERITAGE PROPERTY

By Leila Amineddoleh, Esq.

Not only are art and antiquities beautiful, fascinating, and rich in cultural significance, but they can be great investments. The growing interest in the art world has introduced a new wave of investment products; entire companies have developed in the field of art investment consultation, using art as an alternative investment type. Some economists even claim that art is more secure than stocks, citing the fact that art outperforms the stock market.[1] Since the Second World War, groups of wealthy investors purchased artwork during unstable economic periods. And as with other asset classes, art and antiquities can be used as vehicles for hiding assets.

I.  FORGERIES, ILLICIT IMPORTS & SMUGGLING

One of the most frustrating aspects of art and antiquities collecting relates to valuation. There is a vast disparity between values for authentic versus forged objects. For example, where a convincing copy of a Jackson Pollock may sell for a few thousand dollars, an authentic work by the Abstract expressionist painter may sell for up to $50 million. And as the past couple decades have demonstrated, it can be difficult to ascertain which works are by the hand of a purported artist versus a talented art forger. (This difficulty recently became headline news as art investors sued the well-known Knoedler Gallery for selling multi-million dollar forgeries.[2])

These same complications arise with antiquities. It is not only difficult to determine whether an artifact is authentic, but it can be challenging to determine its origin. Smugglers bring antiquities into the US, but lie about the origin of the objects. Illicit importing has been committed in ingenious ways: some smugglers will cover an authentic antiquity in a plastic coating to make the object appear to be a cheap tourist toy; once the object has passed through customs, the plastic coating is removed and the valuable cultural object is revealed.[3] Other smugglers don’t even disguise the works, they simply claim that ancient artifacts are modern-day trinkets bought while abroad. Another way that people misrepresent objects relates to the find spot (the location where an artifact was excavated). By lying about the object’s origin, smugglers conceal valuable information regarding the work’s creation, greatly affecting the value and legality of a work. (For example, objects from Syria have been recently scrutinized for fear that looted artifacts enter the US and fuel the market for illicit objects. So smugglers now claim that these looted works are from other areas of the Middle East, thereby avoiding detection by U.S. Immigration and Customs Enforcement.)
Continue Reading Recovering Art Assets & Cultural Heritage Property

In the Breaking Bad television series, Walter White hid profits from his illegal manufacture of methamphetamine.  He hid illicit drug profits in a crawl space under his house, as the video above partly reveals.  Walter and his wife Skyler also laundered money through the A1A Car Wash.  Walter’s partner in crime, (Breaking Bad’s Jesse Pinkman),…

How can one detect assets one is unaware of?  Sometimes by putting tipsters to work and collecting their tips.  These tips may be gathered in a variety of ways.  “An Asset Search, Tax Fraud & Divorce” describes a private investigation in which a prospective tipster was interviewed by “Brian”, an ex-IRS Special Agent and former high-ranking official at FinCEN.

Brian conducted the interview on behalf of a divorcing wife trying to locate marital assets hidden by her divorcing husband.  “Warsaw Prosecutors Eye Possible Money Laundering At 50 Platowcowa Street” mentions a tip supplied by an anonymous letter.  This tip letter caused Polish prosecutors to launch a money laundering investigation and search for assets connected to a suspected shell company in Delaware.

Meanwhile, the whistleblower programs at the U.S. Internal Revenue Service and the U.S. Securities Exchange Commission, (“the Commission”), also collect tips.   The two programs respectively sniff out tips about assets hidden in tax or securities frauds.  The article “What Happens To An SEC Whistleblower Tip?” available below, gives an insider’s view of the Commission’s whistleblower program.  One of the article’s authors is Jordan A. Thomas, a former assistant director in the Commission’s Enforcement Division.  Mr. Thomas had a leadership role in developing the Commission’s whistleblower program and he is now a partner and chair of the Whistleblower Representation Practice at Labaton Sucharow LLP.

What Happens To An SEC Whistleblower Tip?¹

One of the questions we’re frequently asked by clients and prospective clients is “what happens to a whistleblower tip once it’s submitted to the SEC, and how does the SEC determine which tips to actively investigate?” These are crucial questions for any potential whistleblower, especially given that the SEC receives approximately 30,000 tips, complaints and referral each year – 3,200 of which were whistleblower tips in 2013 – but can only conduct about 700 active enforcement investigations each year.
Continue Reading Detecting Hidden Assets By Putting Tipsters To Work

At Carmelite Chambers International Fraud & Assert Recovery Conference, I met Advocate & English Barrister Stephen Baker of Baker & Partners from St. Helier, Jersey.  During the Conference, Mr. Baker presented his slideshow with case studies about recovering suspected corruption proceeds or other assets.

Some of Mr. Baker’s slides reveal how foreign bank accounts; multiple jurisdictions and nominees, (i.e. intermediaries), could be used as elements in suspected laundering schemes:

One topic Mr. Baker’s slideshow covers is the investigation of the late Nigerian dictator Sani Abacha.  As Baker & Partners’ webpage explains: “Baker & Partners were central to the successful Jersey investigation into the alleged laundering of the proceeds of the corrupt Nigerian Dictator General Abacha’s crimes through Jersey. This investigation has already resulted in over USD $160,000,000 being returned to Nigeria.”


Continue Reading Searching For Corruption Proceeds & Other Assets On The Island Of Jersey

Identifying and immobilizing assets in a timely fashion can be paramount to asset recovery cases ranging from an ultra- high net worth divorce to a forced collection proceeding against a debtor.

The abstract about “Suspending Suspicious Transactions” ¹ similarly mentions the “timely identification and immobilization” of  assets.  The abstract discusses this with regard…