Mexican Drug Cartels launder money through horse stables

By George H Wittman
American Spectator

In recent weeks Mexican cartel money laundering operations in the United States have been exposed as imaginative and daring. In the two principal cases uncovered, very different devices were used by the drug trafficking managers. These cases are an introduction to the breadth of mechanisms available to turn dirty money clean.
Perhaps the operation that had the most elaborate cover, yet a still relatively simple financial structure, was the most forward-looking. One of the top figures in Mexico's Los Zetas drug organization, Miguel Angel Trevino Morales, had a younger brother who liked horses, needed a job, and was available to manage a ranch (bought through an intermediary with drug profits) south of Oklahoma City.

Along with his wife and three children, young José Treviño Morales set about to establish himself as an owner/breeder of quarter horses. He paid for everything in cash or by using false names and accounts of supposed partners. Treviño Morales and his considerable ranch staff of fourteen built a reputation of fair bargaining and quick payment. The 400-plus horse enterprise was the envy of many other breeders with less deep pockets, but any annoyance was quickly salved by the fair and generous business practices of the Treviño Morales operation.

Meanwhile millions of dollars in cash accrued by the drug trafficking operation of the Zetas was "cleansed" in the accounting for the high maintenance quarter horse breeding and racing business. The stable's reputation grew as it began to turn out serious winners on the track and at the auctions in Oklahoma, Texas, New Mexico, and California. The overall operation was incorporated since 2008 as Tremor Enterprises LLC -- and they paid all their bills on time.
 
The New York Times once again appears to have had an inside source within law enforcement, for when it broke the story on June 12 citing its "investigations lasting months" and anonymous sources, federal authorities, including FBI Special Agents, swooped in on the ranch the same day. They were able to arrest only 7 of the 14 indicted, including José Treviño Morales and his wife. Whether this was due to the Times's early publication has not been surfaced. At this point, however, the U.S. Government has seized 41 of the choicest horses and is arranging for the care of the other 384.

While the Treviño Morales horse breeding operation reportedly successfully "cleaned" tens of millions of dollars -- and won some very large racing purses on the side -- another less romantic money laundering and drug trafficking dance was in process in nearby Western and Midwestern states. Due to the United States' tightening of controls on the production of chemicals used in the making of methamphetamine, the manufacture and shipment of meth from Mexico has grown exponentially.

Many mid-sized American gangs purchase cargos of meth either directly from Mexican cartel producers or intermediaries who have illegally transported the product over the Mexican/U.S. border using both witting and unwitting truck drivers. The meth is then carried from border sites to middlemen in California, Colorado, and elsewhere central to the customer base. One such operation, according to the DEA, owned both a legitimate trucking company and an import/export firm. The latter carried licenses to import goods from China, thus allowing a legal route for money to flow to China and then return in goods or money transfers to Mexico -- and the cycle would begin again.

While there are several versions of the foregoing used in money laundering, one of the most reliable remains the utilization of the real estate market. Purchase and resale of high-end real estate properties (residential or commercial) has been a natural route for cleaning dirty money. Resale at an appropriate price to a bona fide entity creates a cleansed account and money that can be transferred anywhere in the world.

There are many mechanisms now employed by the drug cartels to clean up the cash they obtain through illicit drug sales in the United States and Canada. All that is needed is an intermediary that can maintain the appearance of a legitimate cash flow (such as service and import/export concerns), and careful accounting takes care of the rest. Casinos and high volume restaurants are always an attractive money laundering target. While new and different mechanisms always become available, funneling money into the American stock and commodity markets remains a high priority objective.

The establishment of a legitimate-appearing identity is the sole criterion for creating an investment account allowing considerable sums to be moved around domestically and internationally. Clean identities have evolved through repeated transfers of money from Mexico and other Latin American sources to the Gulf States of the Middle East, China, Southeast Asia and eventually to the usual small countries with discreet banking and taxation laws. It takes quite a bit of imaginative accounting, but it's worth the effort to cover the original sources.

Thus it is the establishment of an acceptable identity that is the key to all illegal money movement. It need not be as elaborate as horse breeding; it can be as simple as what the KGB used to call a "documented legend" that involves a birth certificate, Social Security number -- or equivalent -- and exclusive club membership plus well-distributed cash. This and a few other accoutrements and the money launderer is ready to have a respected friend call his local hard-charging broker with a new client. The securities business swears it's much harder than that, but the Bernie Madoff case showed how social connections and well-covered accounting make a swindle work. The laundering con works the same way



Michael Hearns an Anti Money Laundering specialist with over 27 years of AML experience can also be found at www.launderingmoney.com and on twitter at: http://twitter.com/#!/LaunderingMoney as well as http://moneylaunderingworld.blogspot.com

Regulators hit Miami Gardens credit union with cease and desist order

 

 

By Brian Bandell

South Florida Business Journal

Federal regulators issued a cease and desist order against North Dade Community Development Credit Union for violations of anti-money laundering laws.
Such enforcement actions against credit unions are rare. This is the only cease and desist order issued by the National Credit Union Administration (NCUA) so far this year.
The credit union has only $5.8 million in assets. It was “well capitalized” on June 30, an improved from its “undercapitalized” status a year ago.
The NCUA order on Aug. 29 gave it 30 days to suspend all transactions for money services businesses that aren’t within its geographic area of membership. Credit unions are only allowed to deal with customers in pre-defined geographic areas. In the case of North Dade Community Development, the area is the north-central part of the county.
The regulatory order also told the credit union to stop all business with money service businesses until it implements adequate Bank Secrecy Act, anti-money laundering and Office of Foreign Asset Control (OFAC) compliance. This includes establishing criteria for identifying high-risk members, detecting when transactions involved prohibited countries or individuals, and timely filing suspicious activity reports and currency transaction reports.
It was given 30 days to find an employee responsible for this job, conditional upon approval by regulators


Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at:

http://.launderingmoney.com   and on twitter at: http://twitter.com/#!/LaunderingMoney also on http://moneylaunderingworld.blogspot.com 

Anti-Money Laundering compliance a top priority for regulators

By: Kenneth Corbin

Anti-money laundering policies were identified by both FINRA and the SEC as a top priority for examinations of broker-dealers in 2013. In its exam guidance, FINRA noted "an increase in foreign currency conversion transactions." It also stressed that there are no exemptions from the AML requirement for member firms, even if the company holds no customer funds.

What this means for advisors is clear. Although, by statute, an advisor isn't required to have his or her own individual AML policy, all advisors are covered by—and expected to uphold—their firm's AML policy. And FINRA is paying close attention to how well advisors execute the task.
"Anybody who works at a broker-dealer will have an obligation to implement the policies that the firm is under," says Sarah Greene, senior director of AML compliance with FINRA's enforcement division. "An employee of a firm cannot ignore their responsibilities under this rule. For a firm to comply, its people have to comply."
Broker-dealers came under the Bank Secrecy Act's AML framework under the provisions of the 2001 Patriot Act aimed at curbing money laundering and terrorist financing. The SEC's authority is limited to firms' reporting and record-keeping, while FINRA has a broader enforcement mandate that covers a complete AML program and generally operates as the lead regulator.
At a minimum, FINRA expects firms to set policies and procedures to detect and report suspicious transactions. They must also conduct independent testing of the program, designate an AML officer and provide advisors, broker-dealers and other personnel with ongoing training.
Although advisors aren't likely to be the focal point of an AML enforcement action by FINRA, it does happen. A recent case involving Raymond James Financial Services suggests that regulators are taking a broader view of money laundering cases and raising their expectations that financial firms establish a culture of vigilance.
The case, which Raymond James settled without admitting guilt, involved an investor who was moving large volumes of funds through his brokerage account and then writing checks for round dollar amounts from a money market account. It was a Ponzi scheme that amounted to losses of $17.8 million for investors, and the account holder received a prison sentence of 20 years.
FINRA cited Raymond James for failing to maintain an adequate AML policy, and while the company's AML officer and legal team were not exempt from blame, some of the sharpest criticism was leveled at staffers in an Ohio branch office. The letter described a string of inquiries from the AML officer asking about suspicious transactions that were not addressed by a registered representative and office manager. At one point late in the game, the investor told branch staffers that he had committed fraud and was headed to jail. No one relayed that information to Raymond James' AML officer.

Know Your Laundry
Experts stress that advisors' obligations under AML policies vary from firm to firm.Each company's policy must be tailored to the nature of the practice, accounting for the risks associated with clients, geographic footprint and business model.
For advisors, much of the risk involved with money laundering sits at the front end, in the process of onboarding new clients. Advisors must adhere to the procedures in their firm's customer identification program, a required element in FINRA's AML program template. Advisors should ask prospective clients for representations about their identity and assets and then do their own background checking based on the information provided.
Advisors should be checking prospective clients against the Treasury Department's Office of Foreign Assets Control list of foreign countries, terrorists, drug traffickers and others barred from trade with U.S. firms, as well as other relevant overseas databases. Commonly firms will engage a third-party vendor to perform those onboarding cross-checks.
Then, too, an AML program should aim to ensure the investor is not moving money through a shell bank, which can sometimes be verified by obtaining a foreign bank certificate. Likewise, advisors might probe investors' political connections to determine whether a prospective client may be deemed a "senior foreign political figure" under the Patriot Act.
Much of that monitoring can be automated, with reports of high-volume trades, large cash transfers and other exceptional activity routinely delivered to the firm's AML officer. But any effective AML program also counts a strong human element provided by advisors who often know their customers and their investment objectives best. This is a crucial line of defense in flagging suspicious activity.

Look for Danger Signs
Advisors have a fair amount of discretion in how they handle dubious activity, although experts note that some flags are redder than others. "If they are asked to facilitate sending a wire out of the account to an Iranian bank, that's clearly some suspicious activity," says Byron Bowman, general counsel at consulting firm fi360.
Other potential warning signs include investors who move large volumes of cash equivalents through their accounts and do so frequently.

Call for Backup
That's not to say that there aren't false positives. What if a customer puts in an order to liquidate all of his or her assets and arrange for a wire transfer to Costa Rica? Although this might appear to be an unusual transaction, it's not necessarily one to send the advisor running to the Feds. Often, the first call will be to compliance.
Compliance, in turn, might tell the advisor to get in touch with the client and find out what's going on. After all, the client requesting the wire transfer could have just bought a house in Costa Rica, where he or she plans to retire.
If an advisor can't obtain a reasonable explanation and concludes that the matter should be escalated—often a wrenching decision when a longstanding client is involved—the next stop will be back at the compliance department. At that point, compliance would determine whether the case warrants the firm filing a suspicious activity report with the Treasury Department's Financial Crimes Enforcement Network.
Once the matter is in the hands of compliance, the advisor is often shut out of the process due to the highly sensitive nature of filing a report. Then the firm must make the call, often in consultation with law-enforcement authorities, about whether to keep the account open or cut ties with the client.

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at http://www.launderingmoney.com/ and on twitter at : http://twitter.com/#!/LaunderingMoney also http://moneylaunderingworld.blogspot.com/ and http://launderingmoney.com/

HSBC still in crosshairs of intrest group

By The Huffington Post

Everett Stern didn't realize that becoming a whistleblower would change his life. Not only did he lose his job and career at HSBC, and become blacklisted from the banking industry, he now sleeps with a gun by his bed after receiving death threats on a regular basis. He can barely afford a ticket to New York City to speak at a press conference this Thursday Aug. 29, at noon on the steps of the New York Public Library. But he isn't worried. According to the former bank employee, he will stop at nothing to expose HSBC's continued actions of laundering money for terrorists groups. Although the bank paid a 1.9 billion penalty in 2009,Stern claims he has evidence that HSBC continued to launder money during his tenure after they admitted that they had stopped in 2010.

"The public needs to know that money is still being funneled through HSBC to directly buy guns and bullets to kill our soldiers. Fines are not acceptable. I want a criminal indictment of HSBC executives," he asserts. "And if I die because of this, my life will have been worthwhile."

A noble cause doesn't mean people will listen to you. During his employment with HSBC as an AML (Anti-Money Laundering officer), Stern found discrepancies and brought them to the attention of his supervisors. Through an Internet search, Stern found a Saudi fruit company was sending millions to a high-ranking figure in the Yemeni wing of the Muslim Brotherhood. Stern also uncovered that HSBC was allowing millions of dollars to be moved from the Karaiba chain of supermarkets in Africa to a firm called Tajco, a company that had been singled out by the US Treasury Department as major financiers of the Lebanese Shiite group, Hezbollah. Stern's supervisors, however, told him to not make waves and keep "clearing the quota of 72 alerts per week."

Stern then took his evidence further, notifying appropriate government agencies such as the FBI, CIA and SEC, about violations of US money laundering laws. All efforts fell on deaf ears -- the excuse being that prosecuting the Too Big To Fail bank would precipitate a financial collapse. Frustrated with the lack of action, Mr. Stern recently decided to take the case public, approaching various media outlets, in addition to Occupy Wall Street. By doing so, he has given up a multi-million dollar whistleblower award.

"This is not a Democrat or Republican issue," he said. "Banks financing drug cartels and terrorists affects every single American. I went to Occupy not because I am a major supporter of the movement. I went because they care enough to hit the streets, carry signs and send a message that I also believe in."

The OWS Alternative Banking Working Group, working in conjunction with Stern for tomorrow's protest, agrees. "Everett Stern is able to give us a mountain of information and point us in the right direction to apply effective pressure," says Cathy O'Neil, the Alternative Banking lead organizer. "In turn, we are able to give him an army of supporters and a populist megaphone with a proven ability to get the public's attention."

Michael Hearns an Anti Money Laundering specialist with over 24 years of AML experience can also be found at www.launderingmoney.com and on twitter at : http://twitter.com/#!/LaunderingMoney http://moneylaunderingworld.blogspot.com http://launderingmoney.com