Interpol issues warning that Bitcoin ransomware cyberattacks targeting hospitals could lead directly to deaths in covid-19

By Christine Duhaime | April 7th, 2020

Interpol has released a warning that, during the Covid-19 pandemic, ransomware cybersecurity attacks against hospitals and other institutions and research departments, are expected to increase.

The way ransomware attacks work is that hackers infiltrate and take exclusive control over computer systems, locking out the administrators, and promise to relinquish control of the computer systems on receipt of large payments of ransom in Bitcoin.

Hospitals are a critical infrastructure, although research institutions are not. Because hospitals are significantly being targeted, emergency medical care will be impacted during covid-19, which Interpol believes could lead directly to deaths.

How do you legally pay an illegal Bitcoin payment and not go to jail?

A number of organizations and experts came together a few years ago to develop a response, in consultation with regulators, to enable a Bitcoin payment to be made responsibly, through a digital currency exchange to an extortionist that satisfied the US government, and would not lead to prosecution.

The steps are more involved that this but generally, despite the otherwise illegality of the conduct, a digital currency exchange may allow its services to be used for the payment in Bitcoin to a criminal cyberattacker on behalf of one of its customers in a limited fashion provided:

(a) the digital currency exchange takes or charges no commission or fees, directly or indirectly, on either end of the transaction; and

(b) the digital currency exchange prepares and files a suspicious activity report tailored for digital currency transactions, meaning it includes the wallet addresses, the IP address from its systems, the IP from the emails provided by the customer and such. The customer is the subject of the suspicious activity report even though the customer is also the victim of the ransomware cyberattack.

Also, keep in mind that the customer is usually a corporate entity, such as a hospital, and they must be on-boarded as a customer in order for a digital currency exchange to partake in facilitating the payment and no shortcuts can be made with the identity ascertainment and verification process, even though it is clear that time is of the essence.

The digital currency exchange and its officers, directors and employees are at risk of prosecution and administrative fines for facilitating the payment of a ransomware attack, but it has been generally recognized that by taking the above steps, avoiding the profiting off of a criminal transaction and reporting it to government as soon as practical, liability can be avoided.

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Vancouver payment processor took US$147 million in proceeds of crime in Bitcoin, according to UK news site

By Christine Duhaime | April 4th, 2020

According to an article published in the digital currency news website Cointelegraph, a Vancouver-based payment processor and digital currency exchange called CoinPayments, took in US$147 million in proceeds of crime.

According to the article, the US$147 million was in Bitcoin and was proceeds from a fraudulent scheme run by a UK entity named Control-Finance Limited. The founder, CEO and director of Control Finance was Benjamin Reynolds, who has since disappeared. Over 1,000 consumers were allegedly defrauded by the scheme.

Global payments processor, CoinPayments

Vancouver’s CoinPayments, located at 808 Nelson Street according to its Instagram account, is a global payment processor, and a custodial digital currency exchange. It offers a darknet option for services, as well as a non-darknet option for payment processing and digital currency trading. Their services are offered in Farsi for Iranian foreign nationals. On Twitter, they posted a tweet stating they have no anti-money laundering or know your client [processes in place], with instant transfer of funds from anywhere in the world from a mobile app. They raised US$10.4 million from investors in a series A round. In 2017, CoinPayments processed US$1.3 billion in consumer financial transactions, making them larger than most credit unions in British Columbia in terms of financial transactional volume processed in the province.

CFTC complaint against Control-Finance

On March 23, 2020, the Commodity Futures Trading Commission (“CFTC“) applied to adjourn certain litigation steps against Reynolds and Control-Finance because Reynolds could not be located to be served with notice of a complaint filed by the CFTC on June 17, 2019.

The CFTC filed for default judgment against Reynolds and Control-Finance. When the CFTC attempted to effect service on the company, it discovered that the company address did not exist, or at best corresponded to a building that was boarded up and abandoned.

The CFTC complaint alleges that Control-Finance and its CEO, falsely claimed to consumers that it was operated by Bitcoin experts and that it manufactured an aura of profitability to lure consumers to send Bitcoin, promising rewards if customers referred “friends and family” to the company. The CEO used social media and YouTube to distribute links to refer new customers, but the promise of a referral payment was bogus and no customer ever received a referral bonus.

The CEO, according to the CFTC complaint, lied to customers and defrauded them by making available a dashboard that customers could sign into online that purported to show the balances in their accounts, which were in reality “sham balances.” The sham balances showed customers non-existence Bitcoin and non-existent referral bonuses credited to them. In actual fact, the balances were zero because the CEO had already misappropriated all the digital currencies, and there was no ability to withdraw funds.

After fraudulently soliciting Bitcoin from consumers, the CFTC alleges that the CEO abruptly terminated operations and began to delete parts of the company’s website and social media postings. The CFTC alleges that the CEO then began to make promises to “deceive customers” further with promises to pay some of the customers back. In reality, he had no intention of ever doing so and “deliberately lulled customers into complacency” with the fake pay-back promises while he worked to move out money from the company and launder it, with US$150 million being moved and laundered in Vancouver, Canada, at CoinPayments and at Toronto-based Shapeshift, and Korea’s Bithumb and Coinone.

The CFTC alleged that the CEO illegally diverted digital currencies deposited by new customers to satisfy some withdrawal requests of existing customers (the definition of a Ponzi scheme).

The CEO at various times, promised consumers that he was preserving their investments and made material misrepresentations including that the company was a safe haven and that the company was profitable, which were untrue and were made to conceal his fraud and entice customers to transfer Bitcoin to the company, according to the CFTC.

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“Can you keep a secret?” How 5 different realtors in Canada agreed to launder proceeds of crime from Colombian narcotics activities for a criminal, in a Radio-Canada investigation

By Christine Duhaime | March 31st, 2020

Radio-Canada, the French language version of the CBC, published an explosive investigative story here on March 26, 2020, as part of its Enquête series, where five realtors in Montréal each independently agreed to take proceeds of crime derived from Colombian narcotics activities from a buyer from Panama with a criminal record, on a hidden camera, and to obfuscate the transaction in the name of the buyer’s girlfriend, a 20-year-old unemployed student.

In the report, available on YouTube (here) Radio-Canada explains that the buyer and the girlfriend are actors. They agreed to wear a hidden camera and microphone and, with the Radio-Canada producer, to meet with realtors in Montréal to view properties that ranged from $1.4 million to $7 million.

One of the actor’s task was to disclose to the realtors that he had a criminal record from narcotics activities in Columbia; that he had quite a lot of money from narcotics activities that was moved from Panama to the Bahamas (both money laundering havens) and kept out of Canada.

After disclosing his narcotics activities in Colombia, keeping money out of Canada and his criminal record, the second task of the actor was to see if the realtors would facilitate him buying millions of dollars in real estate with proceeds of crime without providing any ID, and if they would agree to put the real estate in the name of his unemployed girlfriend.

Amazing reporting and shocking result – every realtor agreed to take proceeds of crime from Panama from a person with a criminal record and who was anonymous, and to keep the buyer’s name off any paperwork, and to register real title in a multi-million dollar property in the name of an unemployed third party.

Some of the exchanges between the realtors and the buyer are as follows (translated by us):

Buyer: “Are you capable of keeping a secret?”

Realtor: “Yes.”

Buyer: “Money is not an object for me, ok? The 1990s were golden years for me. I made lots of money. With, ah, Colombia. You follow?”

Realtor: “Yes.”

Buyer: “I was involved quite a lot in narcotics in the 1990s – I operated in the narcotics world quite a lot and I accumulated quite a lot of money that is, of course, outside of Canada. I was arrested for that. I had to do a bit of time. My money derives from that. I placed it in Panama. Then in the Bahamas.”

Realtor: “Ok.

Yes, the realtor says “ok” after learning the guy did time for narcotics activities involving Colombia and parked the money outside of Canada.

And there’s more exchanges with other realtors, as follows:

Buyer: “You comprehend well that my money comes from drugs; we understand each other eh? And I don’t want anything to show up in Canada; my name appears nowhere in any transaction.”

Realtor: “That doesn’t bother me at all.”

Buyer: “That does not bother you at all?”

Realtor: (Laughs) “My best friend’s husband does the same thing.”

Buyer: “We understand each other.”

Realtor: “We understand each other.”

In Enquête, the buyer tells realtors that his girlfriend will buy the real estate through a private company and he will not give his ID. They tell him that’s ok.

One realtor promises absolute discretion and says “I’ll even shake on it.” Another realtor suggests that they refrain from using email.

One realtor says that in his eyes (meaning in his view), the buyer was not the buyer; the unemployed girlfriend was.

Another two exchanges between the fictitious narcotics criminal from Panama and realtors were as follows:

Buyer: “If you ask me for ID papers, you won’t get them.”

Realtor: “Perfect.”

Buyer: “That’s clear.”

Realtor: “I won’t even ask you then.”

Buyer: “You never saw me.”

Realtor: “That’s it.”

Buyer: “I don’t exist.”

Realtor: “That’s it.”

Another realtor:

“I have zero problem with that. Absolutely zero problem. Zero. … no, no, no, no, zero problem with that.”

Two different realtors, after hearing that the money was from narcotics activities from Colombia and that it had been placed in Panama and then in the Bahamas said it was not for them to judge.

Wait what?

Actually, it is for the realtors to judge.

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act requires that realtors determine if there are reasonable grounds to suspect that a completed or an attempted financial transaction is tied to a predicate offence, which is a subjective determination and hence the realtor must make a judgment call. IOW, the realtor’s job is to judge the transaction’s likelihood to be connected to one of many predicate offences in Canada. There were at least three serious predicate offences staring the realtors in the face – tax evasion, money laundering and drug trafficking.

It was snowing in Montreal during the real estate meetings and thus one exchange ends with the buyer, hitting home that he was in the cocaine business in Colombia, saying:

Buyer: “The snow … I prefer to see it on a table. Not on the asphalt.”

Realtor laughs.

Radio-Canada called the realtors a week later and four of the five denied ever having been involved in a situation where a person sought to launder money through them.

Some realtors said that they believed that their anti-money laundering and Criminal Code of Canada obligations arose only when there was a real estate offer from the buyer.

The realtors, however, had an obligation to obtain, verify and record the identity of the buyer and the third party (the girlfriend) when they became clients, and to report the attempted financial transaction as a suspicious transaction to FINTRAC. There is no law that allows a reporting entity or its employees to obfuscate the parties in a transaction, or ignore third party ID measures. Then there is the issue of knowingly accepting proceeds of crime which is a criminal offence.

The Enquête episode in French is below. It ends with commentary about the role of lawyers who practice in the area of real estate law and mentions the concerns with the exemption of lawyers as reporting entities in Canada and the fact that law enforcement has no visibility over the financial transactions of lawyers who have trust accounts.

You may be wondering “just how bad are things in Canada when it comes to compliance with the proceeds of crime legislation?”

Well, remember the first exchange where the narcotics criminal says “can you keep a secret?” and the realtor says “yes”? The whole of the proceeds of crime legislation in Canada, literally the whole of it, is to not keep a secret.

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Albert Battel, the Nazi lawyer who defied the SS to save Polish Jews from an extermination camp

By Christine Duhaime | March 31st, 2020

Almost three years after the German Army invaded Poland, the Nazis started to implement the final solution in Poland, and in 1942, established the first of many extermination camps in which millions of Jews would perish. One of those camps was Bełżec.

SS staff at Bełżec, Poland, 1942 (Source: Wikipedia)

In the midst of those 1942 mass deportations of Polish Jews to extermination camps, in a small Polish town called Przemyśl, a Nazi lawyer and Wehrmacht officer took action, and threatened to kill SS officers to halt the town’s Jewish population from being deported.

That lawyer was Dr. Albert Battel.

Dr. Albert Battel at 3 Piłsudskiego, Przemyśl, Poland, 1942 (Source: Unknown)

Dr. Battel was the only known Wehrmacht officer to have ever threatened the SS with armed force to protect the Jewish people. And he did more — he helped Jewish lawyers in Nazi Germany who were disbarred for being Jewish, to survive and he smuggled hundreds of Polish Jewish people out of a ghetto.

He knew that he could have been shot and killed for the singularity of each of those acts. He did them anyway.

Liam Neeson as Oskar Schindler in Schindler’s List, 2018 (Source: Hollywood Streams)

It has been suggested that Dr. Battel was another Oskar Schindler. Not quite. Unlike Schindler, Dr. Battel had no money and no connections; he didn’t work with the SS, he worked against them; and he was not recognized during his lifetime.

The opposite happened — his actions harmed him.

Dr. Battel was so reviled by the SS that they ordered him investigated, and the depth of what the SS called his friendship to the Jewish people so was egregious in their view, that his case was elevated to Heinrich Himmler, the Reich leader of the SS, the Armed SS and Chief of German Police, who ordered that Dr. Battel be immediately arrested at the end of World War II. Before that, Dr. Battel had been reprimanded by the German law society and sued for supporting Jews in Nazi Germany. After the war, he was prohibited from practicing law because he had been a member of the Nazi Party, despite having worked in defiance of the Nazis. Not one person rose to his defence in immediate postwar Germany.

It wasn’t until 1963, when some of Himmler’s SS files were disclosed in a war crimes trial of a Nazi commander that some of Dr. Battel’s actions came to light. By then, Dr. Battel was dead.

The Wehrmacht had 18 million soldiers; why only one — Albert Battel — stood up to the SS in broad daylight in what was, in effect, a moment of humiliation for the SS, to protect Polish Jews from an extermination camp can never be explained.

Here is his story.

Dr. Battel’s early life in Germany

We don’t know much about Dr. Battel’s early life except that he was born on January 21, 1891, in Klein-Pramsen, formerly in Germany, now part of Poland. He grew up in Breslau, Germany, now Wrocław, Poland, and studied at the University of Berlin and at the University of Breslau.

Breslau, Germany during the Nazi period (Source: Angielski)

He joined the German army in World War I, and received the Iron Cross medal for bravery. In 1925, Dr. Battel began practicing law in Germany.

Nazi persecution and deprivation laws

It’s hard to appreciate the legacy of Dr. Battel without describing some of the laws that came info force during the Nazi era.

In1933, Nazi Party officials began to order the arrest Jewish lawyers. Law societies that regulated lawyers began to restrict Jewish lawyers across Germany from practicing law. The notarial licenses of Jewish notaries were revoked.

Disbarred Jewish lawyers applying for special consideration for readmission to practice law, Berlin, Germany, 1933 (Source: Bundesrechtsanwalktskammer)

As time progressed, the government enacted a series of Aryanization decrees and laws to remove Jewish people from the professions. Lawyers, doctors and dentists could no longer hold licenses to practice. Jewish lawyers were prohibited from appearing before courts and tribunals and doctors lost hospital privilege rights. The offices, files and clients of Jewish lawyers were transferred to Aryan lawyers and the assets of Jewish lawyers were seized.

Banks, at first without legal or judicial authority, confiscated bank accounts, the contents of safety deposit boxes, shares of private and public companies, bonds, commercial and real property deeds and insurance policies that were registered to Jewish people or Jewish owned entities, and the banks turned some of those assets over to the government.

It eventually became a prohibited act to assist or feed a Jewish person, to give or lend them money or anything or value, to give them shelter or to employ a Jewish person without authorization.

The final solution involved, in practice and in law, the gradual implementation of three phases of measures against the Jewish population. The first part was persecution whereby the government enacted laws that prohibited Jewish persons from trading, working, going to school, shopping, swimming, using public spaces, having radios and bicycles or buying food, except in limited places during limited times. The second part was the confiscation of property and assets whereby Jewish families were relocated to ghettos and stripped of protective clothing, exposed to the elements, deprived of heating fuel and sanitary facilities and their homes, money, gold, jewellery, savings, art, books, furnishings, and other valuables confiscated. The third part was removal to concentration or to extermination camps, from which there was usually no return. The first two parts were meant to deprive Jewish people of resources to survive. All three parts, collectively, are what courts have held was the act of genocide.

A heart-crushing moment of WWII, Warsaw ghetto, Poland, July 1942 (Source: Instytut Pamięci Narodowej)

A person who questioned, interfered with, circumvented, or acted against the Nazi regime could be severely punished, or killed.

Dr. Battel joins Nazi Party

In1933, the law required that Dr. Battel join the Nazi Party to be able to continue working in his profession. So he did.

He was both a lawyer and a notary.

In Germany, notaries are lawyers with additional training, who are also agents of the state in certain matters. They have jurisdiction to create and authenticate documents, including documents to prove or create identities. During the Nazi era, notaries also had jurisdiction over the Aryanization of seized Jewish assets. For example, when banks seized safety deposit boxes registered to their Jewish customers, a notary was required to be present to record the property seized for the government. When Jewish owned property and businesses were seized, title could only pass to the Nazi government or newly appointed Aryan owners with the help of notaries who prepared share certificates, property deeds, and instruments of transfer used to effect the wholesale expropriation of Jewish assets.

Assisting Jewish lawyers in Germany

Dr. Battel didn’t engage in notarial work to assist with the expropriation of Jewish assets — he did the opposite. He notarized documents to allow for the assets of at least one Jewish family, possibly more, to be removed from Germany.

That family was his own.

We know from Holocaust legal scholars that Dr. Battel had a brother-in-law named Eduard Heims from Berlin, who married a woman from Breslau (Dr. Battel’s hometown), named Hildegard. Although we know they were family, there isn’t any research available on how Eduard Heims is connected to Dr. Battel. It may be that Hildegard was the connection and was a sister or half-sister of Dr. Battel. Back then, because Heims was Jewish, both Heims and Dr. Battel would have had to obfuscate any familial connection between them.

Eduard Heims was a well-known lawyer, former judge and wealthy private banker in Berlin. His father was a professor of medicine at the University of Berlin.

In the 1930s, Heims was one of the many Jewish lawyers who were disbarred from the practice of law for being Jewish. He was also prohibited from being a banker and the Nazis commenced to seize his assets and his property.

Dr. Battel helped Heims, his wife and their two children with (likely non-Jewish) identity products to escape to London and accompanied them to make sure they arrived safely. We know that Dr. Battel also did some diplomatic advocacy for Heims in Europe at embassies, but we don’t know the nature of that work.

Heims had a sister named Gertraud Henriette Maria Elisabeth Heims, who stayed behind in Germany when he emigrated to Europe.

She was deported to Lithuania and killed during the Kaunas Fort IX massacre on November 25, 1941, in which 9, 200 German Jews were shot to death in fields over the course of three days.

Elisabeth Heims, Germany (Source: Weissekoffer)

Dr. Battel managed to save from expropriation, some of Heims’ property and assets from the Aryanization process, and helped, presumably using his notarial skills, to get those assets to Europe for Heims, and later to the United States. Heims was a multi-millionaire and those assets were considerable.

To effect the removal of Jewish-owned assets of a considerable sum and to effect the emigration of a Jewish family, particularly a prominent one in private banking and law, in Nazi Germany was no small feat and involved Dr. Battel violating a number of laws.

Eduard Heims never denied that Dr. Battel saved his life and his money. In an affidavit filed decades later, he deposed that Dr. Battel saved the lives of his family and their property at the risk of Dr. Battel’s own life.

Heims moved to the United States in 1937 and adopted an English first name, becoming Edward H. Heims. He was wealthy enough to immediately retire and buy a vast acreage along the California coast that eventually became part of the Point Reyes National Park. He is note-worthy because he was the catalyst that caused Point Reyes to become a national park because he was the first landowner to agree to sell his property to the US government for the park, despite pressure from the other landowners not to sell.

Heims has a connection to the Canadian spymaster after whom 007, the James Bond character, is partially based, but that’s a story for another time. Dr. Battel did, as the trailer indicates below, make Heims disappear from Germany.

Trailer for Spectre, 2015 (Source: Zero Media)

But for Dr. Battel, who saved the life and the riches of Eduard Heims, the multimillionaire and Berlin banker and lawyer, the spectacular Point Reyes National Park may not have become a park.

Point Reyes National Park, California (Source: National Park Service)

From 1936 to 1937, Dr. Battel ran into trouble with the Nazi Party and the law society that regulated lawyers for assisting other Jewish lawyers.

He was charged by the state police and found guilty for the crimes of giving money to a disbarred Jewish lawyer, and letting him work at his law office.

He was later reprimanded by the Nazi Party for protecting Jewish lawyers and then reprimanded by the German law society and fined for sharing fees from a file with a third party. Presumably the third party was a Jewish lawyer but we don’t know for sure.

A state police file on Dr. Battel was opened during the time the Nazi Party was in power. He is described therein as having “no merit for the Nazi Party”.

Clearly, no love was lost between the Nazi Party and Dr. Battel.

Dr. Battel is conscripted to the Wehrmacht and arrives in Poland

Although Dr. Battel had no merit for the Nazi Party in 1937, in early 1942, he was conscripted into the army as a reserve officer and assigned to the Wehrmacht office in the town of Przemyśl, Poland.

Przemyśl was a small city of about 60,000 people near the Ukraine border. About one-third of its population was Jewish. The San River divided Przemyśl and in 1942, a Jewish ghetto had been established on one side of the San River. The rest of the city was on the other side. The only way to reach the ghetto was by a railway bridge.

Jewish ghetto, Przemyśl, Poland, July 1942 (Source: Holocaust Research Project)

The Wehrmacht commander in Przemyśl was Major Max Liedtke, a former newspaper reporter who had been fired for publishing comments critical of the Nazis.

In May 1942, approximately 1,000 Jewish youngsters were deported from Przemyśl to Lwów (Lviv). Dr. Battel voiced his opposition to the deportation to the SS and as a result, became known after that among the SS as a “committed friend of the Jews.”

In July of 1942, Dr. Battel was formally reprimanded by the Wehrmacht for being respectful to, and shaking hands with, Dr. Ignatz Duldig, a lawyer and the head of the Przemyśl Jewish Council, with whom he had attended law school at the University of Breslau.

Ignatz Duldig (Source: Geni)

Dr. Battel threatens to shoot at the SS to halt deportations

InJune 1942, the SS drew up plans to deport the Jews in the ghetto of Przemyśl to the Bełżec extermination camp.

The day before the deportation, on July 26, 1942, Dr. Battel, with the support of Major Liedtke, gathered Wehrmacht officers and, using army vehicles, blocked access to the railway bridge across the San River to prevent the SS from carrying out their preparatory work for the next day’s operation.

Wehrmacht vehicles used during WWII in Poland, 1942 (Source: World War Photos)

When the SS troops showed up at the bridge, they demanded that the Wehrmacht move their vehicles and unblock the bridge. Dr. Battel refused and threatened to open fire on the SS if they advanced.

The head of SiPo later reported to Germany commanders that the SS officers had to hold themselves back from shooting at the Wehrmacht for daring to openly confront the SS in public and reported that Dr. Battel had said that he wanted to get Jews out of the ghetto.

The SS retreated for instructions from the leader of the operation, SS Hauptsturmführer Martin Fellenz, who had travelled from Kraków to Przemyśl to oversee the deportation from the ghetto on instructions of SS Oberführer Julian Scherner.

SS Oberführer Julian Scherner, Bohemia (Source: Wikipedia)

Fellenz confronted Major Liedtke and Dr. Battel and threatened them with action if access to the ghetto was not provided.

SS Hauptsturmführer Martin Fellenz, Kraków, Poland, 1942 (Source: Holocaust Historical Society)

During the standoff, Dr. Battel sent several trucks into the ghetto to remove Jewish families and, in five trips, removed about 500 Jewish residents and brought them to the Wehrmacht barracks.

The Wehrmacht eventually opened the railway bridge and the next day, the SS conducted the same violent destructive removal operation as they had for the Warsaw ghetto, forcibly removing approximately 3,850 Jews from their apartments, marching them to the train station and deporting them by cattle cars in trains to Bełżec where they perished, killing any who resisted.

Marching to a train station for deportation, Poland, 1942 (Source: Instytut Pamięci Narodowej)

The Fall of 1942 in Poland

The protection of Jewish people in Prezmyśl by Dr. Battel and Major Liedtke was an extreme irritant to the SS and the Nazi Party.

Decades later, Dr. Marcus Schattner testified in Israel in an unrelated matter, that because of Dr. Battel, in the Summer of 1942 at the height of the deportations there was a “certain state of war between the Wehrmacht and the Gestapo.”

In August 1942, an SS Hauptsturmführer named Weichelt reported with indignation to his superiors that Dr. Battel had Jewish families under military protection of the Wehrmacht and not only that, was feeding them, and asking for more Jewish workers to live and work at the Wehrmacht depot.

Dr. Battel then issued a controversial order to the SS and the local police that special treatment must be given to the Jews in Przemyśl under the Wehrmacht protection to prevent attacks against them from civilian authorities.

In an astounding exchange for that time, on August 22, 1942, SS Untersturmführer Adolf Benthin asked Dr. Battel how far the protection of the Jews should extend and whether in the case of a criminal or political offence committed by a Jewish person, the police could take action. Dr. Battel told Benthin that his consent was required to take action against a Jewish person under his protection.

In Germany, Nazi Party leaders were being told that Dr. Battel’s “social betterment of the Wehrmacht Jews was strongly criticized.”

Dr. Battel ordered arrested by Himmler

Finally, in October 1942, the SS in Poland had enough of the so-called “friend of the Jews” standing up for the human rights of the Jewish people in Przemyśl, and filed two secret complaints against Dr. Battel: one with the Wehrmacht command and one with the SS command in Germany.

The first, the SS investigation, went all the way up to the SS Reichführer Heinrich Himmler.

Heinrich Himmler, Minsk, Belarus (Source: Critical Past)

Himmler wrote to Martin Bormann, Hitler’s private secretary and head of the Nazi Party Chancellery, and informed him that he had ordered the arrest of Dr. Battel after the war and would put him on trial for supporting Jews. That the second most powerful man in the Reich felt it necessary to intervene and order a trial against an unknown officer in a small town in Poland speaks to the impact of Dr. Battel. Dr. Battel never knew that he had been investigated by the SS or was to be arrested on orders of Himmler.

Letter from Himmler to Martin Bormann about Dr. Battel’s arrest, Berlin, Germany, October 19, 1942 (Source: Wikipedia)

The second, the Wehrmacht investigation of Dr. Battel was led by General Walter Von Unruh for the chief of the OKW, which was Wilhelm Keitel, one of the major war criminals who was tried and convicted at Nuremburg. Von Unruh reported that Dr. Battel was the “evil spirit of the troops.”

Dr. Battel was aware of the Wehrmacht investigation. In his personal papers located in the 1960s, he confessed to have taken military action against the Nazi Party to protect the Jews in Poland and wrote that as a consequence, his WWI Iron Cross for bravery was revoked, he was placed in a prison, his earnings were suspended and he was threatened to be handed over to the Gestapo. He wrote that only the benevolence of Austrian General Eugen Höberth Edler von Schwarztal saved him.

General Eugen Höbert Edler Schwarztal, Kraków, Poland, 1942 (Source: NAC)

After Poland

Dr. Battel’s papers suggest that he was cautioned, probably by General Schwarztal, to take sick leave from the Wehrmacht, which he did, at the end of 1942.

He returned to Breslau and resumed practicing law for about 18 months before he was drafted into the Volkssturm before the surrender of Germany, and thus fell into Russian captivity, from which he was released in 1946.

Breslau, Germany, 1945 (Source: Polish Government)

Major Max Liedtke didn’t have a benevolent general to assist him — at the end of the 1942, the Nazis sent him to the front lines. He was taken prisoner by the Russians and held in a Russian POW prison for 13 years, where he died in 1955.

Dr. Battel punished for Nazism postwar

After the war, Dr. Battel was punished in a number of ways for having joined the Nazi Party.

In 1946, he was subject to denazification, which was a process by the allied countries with three goals — to cleanse German society of Nazi influences; to instil in former Nazis a set of new values; and to ensure that former Nazis were economically harmed and excluded from important positions in society and government.

Filling out forms for denazification, Berlin, Germany, 1945 (Source: Musée des Alliés)

Most Nazis, and some war criminals, who went through the denazification process were exonerted. Not Dr. Battel. He was found guilty by lawyers of the crimes of being a Nazi follower and to have benefitted from Aryanization laws that persecuted Jewish people in Germany. He was fined and banned from ever holding a position of power or influence in Germany.

There’s more.

Dr. Battel was then denied admission to practice law by the law society. Several lawyers testified against him and brought up the fact that he had been a Nazi and was not, in their view, fit to practice law.

He got a job at a glass factory and died in 1952.

His family never received the Iron Cross medal that had been taken away from him by the Nazis when a denazified version was reissued decades later to veterans.

Righting the wrongs done to Dr. Battel

There are few lawyers like Dr. Battel.

He not only risked his life, his position, his freedom and his livelihood by disobeying the Nazi Party to save Jewish people, he was harmed by it — first by the Nazis, then the allies, then his fellow lawyers — and he never sought recognition for the good that he did.

For Dr. Battel, the goodness of the deed — saving one life or 500 — was reward enough.

The wrongs done to Dr. Battel were righted — mostly by one man — an Israeli lawyer named Dr. Zeev Goshen.

Remember SS Obergruppenführer Martin Fellenz who, on July 26, 1942, confronted Major Max Liedtke and Dr. Battel to demand that they unblock the Przemyśl railway bridge?

In 1963, in Kiel, Germany, Fellenz was charged with war crimes for sending 40,000 Polish Jews to extermination camps, including those from Przemyśl. In 1946, Fellenz, unlike Dr. Battel, was exonerated by the allies’ denazification process and found to have committed no material wrongdoing, and was thus able to hold office as an elected government official.

Martin Fellenz, Kiel, Germany, 1963 (Source: Wikipedia)

In a twist of fate, like a seesaw, his downfall slowly caused the story of Dr. Battel to rise into the light.

During Fellenz’s trial, an old faded file from 1942 emerged, seemingly from nowhere.

It was a 40 page file of an SS investigation of an unknown dead Nazi lawyer named Dr. Battel that contained written testimony from SS officers stationed in Poland in 1942, one of which was Fellenz, detailing how an insubordinate officer who was a “friend of the Jewish people” had threatened to shoot SS officers if they removed Jews from a ghetto in Przemyśl, and how that lawyer removed several hundred Jewish people from the ghetto and ordered that they be fed and protected, acting against the interests of the state.

Ironically, the same documents prepared by the SS officers to indict Dr. Battel with Himmler in 1942, served to convict Fellenz in 1963.

After he read the old SS file, the judge in the Fellenz case told the jury about Dr. Battel during jury instructions, describing him as a Nazi who had exercised the choice to “stand up for the cause of human dignity.”

After it emerged in the local news in Germany that there was once a Nazi lawyer who was a Wehrmacht officer, who had threatened to shoot the SS to halt a Jewish deportation, two lawyers, Dr. H. Artzt, a public prosecutor in Germany and Dr. Zeev Goshen, independently researched his life from records in Poland, Russia and Germany and published stories in German of Dr. Battel.

Dr. Goshen went further and for many years, asked for Dr. Battel to be recognized by Israel, and finally succeeded when on January 22, 1981, Dr. Battel was recognized as Righteous Among the Nations by Yad Vashem, the World Holocaust Remembrance Centre.

But not without the help of one other prominent person in Israel — Michael Goldmann-Gilad, who provided confirmation of Dr. Battel’s deeds at Przemyśl.

You see, Mr. Goldmann-Gilad was a teenager at the Przemyśl ghetto during the time Dr. Battel was there.

He said of Dr. Battel, “we Jews knew that we had a protector in him. A few of the people Dr. Battel took out of the ghetto survived and are in Israel” … few like him “risked their position and life out of decency and humanity.”

Michael Goldmann-Gilad, investigative officer, Adolf Eichmann trial, Israel (Source: Yad Vashem)

Mr. Goldmann-Gilad was deported from Przemyśl to a concentration camp and eventually made his way to Israel and became an Israeli police officer. He became the investigative officer in charge of interviewing Adolf Eichmann for his war crimes trial and helped secure his conviction.

In 2014, Toni Rinde, a Holocaust survivor in Florida saw a picture of Dr. Battel and recounts the story of how he saved the lives of her family in Przemyśl.

A tree was planted in Israel for Dr. Battel to honour his legacy.

The one who said “no”

For over seventy five years, people have debated and wondered, and theorized why there was never one Nazi officer who ever stood up to the SS in public, and at the risk of their own life, said: “no” to the Holocaust.

But there was.

There was one.

His name was Albert Battel and he was a lawyer.

A tree grows in Israel for Dr. Battel (Source: Yad Vashem)
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SEC files injunction against digital currency CEO who allegedly took money from consumers for a digital currency, made numerous material false representations on a radio show, including involvement of large advisory firm and defrauded the public

By Christine Duhaime | March 26th, 2020

The US Securities and Exchange Commission (the “SEC“) filed for an injunction in Texas on March 16, 2020, against Robert Dunlap, Nicole Bowdler, the girlfriend of Dunlap, and a former Washington State Senator, David Schmidt, in connection with a digital currency they launched called Meta 1 coin (the “MetaCoin“) which raised US$4 million from the public.

According to the complaint filed in a Texas Court, the defendants, or one or more of them, allegedly never spoke a word of truth in connection with MetaCoin, and went on radio shows, which have a wider international audience, and allegedly made material untrue statements to induce the public to invest in MetaCoin. And if that was not enough, allegedly they made further material untrue statements to induce the investing public to have comfort by alleging, inter alia, that KPMG was auditing MetaCoin.

Further, according to the complaint, the defendants used money from investors for a BMW and a Ferrari.

The defendants also set up, allegedly, a digital currency exchange. The complaint alleges that the defendants obtained money and property based on the material untrue statements and by deceit.

Specifically, the SEC alleges that the defendants:

  • sent out a newsletter representing that the MetaCoin would increase in value;
  • stated that they had a proven track record of success and “experts” on the team;
  • stated that the company was growing and hiring 200 people;
  • stated that the MetaCoin was backed by $2 billion in art and gold;
  • stated that the MetaCoin was secure and safe;
  • on the radio show, stated that KPMG was engaged to audit them;
  • attempted to intimidate a person questioning the legitimacy of the MetaCoin;
  • on the radio show, stated that a person who spoke out against MetaCoin was an “absolute fraud” who was going to jail and who had fabricated information against MetaCoin and its owners;
  • on the radio show, stated that they consulted with the SEC who were impressed with the MetaCoin and bought some MetaCoin;
  • on the radio show, stated that they were “leading the way with KYC” compliance; and
  • stated that the public can’t lose money buying MetaCoin.

The SEC says that the statements above were untrue, more specifically, the SEC says some were just lies. The defendants, when contacted by the SEC, cooperated to some extent and then ceased to be responsive.

On the surreal side, one of the defendants, Nicole Bowdler, stated that Abraham Lincoln came back from the dead and made revelations to her. On YouTube, she talks about how angels and Mother Earth also brought her back from another place, below. Dunlap appears at 0:46 in the below video to fix Bowdler’s iPhone.

According to the SEC complaint, the CEO worked from his home but alleged to investors that he worked from an office.

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US unseals money laundering indictment against owner of Bitcoin mixing service used by Canadian darknet site

By Christine Duhaime | March 20th, 2020

Indictment for mixing service

On February 13, 2020, the US government unsealed an indictment against Larry Dean Harmon, the alleged founder of a Bitcoin mixing Bitcoin service, and of a darknet search engine that hooked up with the now-defunct illegal Canadian Bitcoin darknet site called AlphaBay.

The DropBit office photo on Instagram

The mixing service was called Helix and the darknet search engine was called Grams. The US government alleges that Harmon operated a Bitcoin money laundering service and promoted and obfuscated the proceeds of crime derived from drug trafficking and other darknet illegal activities.

With respect to AlphaBay, it was shut down by US law enforcement. AlphaBay operated the world’s largest darknet illegal site accessible on TOR that resulted in the death of several teenagers from fentanyl overdoses. Its Canadian owner was arrested by US law enforcement and committed suicide in custody before being extradited.

Illegal drugs cited as a “victimless crime”

On this website, the unidentified founder of Grams and Helix, described Helix as the definitive Bitcoin cleaner, which, for a 3% fee, will “clean your Bitcoin” and went on to make this statement “victimless crimes such as using drugs is everyone’s right and is the purpose of the darknet” and that he “likes being on the frontier of the Internet’s dark side.”

Over US$311 million in Bitcoin washed

Harmon’s mixing service is alleged to have washed over US$311 million in Bitcoin and to have partnered with AlphaBay to launder money.

Mixers and tumblers are a form of Blockchain smurfing in anti-money laundering law

The way mixing and tumbling services work is that they accept Bitcoin from a wallet address, let’s say of a hypothetical drug dealer, and split and run it through up to 20 different wallet addresses, or more, several times, to generate 20 – 100 different addresses with different amounts, and then send the Bitcoin back to the drug dealer minus service fees.

In the banking world, a parallel is if a bank took $1 million from a drug dealer into one bank account and then opened up between 20 to 100 new bank accounts for the drug dealer and split the $1 million into random non-logical amounts and credited the 20 to 100 bank accounts with each portion of the $1 million, and did that again, and perhaps again, before returning the $1 million minus 3% in fees to the drug dealer. The services that are rendered by tumbling and mixing are smurfing services. Such a bank, engaging in deliberate smurfing, as that term is known in anti-money laundering law, would be shut down yet banks continue to provide banking services to companies that operate tumblers and mixers and to their founders, and to digital currency exchanges that support them.

Bitcoin tumbling and mixing makes tracing the flow of funds next to impossible for a financial crime investigator and that’s the reason they exist – to ensure that financial crime, AML experts, and law enforcement agencies cannot follow the money for financial crime purposes.

Some people who use mixers and tumblers that anonymize Bitcoin transactions and anonymize the transactors involved in those transactions, believe that financial privacy in connection with digital currencies is a human right.

Mixers and tumblers purposely defeat the rule of law

In law, the opposite is true – separate and apart from the issue of the legality of smurfing activity, it is not lawful to operate an enterprise that purposely or indirectly defeats the rule of law, and denies certain constitutional rights, including the right to seek redress through the judicial process. Mixing and anonymizing services expressly promise consumers that their financial transactions will be impenetrable, meaning that no court of law or law enforcement agency will be capable of uncloaking transactions to reveal the identity of transactors. Such obfuscating technology is created to ensure that the right to recover for criminal, fraudulent or civil purposes is purposely defeated.

Unfortunately, Canada has a disproportionate number of Bitcoin tumblers and anonymizing services that have found safe harbor.

Twitter profile picture

Not registered as MSB

The Helix tumbling and mixing service is alleged to have operated from Belize and the US, and to have conducted financial transactions of Bitcoin all over the world and remitted those transactions without being registered with FinCEN or registered as an MSB in any state in the US. Harmon was also charged, as a result, with operating an unlicensed money transmission business and with transmitting funds known to have been derived from criminal activities.

Harmon has property in Belize, Ohio and Colorado. The administrator of AlphaBay, Bryan Herrell, lives in Colorado too. He pled guilty in January 2020, for his role in AlphaBay and is expected to be sentenced in May 2020, for up to 20 years in jail.

Harmon is also known as “coin ninja” and also operated a company that created a Bitcoin wallet service called DropBit. Harmon put his Insta on lockdown but the company’s Insta is still live. His brother who is part of DropBit it appears, has an open Insta here with videos of being in Belize and of sending out massive amounts of cheques for something that allows you to “rent out your account” for $100 a month.

Instagram posting
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American ICO lawyer and director of Vancouver Blockchain company, hit with more extortion charges

By Christine Duhaime | March 18th, 2020

Grand jury indictment for Canadian director

Steven Nerayoff, a US lawyer who advised a number of digital currency companies and initial coin offerings (“ICOs“) was indicted by a Grand Jury on January 10, 2020, in New York.

Nerayoff is, or was, the Chairman of a British Columbia public company called Global Blockchain Technologies Corp. According to SEDI, he remains a director of it and an insider as that term is defined under the Securities Act of British Columbia. It is possible that he ceased to be a director but failed to complete his SEDI filings.

Still a director of the BC cease traded company.

Arrested by FBI in 2019

Nerayoff was the subject of an earlier criminal complaint unsealed in New York in September 2019, and arrested by the FBI. According to that criminal complaint, he threatened to destroy a Seattle company if they did not pay him over US$8 million. The company paid the funds.

On January 10, 2020, more criminal charges were levied against him when the Grand Jury charged Nerayoff additionally with conspiring to obtain digital currencies and money by extortion and threats of violence, force and fear and with extortion over threatening to injure the reputation of executives of the company.

Since then, Nerayoff has changed lawyers a number of times, and is apparently in plea negotiations.

Adding Blockchain to the company name allowed it to raise $64 million

According to its public securities law filings, Global Blockchain Technologies Corp. changed its name to Global Gaming Technologies Corp. and seems to have disposed of substantially all of its undertaking in the corporate law sense.

It had changed its name to be a “Blockchain” company just at the height of the Blockchain and ICO craze, which changed its investment fortunes dramatically. It raised $64 million in 12 months as a Blockchain company in Vancouver, when as a non-Blockchain named company, it only raised $245,000 during its last fund raising attempt.

Changing name to include “Blockchain” yielded $64 million

How it spent $64 million from shareholders in one year appears to be a mystery but it had shareholders from the US, Barbados, Bahamas, Cayman Islands, the Marshall Islands, Thailand and Hong Kong, as well as Canada.

A series of unusual announcements

Global Blockchain Technologies Corp. had some unusual arrangements announced in its public disclosure documentation, and if the arrangements were not unusual, the details announced were peculiar.

For example, on December 12, 2017, Global Blockchain Technologies Corp. announced an agreement with a company called Coinstream Mining whereby it would give US$10 million cash to Coinstream Mining for nothing in return. Coinstream would then give that US$10 million to a company called Cyptoba, who would build a mining farm. Cryptoba would then give 12,500 Bitcoin to Coinsteam Mining over five years, at 2,500 Bitcoin per year at a negligible price.

On December 12, 2017, the price of Bitcoin was US$17,415.40. The delivery of 2,500 Bitcoin per year on that date was a deal worth US$43 million per year so why a 75% discount? Moreover, the whole of the deal was worth US$217,692,500, so why was it priced at just US$10 million?

On December 21, 2017, it announced that the regulator allegedly approved it buying mining equipment for US$20 million from China but that it was not going to mine digital currencies with the equipment – it was acquiring mining equipment for investment purposes. The company also said that US$10 million of that mining equipment would be given to Coinstream Mining instead of US$10 million cash pursuant to the deal described above.

Later, Global Blockchain Technologies Corp. disclosed that some of its mining equipment ended up in New York, which happens to be where Nerayoff lives. Three months later, after raising $42 million, it was out of money and raised another $5 million and announced that it had bought Coinstream Mining and the mining equipment was in Mozambique and Manitoba.

A month later, it announced it had transferred all of its assets related to its US$20 million in mining equipment and presumably the $217 million in Bitcoin under the Coinstream-Cryptoba deal that remained deliverable until 2022, to a company called Metaverse. In an early announcement, Metaverse was described as a subsidiary. Here, it is described as its own listed entity that is also non-arms length – it shared the same directors.

Nerayoff was quoted as saying, in his capacity as chairman of the Vancouver-based entity, that several digital currency exchanges were basement operations handling millions and millions of dollars in transactions and that Global Blockchain Technologies Corp., together with Coinstream Mining, would change that and deliver professional exchange services.

Global Blockchain Technologies Corp. never operated a digital currency exchange according to its disclosure documentation.

It appears to have been a public corporate vehicle that was used to raise significant sums of money that was then gutted in a short period of time.

Shares halted and cease traded

Subsequent to the unsealing of the criminal complaint against Nerayoff in September 2019, the shares of Global Blockchain Technologies Corp. were halt traded by IIROC. And then they were cease traded by the British Columbia Securities Commission. It seems like it is out of money again.

Nerayoff has said that he worked, possibly still works, with a number of Canadian digital currency ICO issuers, not only Ethereum but Polymath and AION. A digital currency exchange in Toronto called Hyperion Crypto Exchange Inc. is partly owned by Global Blockchain Technologies Corp., and it alleges that it is a listed ATS by the SEC and works with the Ontario Securities Commission. All of that, and more, is described in an earlier post here.

Nerayoff has apparently alleged that he invented the ICO and Polymath represents to the public that Nerayoff is the co-founder of Ethereum.

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UK Bitcoin drug dealer who imported illegal drugs from Canada on the darknet, sentenced to 8 years in jail

By Christine Duhaime | March 17th, 2020

A UK man, Paul Johnson, was sentenced to eight years in jail in the UK for operating a darknet drug trafficking business from the attic of his home. In order to obfuscate what he was doing, he set up a company called “Labrador Tea Company” and used it to buy illegal drugs from Canadians in Canada, which he paid for in Bitcoin, and had it sent to the UK, where he re-sold them to others on the darknet, accepting payments in Bitcoin.

Johnson bought ecstasy, cocaine, LSD, heroic, cannabis and other illegal drugs under Labrador Tea Company to try to dupe postal inspectors that he was importing tea from Canada. Primarily, he imported cannabis and LSD.

He amassed a fortune of $2.4 million and used the proceeds of crime to buy a house with cash, and several cars. His neighbors believed he worked at Kentucky Fried Chicken and was able to afford a house and several cars from his job frying chicken at KFC.

The police raided his house in 2017 and seized a wide range of drugs, including heroin and LSD and over $400,000 in Bitcoin at a digital currency exchange.

In order to hide the nature of the drug business, Johnson used several post office boxes at malls and store fronts that rent postal boxes, to receive illegal drugs from Canada. He paid over $40,000 in fees for several postal boxes for the drug operation. He also had two places he paid rent for, one of which was empty, to have an address to receive material – having two residences, one of which is empty, is a common typology for money laundering.

Johnson also bought drugs online from Spain.

We don’t know what digital currency exchange Johnson used, who sold him the drugs on the darknet from Canada, what digital currency exchange the drug seller from Canada used, or Johnson’s darknet handle name.

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Austrian bank shuts down after money laundering allegations

By Christine Duhaime | March 15th, 2020

Revocation of Bank Licence

The Meinl Bank filed for insolvency at the Vienna commercial court after money laundering allegations.

The Bank lost its banking licence from the European Central Bank after a review of its AML compliance found a massive lack of compliance amid allegations that from 2011 to 2015, the Bank was used as a correspondent, willingly, to move approximately €500 million out of Eastern Europe for politically exposed persons, where it was laundered and sent to offshore little islands to be parked in shell companies with obfuscated ownership.

The Meinl Bank was founded in 1923 as part of the food business operated by the Julius Meinl family. Julius Meinl was the chair of the Bank during its lax AML period. When it began to be scrutinized, it went through a name change to Anglo Austrian Bank.

Bank customers caused a run on the bank at the main branch in Vienna and were not able to withdraw their funds. The Bank says it has €245 million in liabilities, €148 million in assets and 9,000 clients. Approximately €60 million is covered by deposit insurance in Austria.

Bank Secrecy

Austria is one of the most secret banking jurisdictions in the world, with centuries long tradition of maintaining secrecy of bank account information. It’s so steeped in secrecy, it’s where Swiss bankers bank. Part of the way the secrecy of Austrian banks is maintained is that it is tied to the culture of the hierarchy of the status of the intelligensia, who are titled, which are notaries, lawyers, professors and doctors and such.

In Austria, notaries are a higher-ranked occupation compared to lawyers, again based on centuries old tradition of the geographical territory of notaries to provide services and the jurisdiction of notaries to practice in certain areas of law that lawyer are prohibited to practice in – notaries are a key entry point to the financial system in Austria.

There is good coverage of the Meinl Bank story here.

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Narcos Canada: Canadian banks & professions deal with significant proceeds of crime from narco trafficking and serious crimes; Canada listed again as “major money laundering country”; plus 10 money laundering areas of concern identified by the US for Canada

By Christine Duhaime | March 12th, 2020

Canada still on the Majors List

Canada made it on the “Majors List” in the annual US State Department’s International Narcotics Control Strategy Report (“INCSR“) again this year.

The Majors List is three lists and it designates countries that are (1) “Major Illicit Drug Producing and Drug Transit Countries”; (2) “Major Precursor Chemical Source Countries”; or (3) “Major Money Laundering Countries”. In 2020, Canada is on two of the three Majors List as both a “Major Money Laundering Country” and a “Major Precursor Chemical Source Country”.

Canada a “Major Money Laundering Country”

The 2020 INCSR, published last week by the US Department of State, identifies Canada as a “Major Money Laundering Country” along with several others including some well-known money laundering countries such as St. Kitts and Nevis, Dominican Republic, Mexico, Argentina, Venezuela, Vietnam, Belize, Curacao, Brazil, BVI, Cayman Islands, Colombia and Iran.

A “Major Money Laundering Country” is defined under US law as one whose financial institutions process financial transactions involving “significant amounts of proceeds of crime from international narcotics (“narco“) trafficking. Based on changes to money laundering typologies, that definition was expanded to include professions (e.g., tax advisors, accountants, company incorporators, lawyers), non-financial businesses (“NFB“) (e.g., casinos) and alternative value transfers (e.g., digital currencies) to recognize countries whose banks, NFBs, professions and other value transfer systems process transactions involving significant amounts of not just drug trafficking but also proceeds of crime from serious crimes.

Canadian banks and professions are dealing with “significant” proceeds of crime from narco trafficking and serious crimes

As a result of being on the Majors List, the 2020 INCSR found that Canada’s banks, NFBs (such as casinos), professions (such as accountants, tax advisors, lawyers), and alternative value transfer systems (such as Bitcoin and Bitcoin exchanges), deal with and process significant amounts of proceeds of crime from narco trafficking and from serious crimes.

The 2020 INCSR also identified Canada as a “Major Precursor Chemical Source Country” along with several other intense drug producing countries such as Argentina, Afghanistan, Chile, Colombia, Dominican Republic, Ecuador, El Salvador, Mexico and Russia.

This year’s report is different however, with many new areas of concern for money laundering in Canada identified and several others that were identified in the past that are now gone, which may mean that Canada has made a dent in financial crime mitigation or that high risk areas have shifted (to the darknet and Bitcoin), or perhaps both.

10 areas of money laundering concern for Canada in the 2020 INCSR

There are 10 points of concern in the 2020 INCSR in respect of Canada as follows:

One – Digital currencies and real estate used for criminal activities

According to the 2020 INCSR, there is room for improved collaboration with Canada in three areas namely, digital currencies (like Bitcoin); the darknet (which by definition mean Bitcoin and so-called dark coins); and real estate transactions.

The 2020 INCSR specifically says that the US would welcome further collaboration with Canada on strengthening coordination on real estate and digital currencies used for criminal activities and investigations involving the darknet.

TwoCanada is shipping containers of cannabis to the UK

The 2020 INCSR reports that the UK has reported the illegal importation of large shipments of containers of cannabis from Canada.

ThreeViolent Nigerian narco trafficking a problem in Canada

Nigerian based narco trafficking networks are popping up in Canada, following a path of similar pop-ups in France, and they are engaging in violent turf wars. The threat has grown in Canada to such an extent that the RCMP is planning to open an office in Nigeria in 2020 to address the growing threat to Canada of narco trafficking of Nigerians. The INCSR notes that illicit drugs often transit through Mozambique after Nigeria before arriving in Canada.

FourCocaine from Colombia coming to Canada from Guyana

Colombian cocaine trafficked to Canada is being transited from Guyana, after first being smuggled from Colombia to Venezuela. The cocaine is hidden in commodities to make it past borders. Canada is now the largest importer of goods from Guyana. TCOs use trade partners, and in fact often create them, to narco traffic. The commodities used to smuggle cocaine from Guyana to Canada would likely include shipments of sugar, rice and vehicles.

Five – Shelf companies used by criminals, narco traffickers and money launderers

Perhaps one of the most important parts in the 2020 INCSR is the concern expressed over the use of shell companies used by narco traffickers, criminal organizations, PEPs and regimes to evade sanctions and launder money, and of shelf companies to hide the true identity of shareholders of private companies for money laundering. Canada, and Vancouver in particular, has a pervasive use of shell and shelf companies, both of which are typically created and sold by larger law firms. In this post from 2016, we explain the difference between shelf companies, shell companies, numbered companies and beneficial ownership. As noted in the 2020 INCSR, the opacity of corporate structures through shell and shelf companies is of serious concern in the anti-money laundering law community.

Six – Canada requires a visa for St. Kitts and Nevis passport holders

Probably as a result of the program of St. Kitts and Nevis where anyone from anywhere can buy a passport from St. Kitts and Nevis provided they paid hefty fees and invest in a hotel-chain condo unit or a “sugar fund”, the 2020 INCSR mentions that Canada now requires that people who hold a passport from St. Kitts and Nevis must apply for a visa before entering Canada because they are high risk. For example, the Iranian foreign national, Ali Sadr Hashemi Nejad, who is on trial in the SDNY for money laundering and sanctions avoidance, was able to buy a St. Kitts and Nevis passport right after the US stripped him of a previously approved asylum claim and he was forced to leave the US.

Seven – Canadian marijuana producers are shipping product to the Caribbean

Eastern Caribbean countries such as Barbados and Antigua report an increase of marijuana being illegally imported that is from Canada, of a high grade, meaning it’s originating from British Columbia, a sign that Canadians are expanding their own narco trafficking activities.

Eight – Transnational criminal organizations in Canada are still narco trafficking cannabis to the US

Several transnational criminal organization in Canada are still exporting cannabis products into the US illegally.

Nine – Proceeds of crime from other countries is laundered in Canada

According to the 2020 INCSR, proceeds of crime that are foreign generated are parked in Canada and laundered and that laundering process involves professional money launderers, constituting a key threat.

Ten – Canada has a proliferation of professional money launderers

The 2020 INCSR identifies that Canada has professional money launderers used by transnational organized crime groups and narco traffickers and moreover that the access of transnational criminal organization to professional money launderers represents the most threatening and sophisticated actions in Canada.

Why is there an annual INCSR produced by the US State Department?

Pursuant to US law for foreign assistance, the US government makes an assessment in connection with providing foreign aid to countries (whether financial, technical, intelligence or other aid and assistance) of the extent to which countries comply with international treaties they signed in respect of financial crime. For example, Canada signed the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances which requires taking effective action against money laundering. Under US law, financial aid and assistance can be withheld for countries on the Majors List when they fail to meet international treaty obligations in respect of money laundering, narco trafficking and illegal drug production. And thus the annual report is to evaluate compliance by countries with narcotics and money laundering treaties for financial assistance.

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