银行对电信网络诈骗的反洗钱重点

By Christine Duhaime | April 20th, 2021

China is reporting that in 2020, 64% of cybercrime involved financial fraud, including online illegal gambling, online illegal loans and illegal securities sold online on various platforms, such as WeChat and QQ.

Many of the fraud cases involved Bitcoin and other digital currencies.

In December 2020, the public security agency of China intercepted a transnational criminal organization operating a fraudulent digital currency lending service between the city of Quezon and the Philippines, arresting 342 Chinese foreign nationals and seizing 7,329 mobile phones and nearly 1,000 computers.

Last year in China, 141,870 people were prosecuted for cybercrimes, an increase of 47.9%, according to data from the Supreme People’s Procuratorate. This flowed from 361,000 arrests. In 2020, China took down 1.6 million fraudulent websites and dismantled 11,000 gangs involved in bank fraud using credit cards online.

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Story of Canadian killer and money launderer, the focus of Netflix true crime series

By Christine Duhaime | April 4th, 2021

Netflix’s “The Serpent“, is bringing the story of Canadian Marie-Andrée Leclerc back into the spotlight. Leclerc, together with her partner Hatchand Bhaonani Gurumukh Charles Sobhraj, aka Charles Sobhraj, were serial killers who, in the late 1970s and early 1980s, murdered several back-packers in Asia, stole their money and lived off the proceeds of crime. She was prosecuted for two of the murders.

Leclerc was from Levis, Quebec.

In 1975, Leclerc met Sobhraj, a Vietnamese foreign national, in India and fell in love with him. She returned to Canada, packed up her things and moved with Sobhraj to Thailand in 1975.

Their strategy involved befriending young tourists, drugging them, often killing them and taking their passports, cash and travellers cheques. They needed the passports to cash the travellers cheques but also used them to travel across Asia. They invented fake names – she was ‘Monique’ and he was ‘Alain Gautier’.

One of the first victims was a tourist from Seattle named Teresa Knowlton. She was drowned in the gulf of Thailand near Pattaya. Some of Ms. Knowlton’s belongings were found in the apartment of Leclerc and Sobhraj. It was not Sobhraj’s first victim, though. He had left a trail of criminality across several countries before meeting Leclerc.

The next victim of the pair in Thailand was a Turkish national named Vitali Hakim. His body was found near the same town of Pattaya, as Ms. Knowlton. He had been badly burned. He had spent several days with Leclerc and Sobhraj before his death. Sobhraj used Hakim’s passport to travel.

Two other victims, Heink Bintanja and Cornelia Hemker, were found dead and burned in Bangkok, and they too had spent time with Sobhraj and Leclerc before their deaths. Another victim, Ann Mary Parry, was murdered while she was searching for Vitali Hakim.

One of their victims who lived, Dominique Renelleau, who was poisoned over a three month period, later testified that Leclerc acted as the poisoner for the duo.

Another person who met Sobhraj but refused to engage with him further, as well as Nadine Gires, who lived in the same apartment complex as Leclerc and Sobhraj in Thailand, met many of the victims and describes her experiences below.

In December 1975, Leclerc and Sobhraj used the passports of Heink Bintanja and Cornelia Hemker to leave Thailand for Nepal. A few days after arriving, they murdered a Canadian, Laurent Armand Carriere, and an American named Connie Bronzich. After those murders, they traveled to India, where they killed an Israeli named Avoni Jacob. They then returned to Thailand.

Shortly after returning to Thailand, Sobhraj became aware that there was an investigation into the deaths of Heink Bintanja and Cornelia Hemker, among others, and that he was a suspect.

He and Leclerc fled to Delhi, where they hooked up with two women, Mary Ellen Eather and Barbara Smith – those four were then accused of poisoning and robbing a man named Jean-Luc Solomon, who was subsequently murdered.

Several months later, in New Delhi, they decided to drug a group of French tourists who reported it to the police. The four were arrested. Eventually, Sobhraj revealed his identity in prison.

In 1980, Leclerc was found guilty of the murder of Avoni Jacob. In 1983, she was diagnosed with cancer in prison and was allowed to return to Canada for one year under compassionate grounds to receive treatment. She appears in this video here, arriving back in Canada like a celebrity.

For unknown reasons, Canada never prosecuted Leclerc for the murder of fellow Canadian, Laurent Armand Carriere, when she returned to the country. Or for offences in connection with the possession and use of his passport by her and Sobhraj. Leclerc, together with Sobhraj, is believed to be connected to at least 20 murders, making her one of Canada’s worst serial killers.

Leclerc died of cancer in 1984, after writing and publishing a number of memoires of her life in which she portrayed herself as an innocent victim of Sobhraj, and denied any complicity in the murders.

Leclerc’s book cover (Source: Amazon)

None of the victim’s families have sought to disgorge from Leclerc’s estate, the revenues from her books, or to sue Leclerc’s estate for wrongful death in the civil sense.

A reporter from La Presse, Madeleine Poulin, travelled to India after the arrest of Leclerc and met with her. She says in this video (here), that her impression of Sobhraj was that he was a psychopath. With respect to Leclerc, she says that Leclerc tried to sell herself as a powerless person who herself was locked up by Sobhraj in the apartment in Thailand who had had no role in the murders.

Poulin, however, in her investigations in Thailand, visited the apartment in which victims were effectively incarcerated while they were poisoned to death and she notes that it would be impossible to be in that apartment and not see and hear the victims.

She also reported that people in the apartment complex who knew Sobhraj and Leclerc in Thailand told her that Leclerc was not locked-up and they saw her coming and going as she pleased.

Poulin also met Australian victims who survived and she said that the Australians told her that they were poisoned by Leclerc.

Poulin also says that the family of Leclerc in Quebec were very angry with her because her reporting detailed her findings in respect of Leclerc, as opposed to the story the family wanted told about her. Leclerc never expressed any remorse to any of the families of the victims and her family never expressed any compassion to those families either, in respect of the harm Leclerc caused.

In Nepal, Sobhraj was eventually convicted of killing Connie Bronzich. His lawyer alleged that the presiding judge accepted bribes in connection with his trial.

Sobhraj is still alive. He is believed to have committed major crimes in Thailand, Nepal, India, Iran and Afghanistan. Crime + Investigation here summarizes his crime spree.

Dutch diplomat, Herman Knippenberg, and his wife Angela Knippenberg, (who were not investigators or in law enforcement), worked for years to collect evidence and piece the case together in Thailand. They were investigating what happened to Bintanja and Hemker. 

Eventually, the Knippenbergs identified Alain Gautier (Sobhraj) as the likely killer and connected their murders to several others which had occurred across Thailand. This article (here) describes their journey to bring Sobhraj and Leclerc to justice.

It was the RCMP in Canada whose investigation determined that the person named Alain Gautier was actually Charles Sobhraj.

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Queen of the North: the forgotten story of how a woman more dangerous than Lucky Luciano, ran the first Mexican drug cartel for 50 years

By Christine Duhaime | January 7th, 2021

More dangerous than Lucky Luciano

Before she packed her bags for the last time and fled her home in Juárez, Mexico in 1973, with the federal police hot on her trail, Ignacia “La Nacha” Jasso had been one of the most powerful and feared gangsters in Mexico for decades, described by American officials as more dangerous than notorious American crime boss Lucky Luciano.

La Nacha ran 1st drug cartel

La Nacha created the first drug cartel and operated what the US government called the largest international drug operation in Mexico and she led it for fifty years, longer than any other drug cartel leader. She was famous for using violence to expand drug trafficking territory and eliminate rivals who stood in her way, once ordering the execution of eleven drug traffickers one night when they would not cede their drug trade to her. In Mexico, she established the first major drug supply and distribution routes to the US, which decades later were used by the Guadalajara, Juárez and Sinaloa Cartels which helped them scale their drug empires when she was gone. These underworld achievements made her a pioneer mobster in the annals of drug trafficking in both the US and Mexico.

But because of it, La Nacha dodged trouble most of her adult life. She started early in life trafficking drugs, and although it was not easy for a woman to lead an international drug trafficking organization in Mexico, she learned to align herself with corrupt Mexican law enforcement officials, especially the Mexican Policía Judicial Federal to avoid serious time in prison and thrive as a drug trafficker, eventually becoming the first Mexican drug trafficker to control drug operations at the Mexican-US border.

She also appears to have been the first Mexican drug kingpin wanted by the US government for extradition.

While La Nacha has been mostly forgotten and minimized in the history of drug kingpins, the Queen of the North paved the way for the emergence in Mexico of the powerful drug cartel phenomena.

La Nacha’s early life

La Nacha was born in the mid 1890s in Juárez, Mexico, a town that borders El Paso, Texas.

During prohibition the population exploded. In 1921, the population of Juárez was 19,451. By 1930, it more than doubled to 39,669. It became one of America’s favourite towns for vices of all sorts, receiving over 400,000 pleasure-seeking tourists a year.

Americans who crossed the border to Juárez came for the brothels, casinos, cabarets, opium and morphine dens and alcohol. It was the final destination for those looking to park 1920s morality at the US border.

Juárez was a town you went to because everything that was prohibited in Texas was permitted there.

Downtown Juárez, 1929 (Source: FilmImages YouTube Channel)

Street of the Devil

Juárez experienced a golden age and an economic boom during prohibition. As the cabarets, casinos, drug dens and brothels sprouted up along Calle Diablo – the Street of the Devil – organized crime was not far behind.

Tourists at a bar in Juárez, 1924 (Source: Ciudad Juarez décadas de 1920-1940 on YouTube)
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Russian national who provided money laundering as a service, pleads guilty in US

By Christine Duhaime | December 18th, 2020

A Russian national, Maksim Boiko, who was accused of operating a money laundering as a service (“MLaaS“) business, pleaded guilty in Pittsburg today, to one count of conspiracy to launder money. In this case, the MLaaS involved opening personal and company bank accounts to receive and then move money for criminals and opening Bitcoin accounts at various digital currency exchanges for the same purpose.

The MLaaS fee was between 40% to 50% – slightly higher than commissions charged by MLaaS operators in Hong Kong and China.

Briefcase of cash (Source: FBI affidavit)

Cybercriminals hired Boiko to launder money

Boiko was among 20 eastern Europeans accused of being part of QQAAZZ, an organized criminal group that laundered proceeds of crime for cybercriminals around the world. He was arrested in Miami on January 20, 2020, attempting to enter the US.

Cash from China (Source: Instagram of Boiko)

The members of QQAAZZ are alleged to have moved tens of millions of dollars since 2016 to be laundered.

Boiko posted numerous photos on Instagram of an accumulation of cash from the US, Hong Kong and China, and of expensive sports cars. In an affidavit, the FBI deposed that Boiko also had photos of his accumulation of wealth on his Apple iCloud account.

Digital currency exchanges

Boiko held an account at the now-defunct BTC-e digital currency exchange and received 136 Bitcoin to his wallet address. Members of QQAAZZ held Bitcoin accounts at Binance, Coinbase, Bitstamp and Revolut that were used for money laundering.

Washing at a bank (Source: Instagram of Boiko)

The FBI deposed that Boiko used bank accounts in China, among other jurisdictions, to launder funds and communicated on an instant messaging platform called Jabber, used almost exclusively by criminals.

In order to provide the money laundering service, Boiko and other members of QQAAZZ, caused to be incorporated several private companies (shells) that had no purpose other than to be used to obtain a bank account in a lax AML jurisdiction. The MLaaS was advertised in Russia on Mazafaka as “a global, complicit bank drop service.”

Life of luxury

The Yacht experience (Source: Instagram of Boiko)
The Rolls experience (Source: Instagram of Boiko)
The Cadillac experience (Source: Instagram of Boiko)

Other Insta posting of wads of cash from Canada

Interestingly, the wads of cash that Boiko posted on his Instagram account seem to pale in comparison to photos (such as the one below) posted by one or more Canadians on their Instagram account(s) who promoted an ICO run by Canadians called HabibiCoin.

US$770,000 cash shown on Instagram account of a
Montreal promoter of the ICO HabibiCoin (Source: Instagram)
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How Canada was used during a global Covid-19 disinformation campaign against NATO

By Christine Duhaime | December 7th, 2020

Canadian troops

According to a report by NATO on countering disinformation, foreign state actors and others, launched a series of disinformation campaigns in Europe in connection with Covid-19 in April, 2020, one of which involved disseminating false information that Canadian troops were responsible for infecting Latvia with the Covid-19 virus.

Latvia

The disinformation campaign involved an elaborate scheme that manufactured a fake journalist’s interview in Latvia, fake documents published on social media and a statement alleged to be from Latvia’s Minister of Defence that was fabricated and sent from a fake email address. Presumably, the disinformation campaign was to elicit unrest.

Poland and Lithuania

At the same time, NATO says that two other similar disinformation campaigns were launched in Poland and Lithuania. In Poland, a forged letter from a Polish military leader was released purporting to criticize US troops. In Lithuania, a forged letter from NATO’s Secretary General was published alleging that NATO was withdrawing its troops from Lithuania.

False narratives were disseminated on social media accounts, including a fake social media account of a well-known journalist. The disinformation campaign went so far as to publish on YouTube, an edited speech given by NATO on an unrelated topic, repurposed to appear as if it was in respect of Covid-19, when it was not.

Laundering disinformation

All of the pieces of disinformation were laundered through multiple news outlets and on social media – some wittingly and some unwittingly. The report by NATO highlights the fact that it is not simply the creation of false narratives that impacts international security that is of global concern, but the laundering of false information through trusted platforms.

Depending upon its content, disinformation falls within the category of a national security threat or an international security issue because it sows discord and undermines confidence and trust in our democratic intuitions. When there is distrust of democratic institutions, they are at risk of remaining resilient. Disinformation can pose immediate threats when it causes people to question information from government sources and make decisions that affect national well-being. A prime example is a population’s response to government directions during a pandemic.

Inventor of disinformation

It is sometimes believed that the KGB invented and/or mastered disinformation but that is not accurate or supported by intelligence research.

The modern inventor of disinformation campaigns and fake news to manipulate foreign governments and the public and to elicit military action was a Canadian named William Stephenson. He faked his name (his real name was William Stanger), his background, his past and his education and used it to land a top-level job working for MI6 during WWII. Stanger was close to James Bond creator Ian Fleming and many of the 007 characteristics we all know (such as a Vodka Martini shaken, not stirred) are based on William Stanger.

Although Canadian, Stanger engaged in deep disinformation tactics in the US (against the American people in favour of the British) to incentivize Americans and the US government to financially support the UK during WWII, and join the war. Because his conduct was in furtherance of efforts to defeat Hitler, history has been kind to Stanger and he was knighted at the request of Churchill.

In today’s world, neither Stanger nor his techniques would be publicly lauded, like they were back then. Political disinformation of the breath, reach and manipulative effect that Stanger practiced as a foreign agent to manipulate a country that was an ally, was on another level altogether. It is now accepted in the intelligence community that deep disinformation poses significant threats to the rule of law and erodes trust in government institutions.

Shaken, not stirred (Source: YouTube)
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Malta businessman allegedly laundered €500 billion for ‘Ndrangheta and other Mafia; was preparing to launder €136 billion more

By Christine Duhaime | November 30th, 2020

According to prosecutors in Italy, a businessman in Malta and alleged IT specialist, Roberto Recordare, is under investigation for allegedly having laundered €500 billion in proceeds of crime for the ‘Ndrangheta, Cosa Nostra and Camorra Mafia groups and for planning to launder €136 billion more. Approximately €36 billion of the amount laundered was allegedly in cash. By sheer amount, Recordare may be the biggest money launderer of all time.

Roberto Recordare

Italian prosecutors said that they learned of Recordare’s activities in Malta through telephone interceptions. Allegedly, he laundered funds through Dubai, Afghanistan and other countries that he thought were removed from the visibility of the US Treasury.

Recordare is allegedly aligned with the ‘Ndrangheta and is from the ‘Ndrangheta region of Calabria. It is believed that the ‘Ndrangheta offered money laundering as a service to other Mafia organizations for a commission with Recordare as the laundering kingpin.

Planned to kill Italian prosecutor

During the intercepted telephone communications, the police say that Recordare discussed killing an Italian prosecutor with a bomb, triggering a common law duty to warn from law enforcement in respect of the prosecutor. During those calls, Recordare allegedly discussed his use of private companies in Malta to front laundering activities. Two private companies tied to him in Malta are  Golem Malta Limited and Recordare Holding Limited.

According to this report, Recordare also planned to launder money using fake securities and fake humanitarian aid projects with funds routed through a lawyer. In 2017, he moved his documents to a cloud-based service based in Aruba, believing that the documents would be safe from law enforcement.

Recordare allegedly laughed about bombing death of Malta journalist

During the intercepted telephone communications, Recordare is alleged to have laughed about the assassination of Malta journalist Daphne Caruana Galizia, who died as a result of a car bomb and was recorded as saying that they were still picking up pieces of her in Malta. Ms. Galizia wrote a blog in which she covered financial crime and corruption in Malta.

Recordare’s two companies show up in the Paradise Papers database.

Recordare’s Malta companies in Paradise Papers

Malta is know for very lax anti-money laundering compliance. In 2017 through to 2018, it embarked on a tour of several countries, including Canada, to recruit Bitcoin and Blockchain companies to move their business there with the promise of light to no financial crime oversight, which is why today, there are still quite a number of Bitcoin digital currency exchanges and other digital currency enterprises physically or on paper, domiciled in Malta.

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Murder, violence and bombs – how the Mafia extorts a whole city

By Christine Duhaime | November 29th, 2020

Controlling a whole city

It can sometimes be hard to grasp the extent to which the Mafia operates its extortion racket against businesses, and the extent to which it controls so many businesses with threats of bombs, violence and death.

Società Foggiana detonates a bomb at a store that wouldn’t pay extortion (Source: YouTube)

An Italian investigating Judge, Francesco Agnino, came across Mafia extortion activities that were so pervasive, the whole city of Foggia, was under the control of the fifth Mafia, the Società Foggiana. In order to provide visibility over the problem, he decided to publish the names of the businesses being extorted by the Società Foggiana with the amounts extorted, as part of an investigation that was revealed by law enforcement last week.

Monthly extortion payments

In Foggia, extortion payments by the Società Foggiana are called an insurance premium.

Among the extortions found by law enforcement were:

  • Buononato SNC, a funereal home forced to pay €3,000 per month;
  • Fabbri SRL, an excavation company forced to pay €1,200 per month; and
  • Alessandro Carniola, a promoter forced to pay €1,500 per month.

Forced hires of Mafia family and friends

Some businesses were forced to hire employees who were members or friends of the Società Foggiana. For example, Daunia Spedizioni SRL, a transportation company, was forced to pay an undisclosed amount in extortion and hire three people aligned with the Mafia.

Rigging horse races

A horse jockey was forced to rig a standardbred horse race so that bets placed on a less favoured horse where the odds were higher, would pay out when the horse placed. Only the horse didn’t place and the Mafia threatened to kill the jockey and his son if he did not pay the Mafia back the money they would have made.

Two other jockeys who raced horses with best ranking finish times, were forced to rig standardbred horse races at the Ippodromo Del Sauri to make sure that their horses did not place so that the highest odds were paid out to the Mafia. Standardbred horse races tend to be favoured by Mafia for rigging because there is less oversight compared to thoroughbred horse racing. Different groups of Mafia have rigged horse races in the past. In 2017, the Palermo racetrack was suspended after law enforcement found evidence that the Cosa Nostra Mafia was rigging races and bets.

In Sicily, they also engage in illegal horse racing in the streets for money, a practice that involves drugging horses and forcing them to run for many miles, chasing them with scooters to terrorize them into continuing to run to exhaustion.

An illegal horse race in Italy (Source: YouTube)

Every sector was paying extortion

The tentacles of the Mafia in Foggia were felt in the food services sector – at the local farmer’s market, a merchant from Cerignola was forced to pay €3,000 a month to the Mafia. Tamma, a pasta factory, was forced to pay the Mafia €3,000 per month and forced to hire associates of the Società Foggiana in the factory.

Bars, restaurants, cafes and funeral homes were all forced to pay extortion fees to the Mafia.

Despite Covid-19, the Società Foggiana has continued its extortion, robbery, murder, gambling and fraud activities. A report (here) by Le Iene, covers their Covid-19 activities. In April, they bombed an old age home because its owner would not pay an extortion fee.

According to the investigation, the different families of the Società Foggiana met to go over lists of businesses that were paying extortion fees, with a view to identifying any that were not part of the payment scheme so that they could be “attacked.”

A Christmas bonus for the Mafia

The investigators said that they learned that extortion is calculated per month but is collected only every three months and then once more for Christmas, as a Christmas bonus for the Mafia.

The investigation led to the arrests of several members of the Società Foggiana this month for extortion, violence, attempted murder and membership in the Mafia.

Operation against the Società Foggiana (Source: YouTube)

In a new accelerated criminal trial process, 25 members of the Società Foggiana were convicted and sentenced to terms of incarceration ranging from four months to 18 years.

The Società Foggiana is called the fifth Mafia because they are considered the fifth Mafia organized group to form. They are the most violent at this time and the least interested in being opaque.

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Well-known leaders of organized crime welcomed at Montréal area casinos

By Christine Duhaime | November 26th, 2020

According to an investigation by a number of journalists with the Journal de Montréal (here), two casinos managed by Loto-Québec, a government agency, laid out the red carpet to well-known organized crime figures associated with the Cosa Nostra Mafia and Hell’s Angels.

Stefano Sollecito was VIP gambler

Their investigation found that Stefano Sollecito, said to be a well-known member of the Montréal Mafia and the son of Rocco Sollecito, gambled $2.5 million over the course of 2 to 3 years at the Casino de Montréal. Moreover, Sollecito was treated as a casino VIP client, and with deference by registered casino employees during phone calls obtained by the Journal de Montréal.

In 2019, Sollecito was one of the top ten gamblers at the Casino de Montréal a few months after being released from incarceration for gangsterism and cocaine trafficking charges. According to the investigation, although a well-known Mafia figure, Sollecito had bank accounts at the TD Bank and the National Bank, which he used to deposit cheques from gambling winnings.

The investigation found that Vito Rizzuto’s son, Leonardo Rizzuto, also gambled at casinos in Québec.

Members of Rizzuto organization (Source: RCMP Project Colisée Powerpoint, 2012)

Journalist Eric Thibault, who participated in the investigation, said during a TV interview that organized crime at Québec casinos was not new. He said that the RCMP learned during Operation Colisée, a project to dismantle the Rizzuto criminal organization, that Francesco Del Balso, said to be a well-known member of the Rizzuto organized crime family, had spent $7 million gambling with Loto-Québec in three years and that Loto-Québec had issued him cheques totalling $2.5 million.

Hell’s Angels also at casinos

Members of the Hell’s Angels also were permitted to gamble at government casinos in Québec, including David Lefebvre and Gregory Woolley.

Hell’s Angels member Gregory Woolley was seen by the Sûreté du Québec meeting Ziad Ziade, a Lebanese organized crime figure, at a restaurant at the Casino de Montréal.

Sollecito was not simply allowed to gamble, he was also comped freebies at two Montréal area casinos as a VIP gambler including a free dinner for four, free golfing, free hotel rooms and free concert tickets.

The investigation by the Journal de Montréal reported that 18 organized criminal groups were found to have laundered money at casinos in Québec.

Mr. Thibault said that Loto-Québec’s response to the investigation was that it followed all the laws applicable to it operating a registered casino as a government agency.

Did Loto-Québec know?

You may be wondering – did the Loto-Québec employees know these were organized crime figures? In one segment (here) as part of the published story, Richard Martineau interviewed one of the journalists who broke the story, Félix Séguin, and asks that very question directly. Here’s how the conversation loosely went, translated from French:

Martineau: That’s what I wanted to ask you, as a question – did they know?

Séguin: Well, of course…let me tell you a little story. At one point, the security of the Montréal Casino observed Mafia figures coming in to gamble in the millions per year and they filed reports with the lottery corporation. The lottery corporation informed FINTRAC that it believed that the Mafia was frequenting the Montréal Casino to launder money. FINTRAC responded “Yes, the Mafia is using you to launder money.” With one hand, Loto-Québec was reporting the Mafia to FINTRAC; with the other hand they were giving them gifts so that they would continue to spend money there. Do you see a problem of ethics and governance?

Martineau: But this is a problem of money has no smell – come gamble at casinos because we have a mission to bring in the most amount of money possible for the coffers of the state. We’ll pinch our nose; we’ll close our eyes, and that’s it – incredible.

Séguin: What you just said there has a certain validity. In some countries and in provinces, we have nationalized gambling and regulate it, partly to make sure to keep Mafia out. In some places like Switzerland and Monaco, with regulated casinos what they do is super interesting – where they suspect a person is gambling with proceeds of crime, they charge a surtax on the funds to the Mafia gambler. And you know what? The Mafia figures actually pay the surtax to launder money! In Canada, we have nationalized gambling (government conducts and manages all gambling).

Martineau: A few years ago, I spoke to Revenue Québec and asked them that, if I was the Mafia, if I had to pay sales taxes. They said yes, the Mafia has to pay those taxes by filling out a form and disclosing what the source is from, let’s say, drug trafficking. I asked if Revenue Québec would report me to the police and they said no, that Revenue Québec is not “stouleur” (means a rat or a tattle-tale) and Revenue Québec will not stouleur you to the police because there is a wall between us and law enforcement.

Séguin: I’m less sure that is accurate.

Martineau: No, he told me that. I asked if I could deduct my trips to Colombia to buy drugs and equipment I bought to weigh drugs and he said “yes” those are your expenses. It was surreal.

Martineau: Look, Loto-Québec is like Hydro-Québec, a state agency within a state agency and they are opaque and its hard to get information because they protect it. You did a sacré job with this investigation (a “sacré job” with an investigation means a hell of an investigation).

Séguin: One of the issues we discussed in editorial meetings was if a Mafia passes a test of identity with Loto-Québec and the test is faulty and they did not catch that it was the Mafia, what sort of standards do you have? In British Columbia, they have a commission looking at casino money laundering called the Cullen Commission and it deals with the same type of strategy as happened in British Columbia, and when we showed the Commission the Loto-Québec documents they said it was “troubling and shocking.” Meanwhile, Loto-Québec said they practiced the highest standards.

You can read the original series of stories from the Journal de Montréal website here. The journalists’ investigation and their writing of the stories that flowed from it really is a sacré job.

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Offshore advisory firm that once advised Crocodile Dundee star pleads guilty to helping wealthy clients hide money in tax havens

By Christine Duhaime | November 23rd, 2020

Strachans SA

Last month, Strachans SA, pleaded guilty in the US to hiding income and assets in offshore bank accounts, and in various corporate entities from tax authorities for its clients. Strachans SA was an accounting and financial services firm based in Jersey and Switzerland. In 2013, it became news-worthy when it and/or one of its shareholders were accused of the disappearance of US$34 million owned by Crocodile Dundee star Paul Hogan, that it had helped Hogan park in offshore bank accounts.

Strachans SA created trusts, foundations and companies in offshore jurisdictions for clients and acquired banking for them using those corporate documents at financial institutions around the world. Interestingly, it earned US$4.7 million in fees in five years from 60 US residents, and other fees from non-US residents. One of its founders was an accountant named Philip Egglishaw.

2020 Interpol notice of Egglishaw (Source: Interpol)

Offshore advisory services

Offshore entities created by professional facilitators to hide money and defeat the rule of law on behalf of clients, must acquire assets from the evading clients and must be able to facilitate those evading clients to subsequently have access to those funds (sometimes referred to as repatriation of funds), both in ways that obfuscate the trail of money so that no law enforcement agency has visibility on the assets and the person behind the assets. That’s essentially the service they offer.

One can think of it as a two-way street for investigations purposes in terms of the movement of money – the professional services firm sits in the middle as the conduit for the intake of wealth being exited from country “A” and then is the conduit for the shipping back of that wealth in tranches to country “A” over the course of several years. The shipping back of wealth is the part that is high risk for these type of bad actors and that part of their services is where more resources are expended in creating layers to obfuscate money movements.

Fake loans, fake consulting contracts and dummy invoices

In order to manage that part of the services that involved repatriation of client funds, Strachans SA admitted that it created fake loans, fake consultancy agreements and dummy invoices for clients.

For example, under the fake consultancy arrangements, a Strachans SA entity would fake hire the client for services that were never rendered, creating a false reason to send the client’s money back to them in a tranche as fake consulting fees when the client needed some portion of funds to spend.

Entertainment guru Glenn Wheatley, who was one of Strachans SA’s clients in Australia said he used the fake loan scheme to repatriate money he had hidden offshore. The way he described repatriating his hidden money from Switzerland to Australia was as follows: “all I had to do was approve the transaction. The lawyer sent the money off, deducted his secret fee and arranged for the money to come back as a loan.”

In a Strachans SA proceeding in Australia, a Supreme Court judge referenced one document written by a law firm describing a repatriation scheme, which gave instructions that 25% of client funds moved to an entity to be repatriated were to be retained. While it’s not clear, 25% appears to be the secret fee that Wheatley says was payable, and if that is the case, it suggests that a law firm extracted a 25% cut to launder money and created the documentation to paper the money laundering transaction.

Credit cards in fake names

Certain clients of Strachans SA said that Strachans SA arranged for them to be given branded credit cards issued by MasterCard or Visa in fake names to use as a method to repatriate their funds from Switzerland.

The issuing and mailing of credit cards to other countries, and more particularly charge cards, are a significant money laundering vehicle often used for sanctions avoidance and to evade currency controls.

Strachans SA also placed some client funds in the personal bank accounts of the shareholders of Strachans SA, and in essence its shareholders then became the personal bankers of the clients, holding their funds to make sure that tax authorities would not suspect its provenance.

Australia’s investigations

The Strachans SA offshore services scheme first came to light in Australia.

In 2004, the Australian government seized a laptop owned by Egglishaw. The laptop contained the files of the clients of Strachans SA and communications among clients and the firm. Egglishaw brought a motion for the suppression of the information on the laptop and lost. Based on the information obtained by Egglishaw, the government commenced a criminal investigation into suspected money laundering and fraud by Australian residents using Strachans SA and a bank it owned called Corner Banca SA in Lugarno, Switzerland.

On June 9, 2005, Australian federal police executed 48 search warrants over two days at law firms and accountant’s offices who were involved directly, or indirectly through clients of Strachans SA, and at the homes and offices of clients of Strachans SA.

Authorities had at first attempted to obtain information from law firms and were met with barriers of claims of privilege. They then obtained search warrants for client files on the basis of the exceptions to privilege and confidentiality over client files (arises when advice is sought or obtained in furtherance of unlawful conduct, wittingly or unwittingly involving a law firm).

Philip de Figuereido

A director of Strachans SA, Philip de Figuereido, was extradited to Australia from Jersey for money laundering and fraud, and spent a few years in jail. He then returned to Europe.

Philip Egglishaw

Egglishaw was charged with various offences in Australia connected to Strachans SA. He was alleged to have masterminded a US$2 billion offshore fraud scheme. He disappeared from Australia.

In 2013, an Interpol red notice was issued for his arrest.

On May 3, 2017, Egglishaw was located in Italy and arrested. He was released by an Italian court which held that the charges against him for fraud and money laundering had taken too long to be prosecuted.

Philip Egglishaw under arrest (Source: YouTube)

In 2017, a reporter located Egglishaw apparently living a lavish lifestyle at a mansion he had purchased in 1999, on the French Riviera in the town of Saint Paul-de- Vence near Nice. The mansion features a swimming pool, tennis court and manicured grounds and Egglishaw owns a Bentley, a Lamborghini, a black Mercedes and an Audi sports car. His brother, another shareholder of Strachans SA, allegedly owns a villa in Nice a few miles away.

Litigation involving Strachans SA over MLATs and trust documents

In 2012, Strachans SA was successfully sued in Jersey by the beneficiary of a family trust that it had set up for a client who was seeking information, as a beneficiary, on funds held in trust. The beneficiary was concerned by the investigation of Strachans SA by the Australian Crime Commission and the arrest of its director, Philip de Figuereido, and feared that the assets of her family trust had been misappropriated. Egglishaw refused to provide trust account information to her. Strachans SA and a trust company called Roker Trustees, who worked with Egglishaw, took the position that unless the beneficiary indemnified them in respect of their conduct of the file, and the funds they managed, she was not entitled to trust information. Strachans SA and Roker Trustees were not successful in the litigation to hide trust statements from a beneficiary.

In 2008, Strachans SA sued the Australian government over its use of MLATs with Switzerland for information on its affairs in that country. MLATs are agreements between countries for the provision of information where the conduct of a legal or natural person in the requesting country involves criminal offences but MLATs have been misused for information in connection with investigations into regulatory offences to obtain information.

In this case, Switzerland pushed back in respect of the MLAT request and sought evidence that the alleged conduct was criminal (in criminal legislation) and was conduct that could be proven to be attached to the person(s) who were the target of the MLAT. Records and information obtained by MLATs that are not compliant with the terms of MLATs or national laws, can be challenged and derail a prosecution or later overturn a conviction because the evidence is tainted (poisonous tree doctrine(1)). Switzerland ultimately refused to proceed against Egglishaw because of the inability to tie the conduct to criminal offences under national criminal legislation provably attributed to Egglishaw.

Interestingly, one of the key points of argument in the MLAT litigation commenced by Strachans SA was correspondence by law firms giving instructions to Strachans SA for the movement of money for repatriation via fake documents and the 25% retainer that was to be deducted from funds back to the clients. The Australian government provided, among other things, these types of law firm communications to establish that the conduct constituted criminal offences under criminal statutes and ergo met the terms of the MLAT. Strachans SA argued that the communications were documents from law firms, not them and to the extent it evidenced criminality, it was in respect of the authors of the documents, not them. The Court agreed with Strachans SA on that point.

You can read more about the leading case on MLATs here. That case,  Elgizouli v. Secretary of State for the Home Department, which involved the ISIS Beatles, was brought about when the mother of one of the ISIS Beatles learned years after the fact that an MLAT request had been used to provide information about her son to the US government. Despite the passage of years, she was able to bring a judicial review application to prevent the use of written records and information in respect of her son being shared with the US government.

MLATs can be challenged on two fronts – by a natural or legal person in the requesting country arguing that the originating MLAT suffers some legal impediment to be effective (like Strachans SA did) under the laws of the requesting country, or in the receiving country arguing that the receiving MLAT, if complied with, violates the rights of the natural or legal person targeted under the receiving country’s laws (like Ms. Elgizouli did). They can also be challenged by a legal or natural person if an MLAT was used inappropriately to share or obtain information irrespective of the outcome of an investigation, or if too much information was sought or obtained that falls outside the four corners of the intended purpose of an MLAT.

(1) The fruit of the poisonous tree doctrine is 100 years old and arose in Silverthorne Lumber Company v. US, after LE seized corporate records without legal authority and photographed them. In 1910, US Courts held that evidence obtained without legal authority cannot be used in trials (Weeks). Silverthorne Lumber later established that evidence obtained without legal authority could not be used at all (not just not for trials). The doctrine is still alive today as part of American jurisprudence and is subject to some exceptions.

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Jimmy the Henchman, money-order money laundering and lawyer conflicts

By Christine Duhaime | November 13th, 2020

In case you missed it, in the middle of the first wave of Covid-19, James Rosemond, who is aka Jimmy The Henchman, lost his last appeal of his third conviction for charges of murder-for-hire and is now serving seven life sentences in US federal prison.

The Game talks about Jimmy the Henchman (Source: VladTV Channel on YouTube)

Rosemond founded Czar Entertainment in 2003, and managed the careers of several big names in the entertainment industry, including Akon, Mike Tyson, Sean Kingston and The Game.

Drug trafficking and money orders

Several years after starting his music company, he was charged pursuant to a thirteen-count superseding indictment, along with several co-defendants, charging that he had led and operated a criminal enterprise since 2007 which generated more than US$11 million a year in proceeds from cocaine distribution and that he had laundered the proceeds of crime.

Rosemond’s narcotics trafficking operations moved cocaine and proceeds of crime between LA and New York. The method in which he laundered money was through the US Postal Service in which cash proceeds were converted into money orders. Rosemond used those money orders to pay rent and tuition.

Murder-for-hire trials

He was later charged with arranging a murder-for-hire.

In 2007, members of a rap music group known as “G-Unit” assaulted Rosemond’s son outside his New York apartment. G-Unit was run by rapper 50 Cent.

James Rosemond Jr. speaks about his father (Source: GlobalGrindTV Channel on YouTube)

In 2009, Rosemond recruited a crew to kill Lowell Fletcher, one of the G-Unit members who had assaulted Rosemond’s son, in retaliation. Fletcher was killed on September 27, 2009, with a handgun owned by Rosemond.

Rosemond was tried three times for the murder-for-hire of Fletcher. However, the first trial was declared a mistrial. He was convicted in the second but the conviction was vacated by the US Court of Appeals for the Second Circuit. He was convicted in the third trial and in May 2020, lost an appeal of that conviction.

Lawyer conflicts from representing a criminal unit and one of its members

In 2011, the Rosemond case became note-worthy as well over complex issues that arose over potential lawyer conflicts.

What happened, in part, was that the government made arguments pursuant to Wheat v US and its progeny to have Rosemond’s lawyer disqualified for reasons of institutional integrity.

It argued, among other things, that Rosemond’s lawyer would be in the position of an unsworn witness, partly because of the fact that his law firm received a large payment for legal services in trust from funds that could not be attributed to revenues from Czar Entertainment or Rosemond. That placed the law firm in the position of being a witness against its own client in respect of the payment it had received. Since it was possible that it would be a witness, it could not also act for the client.

House counsel doctrine for organized crime members

Another lawyer conflict arose by virtue of the fact that the government argued that Rosemond’s lawyer was what are called “house counsel” in Mafia and criminal enterprise cases – meaning in essence that the law firm was akin to an in-house counsel, corporate lawyer, except to unincorporated entities (called criminal units) that form crime organizations.

In this case, the law firm – the “house counsel” – acted for the Rosemond enterprise (the criminal unit) and then crossed-over and acted individually for Rosemond (the person). It was the “house counsel” because it had acted, in the past, for more than one of the defendants in the ad hoc criminal enterprise, which in this case was the drug trafficking activities of Rosemond and his partners. Moreover, in the specific prosecution, one of the lawyers of the firm had met with a witness to discuss the government’s investigation, which meant that it could not then act for Rosemond. The multiple representations and the crossing-over placed the law firm in a conflict.

In a Canadian version, the same would apply for law firms that act for the Hell’s Angels, for example. Issues arise if they then act for any one of the individual members of that organization under the conflicts rules associated with the “house counsel” doctrine. To be clear, the “house counsel” doctrine necessarily starts with the law firm acting individually for one person of a criminal group – not the organization per se – and kicks in once the law firm acts for a second member. Lawyers may cross-over into conflicts without knowing that there is a house counsel doctrine that governs conflicts in respect of criminal enterprises, even if they are ad hoc, as in the case of Rosemond’s group.

The underlying conflicts rule when it comes to legal and natural persons is that a firm is not supposed to defend both a legal person (a company) and its directing minds (directors and officers) or members (shareholders or gang members) whether the defence is in a criminal, civil or regulatory matter.

Another conflicts problem arose in that the lawyer’s firm had previously acted for one of the parties besides Rosemond in the proceeding and that necessarily meant that the law firm’s interests diverged – the law firm could not honor its obligation to the former client not to act adverse in interest to it while it was subsequently representing Rosemond (the current client) in a litigation – the positions were not reconcilable.

Convictions have been overturned when law firm conflicts are present and lawyers have not disclosed them; ceased to act; or obtained, if possible, waivers in respect thereof, which is why governments move early to remove lawyers from acting when they may be in, or appear to be in, a conflict of interest that may jeopardize a proceeding and the rights of any one defendant.

Not surprisingly, one of the grounds of appeal later argued by Rosemond during one of his many appeals was that he was denied the right to a lawyer (and law firm) who was conflicts-free.

There have been at least three “house counsel” doctrine cases that are known – perhaps more that were never reported, and the doctrine mostly is used in the US where government and defence lawyers, and Courts very strictly apply conflicts rules because of a greater awareness that a breach of conflicts rules can completely de-rail a criminal prosecution and overturn a conviction.

One of the very first “house counsel” lawyers went on to become, decades later, the defence lawyer for the leader of the largest criminal enterprise at one time – El Chapo.

When clients lie to government

The defence of Rosemond in respect of his drug trafficking trial was extraordinarily complex, partly because Rosemond had lied to the government and thus his lawyer was faced with the reality that lawyers are prohibited from assisting clients to be untruthful in their testimony. The lies made by Rosemond, which impacted and limited his options as a defendant, were described by the Court as the hand his lawyer was dealt from the client’s gamble to go down a path of being untruthful to government agencies.

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