Duhaime's Financial Crime and Anti-Money Laundering Law

Jackpot or not? Report says combo of online gambling sites and Bitcoin facilitate money laundering

By Christine Duhaime | April 27th, 2014

According to a report released by McAfee Labs, available here entitled “Jackpot! Money Laundering Through Online Gambling,” the global online gambling sector appears to be rife with money laundering problems and Bitcoin is facilitating it.

It may be that money laundering is happening on a large scale through unlicensed online gambling websites but the report itself is based on assumptions that are not accurate:

The Report claims that the global online gambling sector will grow 30% in three years starting in 2013 (hence the problem of money laundering online will allegedly get worse). That seems doubtful since it is based on assumptions that the US will authorize online gambling across all states by 2016, which will not happen.
The Report says that as between poker, casinos, betting and bingo, in the online gambling environment only poker and casinos are money laundering risks – there is no greater inherent risk with poker or casinos than with betting or bingo.
The Report purportedly looked at licensed online gambling around the globe which it described as “regulated gambling” and with respect to Canada, for example, it stated that Canada has 120 online regulated gambling websites. Actually, it only has three regulated online gambling sites – those operated and managed pursuant to the Criminal Code of Canada and provincial gaming control legislation by the provincial governments in British Columbia, Quebec and Manitoba. Canada never had and does not have 120 regulated online gambling websites.
The Report describes how money laundering at online gambling sites occurs – purportedly by what is called in the industry “minimal play” whereby in the land based environment for example, a person feeds a slot machine with say $100,000 and cashes out after minimal play for a casino cheque. According to the Report, gamblers go online and invest proceeds of crime in “minimal play” transactions then cash out, presumably with cleaned funds; or in a second scenario, they play online and with the gambling wins (the Report assumes gamblers always wins whereas the reality is that the house always wins) they purchase illegal goods (likely drugs) which allows the seller of the illegal goods to earn revenue tax free and the purchaser to acquire goods online illegally. In the first scenario, gamblers who engage in minimal play then cash out online have gained no money laundering benefit because they have not structured or washed the funds at all – all they have done is moved funds online and the remainder comes right back to them from the casino operator in the same form. In the second scenario, most money launderers would not use proceeds of crime to acquire illegal goods, such as drugs, as a money laundering method and expose themselves to additional risk of detection by law enforcement. They almost always use proceeds of crime to buy something legal – that’s how it gets cleaned.
The Report states that the use of digital currencies such as Bitcoin at licensed online gambling sites makes it less likely that transactions will be subject to scrutiny of deposits and withdrawals, increasing money laundering risks. However, at the present time, there are no licensed and regulated gambling entities in the world that accept digital currencies as a payment method – that is because no gambling regulator has approved the use of digital currencies for gambling purposes. It is not possible, therefore, for the acceptance of Bitcoin as a payment method at regulated online gambling sites to cause an increase in the risk of money laundering – simply because Bitcoin cannot even be accepted at regulated gambling sites.

Woman arrested in Toronto with 10,000 uncut diamonds inside her

By Christine Duhaime | April 27th, 2014

Toronto woman arrested with 10,000 diamonds stored in a body part

A woman arriving from Trinidad & Tobago, Helena Freida Bodner, was arrested at Toronto’s International Airport last month attempting to import 10,000 uncut diamonds in one of her body cavities. She has been charged with smuggling, making a false statement to immigration authorities, and importing rough diamonds without the requisite paperwork.

According to the Trinidad Guardian Newspaper, the arrest is indicative of something more serious, and potentially more sinister. As the Guardian notes, Trinidad is not a diamond-mining country, and so the diamonds must have come from another country making their way through Trinidad to Canada, possibly being moved to a fourth or even fifth destination. It notes that authorities said the purchase of the diamonds was secured well in advance, as it’s unlikely that a smuggler would risk moving that quantity of diamonds without a guaranteed payment.

The article in the Guardian can be read here.

Canada makes its first corporate prosecution for economic sanctions violations

By Christine Duhaime | April 24th, 2014

Although Canadian economic sanctions have been in place for years, until now Canada has never prosecuted any company for sanctions violations. That changed earlier this month when Lee Specialities Ltd., a Calgary based company, was charged with violating Canadian (and UN) economic sanctions by exporting goods to Iran that could be used for nuclear devices.

The RCMP investigated the company after customs officers at Calgary International Airport intercepted a shipment of Viton O-rings in May 2011 destined for Iran from the company.

Under the Special Economic Measures Act (“SEMA“), all Canadians, Canadian entities (including trusts, funds, partnerships and corporate entities) and persons in Canada are prohibited from certain activities in relation to Iran and Iranians, including providing goods, financial services or insurance, facilitating a transaction or dealing in real or personal property. They are also prohibited from exporting, selling, supplying or shipping goods to Iran or to certain persons in Iran, or from providing technical data related to petrochemicals, ships, gas, and arms. It is of course, also prohibited to invest in Iran or to provide financing or banking/correspondent relationship services for Iran or Iranian entities.

Banks, credit unions, trust companies, insurance companies, MSBs, certain Bitcoin businesses and securities dealers, fund managers and any type of seller of securities must determine on a continuing basis whether they have prohibited property of a designated Iranian person or entity in their possession or control (e.g., bank account, securities, funds, Bitcoin, insurance policy, derivatives, mortgages, lines of credit, credit cards, etc.) and if so, disclose it to the RCMP forthwith and take steps to freeze prohibited property.

Lee Specialties Ltd. allegedly said that the shipment of prohibited items was intended to be sent to Dubai, not Iran, but was for a corporate recipient that had the same or an identical name, and an Iranian address was used in error by its accounting people. It’s unclear how it obtained an Iranian address from which to process a P.O., create a shipping label and arrange for shipping to Iran and why it had the address of an Iranian company in its accounting system in any event, given the prohibitions set out in the sanctions regulations.

The company pleaded guilty under SEMA and was fined $90,000.

UAE to implement tougher anti-money laundering laws and jail terms for reporting failures

By Christine Duhaime | April 21st, 2014

UAE debates tougher AML laws

The United Arab Emirates is proposing amendments to its anti-money laundering legislation that, if approved, may be one of the most stringent anywhere. That’ s because it will allow the incarceration of officers for failures to report transactions suspected of involving money laundering or terrorist financing without a due diligence defence. Canadian anti-money laundering laws, for example, also permit the incarceration of employees and directors and officers for similar reporting failures for a term of up to 5 years, however, a due diligence defence is available for officers and directors and with respect to employees, a defence of upstream reporting is available.

The proposed amendments will also expand the law to make it an offence to fail to report if a person has controlled substances in the UAE (such as drugs and alcohol) or to fail to complete currency importations, exportations and holdings in amounts to be prescribed.

The UAE is one of the few jurisdictions in the world where crimes against the environment, or a violation of environmental laws, is a predicate offence to money laundering. The same is true for damage to public property and violations of international treaties.

One of the more innovative approaches taken in the UAE was the formation in 2002 of a national anti-money laundering committee which advises the government in respect of policy and legal issues comprised of several federal ministers in charge of customs, taxation, finance, trade, justice and the Central Bank. This committee was responsible for directing these proposed legislative amendments currently under consideration.

Primer on correspondent banking relationships and offshore tax havens

By Christine Duhaime | April 14th, 2014

How correspondent banking relationships are used to launder funds

My favorite resource for correspond banking is the US Senate Report on Correspondent Banking published several years ago. Despite its age, it remains timely because it deals specifically with how the US financial system is used by correspondent banks in, mainly offshore tax havens to, inter alia, launder funds. Interestingly, the Senate Report notes that only one bank operating in the US refused to respond to questions posed of it by the Senate as part of its investigation – a Canadian bank.

Correspondent banking defined

Correspondent banking is the provision of banking services by one bank to another. It allows foreign banks to conduct business and provide services where they have no physical presence. For example, a bank licensed in Switzerland with no US office may want to provide services in the US for its customers. Instead of the Swiss bank bearing the cost of setting up a US branch office, it can open a correspondent account with an existing US bank. The Swiss bank, called the respondent bank, can thereby offer services and products through the US bank, called the correspondent. Large international banks in financial centres of the world serve as correspondents for thousands of smaller foreign banks.

Services provided by correspondent banks

Correspondent banks provide cash management and investment services to respondent banks. The cash management services include deposit accounts, international wire transfers, cheques clearing, payable through accounts and foreign exchange services. Investment services include money market accounts, investment accounts, certificates of deposit and securities trading accounts. By far, the most important service is providing access to international funds transfer systems. International wire transfers are complex in that they involve multiple electronic communications that trigger a series of debits and credits recorded on the ledgers of financial institutions that identify the sender and receiver of the wires. Multiple banks are involved in payment transfers and correspondent banking acts as the gateway, or the electronic pathway, to allow funds to move from one jurisdiction to another.

For many foreign banks, especially in offshore tax havens, if access to correspondent banks were severed, they would be unable to operate. Another went so far as to say that without correspondent accounts, offshore banks would close.

Correspondent banks are susceptible to money laundering

US correspondent banks are susceptible to money laundering due to: (a) culture of lax due diligence at US correspondent banks; (b) nested correspondents; (c) bank secrecy laws; (d) difficulty seizing funds in US correspondent accounts; (and e) weak compliance at foreign banks. In the Report, offshore bankers informed Senate investigators that offshore bank accounts are held mostly by Americans and Canadians and named several major banks in both countries that provide correspondent relationships to it that, whether they were aware of it or not, provided money laundering services to that bank’s clients.

What bankers say about correspondent banking

One US correspondent banker told the Senate that there is no reason for offshore banking to exist if not for tax evasion or other financial crimes.

Another US correspondent banker informed the Senate that 100% of its clients were engaged in tax evasion and sought bank secrecy for that precise reason and were willing to pay higher offshore fees.

According to a third US correspondent banker, the way the offshore correspondent banking scheme works is as follows:

Lawyers from anywhere arrange for a corporation to be established in an offshore tax haven or buy, in that jurisdiction, a shelf corporation (which most law firms already have);
The bank in the tax haven sets up a bank account for the client in the name of the new corporation;
Shares are held in the name of another shelf corporation;
Lawyers act as the sole director of the corporate entity or another corporation fulfills that function as a nominee director;
In order to secure the client’s interest as the actual shareholder (the beneficial as opposed to the legal owner), assignment agreements are entered into evidencing the arrangement whereby the real shareholder assigns its shares to the nominee shareholder. Such assignments are not part of corporate records; and
In order to spend the funds (indirectly repatriating them), clients are issued credit cards in the name of the corporate entity and advised to use those cards as a way of removing funds indirectly from offshore accounts to the US. Alternatively, the offshore bank will pay for goods and services on behalf of the clients, for example, paying for home deposits or luxury vehicles.

By entering into the above type of arrangement, the client has complete anonymity for corporate, banking and anti-money laundering purposes.

Canadian indicted in US for money laundering

By Christine Duhaime | March 21st, 2014

International tax lawyer and former fund manager from Quebec indicted after IRS sting

The arrest of two Canadians from Quebec, Eric St-Cyr, an investment fund manager, and Patrick Poulin, a lawyer, in the US over money laundering charges hit the news today when their cases were transferred to Florida for prosecution.

St-Cyr and Poulin were indicted on March 6, 2014, in Virginia and the indictment was sealed pending their arrests on March 13, 2014. They are not being released on bail.

Bishops Legal

According to LinkedIn, Poulin, is a Quebec tax lawyer at a law firm named Bishops Legal, in the Turks and Caicos. According to the Bishops Legal website, it services prominent international banks and other financial institutions and global investment funds and undertook financial regulatory work for those clients.

Clover Asset Management

St-Cyr operated an asset investment firm, Clover Asset Management, for Canadian and American clients that was incorporated in the Cayman Islands. According to the firm’s website, St-Cyr set up the firm because no firm could meet the “needs” of institutional and private wealth clients in the Caribbean except him. St-Cyr’s bio says he was a former asset manager in Canada.

Alleged use of beneficial ownership and law firm trust account to wash funds

According to the indictment, St-Cyr and Poulin, together with a third defendant, used beneficial ownership structures to create layers of transactions in multiple jurisdictions to facilitate the laundering of proceeds of crime. They are alleged to have solicited clients to specifically use their services to evade US taxes by, inter alia, creating bogus legal entities, including foundations, in offshore tax havens.

Allegedly, part of their services included serving as board members of the legal entities to obfuscate true ownership and control. Part of the alleged money laundering scheme involved having clients fund bogus foundations, subsequent to which the foundations would wire funds to St-Cyr’s investment firm for investment to dodge reporting taxes. According to the indictment, Poulin would subsequently wash the funds through his law firm’s trust account back to the client in his or her home country.

Other non-US lawyers allegedly helped in the money laundering scheme

The indictment alleges that a series of non-US lawyer and advisors were used to create many bogus legal entities (e.g., corporations, trusts and foundations) for tax evaders and allowed their law firm trust accounts to be used to receive funds for that purpose.

In order to catch St-Cyr and Poulin, three US undercover agents met with them in Canada and Miami and hired them to launder $2 million of dirty money the agents said they obtained from defrauding a US bank. According to the indictment, Poulin and St-Cyr were willing to launder proceeds of crime provided none of the proceeds were derived from terrorism or drug trafficking.

Zero Exposure Inc.

According to the indictment, Poulin, through his law firm, established a foundation for the undercover agents with the not-so fortuitous name of “Zero Exposure Inc.” Poulin was, at that point probably about 100% exposed if the allegations are accurate. The indictment alleges that subsequently, Poulin knowingly accepted proceeds of crime into the law firm trust account, which were sent to him in the Cayman Islands and invested. He also allegedly used Canadian financial institutions to launder funds from Quebec to the US.

St-Cyr is alleged to have told the IRS agents that foundations are better for laundering funds and trusts are better for tax evasion, and that he charged higher fees for money laundering than for tax evasion.

The charges

St-Cyr and Poulin are charged with Conspiracy to Launder Money Instruments pursuant to 18 USC §1956(h) and Laundering Monetary Instruments pursuant to 18 USC §1956(a)(3)(B). The latter relates to undercover operations where the financial transaction involves property represented to be proceeds of specified unlawful activity. The proceeds in §1956(a)(3) cases are not derived from a real crime; they are undercover funds supplied by the government. The specific intent provisions in §1956(a)(3) require that the transaction be conducted with the intent to conceal or disguise the nature, location, source, ownership or control of the property or to avoid a transaction reporting requirement.

Equatorial Guinea Vice President charged with money laundering

By Christine Duhaime | March 20th, 2014

The Vice-President of Equatorial Guinea, Teodorin Obiang, has been charged with money laundering in a multinational corruption case in which it is alleged that he illegally moved state assets to other countries, including France. His lawyer in France, Olivier Metzner, was found dead last year floating in the sea in Gulf of Morbihan.

Politically exposed person

Mr. Obiang is the son of of the President of Equatorial Guinea. He was the subject of a US Senate Committee on Homeland Security & Governmental Affairs Money Laundering Report on the use of lawyers for laundering proceeds of crime by politically exposed persons, summarized here. Pursuant to that Report, Mr. Obiang hired US attorneys to set up shell companies for the purposes of laundering $100 million into the US through law firm trust accounts. Funds were used for lavish expenses, such as a house in Malibu and a private jet, and to attend parties at the Playboy Mansion. Mr. Obiang was a politically exposed person.

Mr. Obiang’s assets in France were frozen after financial magistrates in France began investigating the conditions under which he acquired property in France. Before his untimely death, Mr. Obiang’s former lawyer said that his client was not subject to French law, which is true.

Canadian family of Gabon Former President Allegedly Implicated

The French investigation also involves another politically exposed person who was the subject of the US Senate Committee on Homeland Security Report, El Hadj Omar Bongo Ondimba, the President of Gabon, who is deceased. The Report describes how one of his wives, Marie-Yva Astier and his daughter, Yamilee Bongo-Astier, both granted Canadian citizenship, allegedly laundered state assets in North America. Ms. Bongo-Astier laundered funds for her father in the US and had over $1 million cash in her safety deposit box at a New York bank, according to the Report. The New York bank thought her activities were suspicious but because Ms. Bongo-Astier produced a Canadian passport and said she was from Canada, the compliance officer did not investigate the origin of funds. Ms. Bongo-Astier and her mother are politically exposed persons in Canada, the US and many other jurisdictions that have anti-money laundering laws in force.

US Treasury Undersecretary for Terrorism Discusses Banks, Bitcoin, AML & Sanctions

By Christine Duhaime | March 18th, 2014

US Treasury Undersecretary for Terrorism on Bitcoin, Banks, AML and Regulation

The US Treasury Undersecretary for Terrorism and Financial Intelligence, David S. Cohen, discussed the risks of digital currencies and Bitcoin in a Bloomberg talk in New York City today.

Mr. Cohen said the regulation of Bitcoin coming down the pipe may require financial transparency which he said will involve the identification of Bitcoin customers (in an anti-money laundering sense).

“Financial Scarlet Letter”

He also said that if push comes to shove and it is not possible to balance transparency in the financial system and digital currencies, the US government will choose financial transparency over virtual currency to protect the global financial system.

And, he said, financial institutions that do not comply with their legal obligations [in respect of Bitcoin transactions and AML compliance], will be saddled with a financial scarlet letter.

Executive Summary

Our Executive Summary of Mr. Cohen’s presentation is as follows:

FATF is coming out with a paper on digital currencies and Bitcoin with common definitions for international use, led by the US Treasury.
Digital currency differs from cash mainly because of the consumer protection risks associated with it, whether as a securities, commodity, or financial service.
The long-term viability of digital currencies depends upon whether the financial crime risks associated with it can be controlled.
The chief concerns in respect of digital currencies and illicit finance include terrorist financing, drug trafficking, sanctions avoidance, money laundering and these concerns are not theoretical.
The anonymity of digital currency transactions makes it somewhat difficult for financial institutions to comply with anti-money laundering laws.
Not enough attention has been given to terrorist financing and proliferation of WMD potential risks with digital currencies. Digital currencies are appealing to terrorists except that its instability is currently a deterrent for them.
With respect to sanctions, they only work if law enforcement can detect efforts to avoid them and sanctions will have a weaker bite if digital currencies are permitted to continue in anonymous form.
Currently, there is no widespread use of digital currencies for terrorist financing.
Besides the US Treasury, the SEC, CFTF, IRS, and CFPB are assessing digital currencies.
US Treasury wants to foster the viability of digital currencies as a core goal to allow financial innovation to flourish in order to serve the unbanked and underserviced populations, however transparency is paramount.
Transparency of digital transactions will mean basic controls – client identification, client transaction monitoring, record-keeping, reporting to FIUs, risk assessments – in other words, AML law.
Any financial institution can be exploited for money laundering from digital currencies and therefore, all of them must have in place controls to mitigate threats. Those that are disregarding their [AML] obligations, “will be saddled with a financial scarlet letter.”
US Treasury is aware of the opposition to the regulation of Bitcoin and regardless, there will be scalable regulation to bring in transparency.
The regulations currently in place in the U.S. apply at the two crucial points in digital currency transactions – entry and exit of users in respect of digital currencies (e.g., when you buy and when you sell). The federal view is that this is currently sufficient to detect and deter financial crimes. However, if digital currencies achieve greater adoption or if normal financial life can be conducted for long stretches fully within the digital currency regime, the US government will increase regulation.
US government intends to go after digital currencies not registered as money transmitters, financial institution not in AML compliance, entities violating sanctions law in respect of digital currencies, and the use of digital currencies for illicit purposes.
With respect to Bitcoin, Blockchain records are immaterial – for financial crime, it is not the transactions of Bitcoin that are material – it is the transactors (e.g., the identity of the persons).

The full presentation is here.

The violent methods gambling debts from Macau are collected in Hong Kong

By Christine Duhaime | March 16th, 2014

Law Commission notes violent methods of gambling debt collection

According to a Consultation Paper prepared by the Law Reform Commission of Hong Kong, debt collection in Hong Kong is a significant and violent problem, mostly arising from gambling debts incurred locally and in Macau. Loan sharks in Macau and Hong Kong account for 21.4% of the debt collection criminal complaints to police, the largest type of complaint filed.

The Law Reform Commission looked at police reports and judicial decisions involving debt collection tactics, noting both the involvement of Triads in many cases and the large extent to which torts (false imprisonment, assault, defamation) or serious crimes (murder, attempted murder, extortion, criminal interest rates) were committed in the debt collection process.

A synopsis below of some of the cases studied by the Law Reform Commission, and several subsequent ones, shed light on the violent nature of the collection of gambling debts in Hong Kong:

The Queen v. Chan, CACC 311/1983 – Loan sharks burned victim with cigarettes during two day period to collect gambling debt.
- A man from Hong Kong, Tong King-yiu, borrowed money from a loan shark in Macau to gamble.
- When he failed to repay the loan, the loan shark took steps to physically pressure him into paying. Three men employed by the loan shark, Chan, Yau-hang, Ho Lai-man and Ho Su-kun, seized Mr. Tong in Kowloon, brought him to a hotel room and, over the course of a few days, beat him up and burned him with cigarettes.
The Queen v. Chan, 231/1994 – Loan sharks attempted to collect an extra HK$15,000 from gambler for wages and expenses incurred by them to collect his gambling debt.
- A man from Hong Kong, Wong Chi-keung, borrowed money from a loan shark in Macau to repay a gambling debt.
- When he failed to repay the loan, he was forcibly detained and taken to a karaoke bar. While there, he was forced to make phone calls to raise funds to repay the debt.
- Mr. Wong owed $25,000 and was told he had to raise HK$40,000 to be set free, the extra HK$15,000 was to pay the wages and expenses of the men forcibly confining him for their time in collecting the debt for their employer.
HKSAR v. Wong Fuk Tak, CACC 249/1999 – Triads informed debtors that they were Triads, a criminal offence in Hong Kong.
- In April 1999, sixteen men belonging to the Wo Hop Triads in Hong Kong, were convicted for being members of a prohibited gang and criminal activities related to that membership.
- Among the many offences committed, murder, a Triad explained to an undercover police officer that watching a person being chopped from the head by a young Triad was “so exciting…like shooting a movie.”
- When it was suggested at a Triad meeting that the young Triad who had committed murder be placed in hiding, the Triads objected, saying it was better for the story of how they killed someone by hacking to get out.
- Another offence for which they were convicted related to hacking up a group of 16-year-old boys “like meat” with knives.
- Among other things, the Triads were convicted of disclosing their membership in the Wo Hop. Under Hong Kong law, it is a criminal offence to say you are a member of a Triad or to say you are a Triad manager, a testiment to the fear they invoke. Whether one is a member of a Triad is irrelevant for the offence. Claiming to be a Triad officer carries a fine of HK$1 million on conviction and a term of imprisonment of up to 15 years.
- Debt collectors in Hong Kong often claim to be Triads in order to more easily extract payment.
HKSAR v. Wong Ka-fat, DCCC 937/2008 – Triads forced a tourist to incur HK$300,000 gambling debt at Macau casinos then attempted to collect HK$650,000 from his family under threats of violence.
- A 20-year old American university student visited the Wynn Casino in Macau and while there, was approached by junket operators and was convinced to go with them to gamble at the Casino Lisbon.
- At the Casino Lisbon, the student was coerced into giving details about his family, then taken to a VIP Room to gamble on the promise of free tickets to show and hotel stays.
- He was given “mud chips” worth HK$10,000 each and one of the promoters gambled HK$30,000 of the chips for the student and lost. The student was not allowed to leave or stop gambling.
- The student was taken to another casino in Macau where the junket operators continued to place bets for him, allegedly losing HK$300,000. At that point, he was taken to a restaurant and asked to sign an IOU for HK$650,000. He was detained for approximately 12 hours and finally dropped off at the Macau ferry and escorted back to Hong Kong.
- He was brought to an ATM and instructed to take out as much as he could, which was HK$20,000.
- His escorts brought him home and, once there, threatened his mother if she did not pay them HK$650,000. When she refused, they threatened to take her son away.
- Eventually, she called the police and notwithstanding the police investigation, the junket operator called other family members, including his elderly grandmother, to collect the alleged HK$650,000 in debt, threatening to harm them if they did not pay. Eventually, the debt collectors were arrested.
- As noted by the Court of Hong Kong, this was part of a well-known Triad “scam” perpetrated on visitors to Macau wherein they are promised numerous free casino and hotel benefits for minimal gambling, then effectively held against their will while the loan sharks gamble for them with mud chips, and run up enormous fictional debts. The gambler is told he has incurred huge gambling losses and is forced to repay fictional debts to organized crime.
HKSAR v. See Wah Lun, CACC 370/2009 – Triads plotted to dismember and kill a Macau casino chip dealer for allowing HK$100 million casino win.
- Several Triads were convicted of disclosing membership in the Triads, being members of Triads and several other criminal offences including attempted murder. During their trial, evidence emerged of their methods for collecting gambling debts from Macau.
- In one debt collection file, Triads plotted to kidnap Wong Kam Ming, bring him to a secret hiding place and chop off his arms and legs before killing him.
- Mr. Wong was a mud chip dealer at a Macau casino and he had allowed a person to win HK$100 million gambling at a VIP Room, when the policy was that mud chip dealers were required to ensure players lost. Alleged Triad boss, Cheung Chi Tai, also known as Tsang Pau, operated the VIP Room in question. Mr. Wong therefore owed the Triads for the amount the casino paid in winnings. According to evidence at trial, Cheung Chi Tai owned two VIP Rooms at Macau casinos, including the Chengdu Hall at the Sands.
- The gambler who won HK$100 million was accused of cheating – his house was set on fire and he was attacked numerous times.
- Among the evidence seized at the local Triad office were guns, beef knives, Japanese dagger, balaclavas, handcuffs, extra licence plates, martial arts weapons and notebooks containing particulars of the family members of people who owed debts.
- A witness who testified at the trial was allowed to testify remotely because he was a “witness in fear”, fearful for his life for testifying against members of the Triads.

It may not be as exciting to gamble in Las Vegas, but it appears to be much safer.

Two Hong Kong billionaires convicted of money laundering over Macau government procurement case

By Christine Duhaime | March 14th, 2014

Surprising criminal conviction of two Hong Kong tycoons

In a surprising decision, the Macau Court of First Instance has convicted two high-profile Hong Kong businessmen of money laundering. Joseph Lau Luen-hung, and Stephen Lo Kit-sing, each received a sentence of five years and three months in prison and were sentenced in absentia.

Mr. Lau is the chairman of Chinese Estates Holdings Limited, a listed Hong Kong company. On the announcement of the conviction, the shares of Chinese Estates Holdings Limited were immediately halted. Lau is ranked 158th on the Forbes list of the world’s richest people with an estimated wealth of US$8.4 billion. Mr. Lau graduated from the University of Windsor in Canada.

Mr. Lo is the chairman of BMA Investments.

Mr. Lau and Mr. Lo were convicted of bribery and money laundering for offering Macau’s former public works minister, Ao Man-long, a HK$20 million bribe in connection with one of the most well-known public procurement infrastructure cases worldwide. Mr. Ao was incarcerated for 29 years for taking bribes and laundering the proceeds of crime in connection with several real estate developments in Macau, including casinos. The Ao case is well-known because it remains one of the only cases in which a whole family of a money launderer was convicted of money laundering for acquiescing and/or facilitating Mr. Ao’s criminal activities. It is also a well-known case because Mr. Ao kept details of every illegal transaction and the kickbacks he received in a notebook. He amassed a fortune of $100 million in seven years from proceeds of crime and funneled that money to Hong Kong banks, then to the British Virgin Islands.

Mr. Ao was a politically exposed person, as that term is used in money laundering law, and banks in Macau, Hong Kong and the British Virgin Islands were required to report the movement of his funds to law enforcement under anti-money laundering law as suspicious transactions.

The Macau Police are expected to seek the extradition of Mr. Lau and Mr. Lo from Hong Kong and although there is no extradition treaty between Macau and Hong Kong, pursuant to international anti-money laundering conventions and norms, the extradition of persons suspected, or convicted of money laundering offenses is facilitated and expedited among countries.

The Macau Police are also expected to seek the assistance of Interpol in issuing a notice for the arrest of Mr. Lo and Mr. Lau to ensure they cannot travel anywhere.

Another person associated with the Ao, Lau and Lo cases, Ho Meng Fai, fled Macau while on bail and is being sought by Interpol.

Mr. Lau has had a team of lawyers representing him and switched law firms midway through his defense. It is unclear whether any of his lawyers had experience in proceeds of crime. According to the Macau Business Daily, at one time, Mr. Lau was represented by the lawyer who defended Mr. Ao and lost.

The ICOC will likely commence an investigation into the affairs of Chinese Estates Holdings Limited.