Escort agency indicted amid allegations of money laundering

By Christine Duhaime | November 20th, 2012

Escort Agency indicted

New York’s attorney general has indicted several corporations and 19 people in connection with an alleged prostitution and money laundering operation in New York and New Jersey that provided escort services and drugs. Several of the people indicted included clients who used the services, escorts, chauffeurs, den keepers and the shareholders and managers of the corporations.

Clients who hired escorts, some of whom were indicted and many of whom were not, are accused of being co-conspirators in the criminal enterprise by virtue of the fact that they shared a common purpose of engaging in, and profiting from, criminal conduct.

According to the indictment, in order to launder the proceeds of crime, the corporate defendant, Somad Enterprises Inc., set up numerous subsidiaries that purported to provide services such as acupuncture, antique sales and party planning, in order to divert prostitution revenues through those entities and to create false business records to open bank accounts, obtain merchant codes from credit card companies and create invoices and employment records.

The authorities seized approximately $3.5 million in cash from the escort agency and freed two women who were being forcibly trafficked for sex.

The specific charges include enterprise corruption for operating a criminal enterprise, namely a prostitution-based money laundering enterprise, money laundering and falsifying business records. The so-called “lady pimp”, Jay King, is alleged to have been the brains of the operation.

She allegedly provided cocaine and Viagra to men as part of a package deal for prostitution services.

How cell phones & Internet banking are used by cybercriminals to steal your money

By Christine Duhaime | October 27th, 2012

The cyber crime problem

As more consumers use the Internet to complete financial transactions, the threat of various forms of cyber crime is likewise increasing. Those forms include identity theft, bank account hijacks, ATM skimming, POS data thefts, and credit/debit card account theft. Victims of financial cyber crime are often financially wiped out and in the US alone, cyber crime is estimated to cost the economy billions of dollars annually.

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U.S. warns of increasing incidents of ransom for terrorist financing

By Christine Duhaime | October 7th, 2012

U.S. Under Secretary for Terrorism and Financial Intelligence, David Cohen, was in Europe this week warning government agencies against the increase in kidnappings for ransom by terrorist organizations (listed entities). In the past decade, al Qaeda is estimated to have received ransom payments of US$120 million from kidnappings that occurred mostly in North Africa, Yemen and Mali. The average ransom payment is approximately US$5.4 million. Funds raised by ransom payments have helped terrorist organizations build capacity to continue their activities including recruiting, indoctrinating new members, paying salaries, traveling, establishing training camps and buying weapons and communications equipment.

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Canada moves forward on law to remove foreign criminals

By Christine Duhaime | September 22nd, 2012

Foreign Criminals Removal

On Monday, Canada’s immigration minister will move forward with legislation to facilitate the removal of foreign criminals from Canada. Bill C-43, entitled the Faster Removal of Foreign Criminals Act, will amend the Immigration and Refugee Protection Act in the following ways:

  • Certain foreign nationals convicted of a criminal offence in Canada will be able to file an appeal to the Immigration Appeal Division in respect of their removal only if their sentence is less than six months. The aim is to ensure that those convicted of more serious offences, such as fraud, money laundering, or terrorist financing, are ineligible to appeal their status in Canada;
  • Foreign nationals who have been convicted of an offence outside of Canada that carries a sentence of 10 years or more will be ineligible to appeal before the Immigration Appeal Division;
  • Foreign nationals who are inadmissible to Canada by virtue of serious criminality (e.g., human rights violations, organized crime, terrorism) could no longer apply to remain in Canada under humanitarian and compassionate grounds;
  • The Minister of Immigration will have the authority to deny temporary resident status to a foreign national for up to three years on public policy considerations;
  • Foreign nationals who have a family member who has been determined to be inadmissible to Canada amy now be denied entry to Canada;
  • The inadmissibility period for misrepresentation in an immigration application will be extended to five years from the current two years and such persons will be banned for that period of time from applying for permanent residence;
  • Foreign nationals will be required to attend interviews with Canada Border Services Agency and the Canadian Security Intelligence Service if ordered to do so; and
  • Foreign nationals will be able to renounce their permanent residence status by application (rather than by an administrative process).

In June of this year, the Minister introduced Bill C-43 by saying: “If you’re Muammar Gaddafi’s son, I don’t want you in Canada,” in reference to Saadi Gaddafi, who spent several months in Canada in 2008 as a temporary foreign visitor, and purchased property in Toronto.

Canadian pleads guilty to money laundering in US over online gambling

By Christine Duhaime | September 19th, 2012

Nelson Burtnick, the Canadian executive who was indicted for money laundering in April 2011 in connection with his role operating the Full Tilt Poker gambling website, pleaded guilty to money laundering today.

He was indicted, along with several others, for money laundering, bank fraud, and illegal gambling for disguising payments from U.S. gamblers as payments to fictitious online merchants selling other goods and services. He admitted that he helped to deceive banks into processing hundreds of millions of dollars worth of gambling transactions in the U.S. He faces up to 20 years in U.S. federal prison.

2 men arrested after swallowing $40,000 in cash

By Christine Duhaime | September 16th, 2012

Police in Columbia have arrested two men arriving in that country after discovering that they were each smuggling $40,000 cash in $100 bills, hidden in their stomachs. The cash was wrapped in plastic, similarly to the way in which drug smugglers wrap up heroin and cocaine for internal body smuggling. The men were taken to a medical clinic and given laxatives to facilitate the removal of the packs of cash from their body.

Convicted lawyer Scott Rothstein’s wife charged with money laundering

By Christine Duhaime | September 9th, 2012

In a much anticipated move, Kim Rothstein, the so-called “free-spending” wife of Scott Rothstein, the Florida lawyer convicted of money laundering for running a Ponzi scheme through his now-defunct law firm, has been charged with conspiracy to commit money laundering.

Kim Rothstein’s lawyer, Scott Saidel and her close friend, Stacie Weisman, were also charged with conspiracy to commit money laundering. The charges stem from allegations that they attempted to hide more than US$1 million in jewelery from federal authorities to avoid the jewelry being seized when Scott Rothstein was charged in 2009.

In 2010, Scott Rothstein was sentenced to 50 years in prison for money laundering, and other charges. At the time of his arrest, he owned more than a dozen luxury homes, 21 exotic cars, a 87-foot yacht, and a handful of restaurants. Nine years ago, he was worth less than US$200,000. The incredible fortune he amassed in such a short period of time was derived illicitly, and much of it from firm clients. His Ponzi scheme was the largest investment fraud scheme in Florida history.

Switzerland opens money laundering investigation into UBS

By Christine Duhaime | September 4th, 2012

According to Bloomberg News, the AG for Switzerland opened a criminal probe of UBS AG on August 29 as a result of a complaint filed by Bruno Manser Fund, a rain-forest advocacy group, that alleged that UBS AG allowed its bank to be used to launder proceeds of crime from Musa Aman, Chief Minister of the Malaysian state of Sabah. The group alleges that Aman laundered over USD$90 million from proceeds from the tropical timber business in Sabah, Borneo, through a number of UBS bank accounts located  in Hong Kong.

HSBC accused of lax anti-money laundering compliance

By Christine Duhaime | July 17th, 2012

HSBC investigation

The U.S. Permanent Senate Subcommittee on Investigations has found that HSBC Holdings PLC allowed drug traffickers, terrorists and rogue states to launder billions of dollars in the U.S. as a result of poor anti-money laundering (“AML“) and counter terrorist financing (“CTF“) controls.

The Subcommittee found that HSBC serviced high-risk clients in drug-trafficking countries with weak AML measures; allowed US$19.4 billion in transactions linked to Iran to go through their affiliates over a seven-year period; and provided services to certain banks in Saudi Arabia and Bangladesh despite their ties to terrorist financing.

The Subcommittee investigated HSBC’s AML and CTF practices over a period of twelve months and issued its findings in a 330-page report to the U.S. Senate entitled “U.S. Vulnerabilities to Money Laundering, Drugs and Terrorist Financing: HSBC Case History.”

The Subcommittee focused on HSBC’s U.S. affiliate, HSBC Bank USA, N.A., which functions as the U.S. nexus for HSBC’s worldwide network and is a correspondent bank. In AML, correspondent banks provide affiliated banks with U.S. dollar services, including services to move funds, exchange currencies, cash monetary instruments, and carry out other financial transactions.  Correspondent banking can be a major conduit for money laundering and terrorist financing.

In 2010, HSBC was the subject of a supervisory letter from the U.S. Office of the Comptroller of the Currency for several violations of U.S. AML laws, including maintaining an inadequate AML program and was also the subject of a cease and desist order from the OCC requiring it to strengthen multiple aspects of its AML program. At that time, HSBC had a massive backlog of 17,000 alerts identifying suspicious client transactions that were not acted upon.

The Report and testimony are available at this link on the website of Homeland Security & Governmental Affairs.

Lenny Dykstra pleads guilty to money laundering

By Christine Duhaime | July 14th, 2012

Former New York Mets all-star outfielder, Lenny Dykstra, pleaded guilty in U.S. District Court today in LA to money laundering, bankruptcy fraud and concealment of assets for hiding and selling sports memorabilia that were assets that were supposed to be included in his bankruptcy filing. After filing for bankruptcy, Dykstra is alleged to have sold or destroyed approximately US$400,000 worth of sports items without permission of his bankruptcy trustee.

Dykstra filed for bankruptcy three years ago, claiming he owed US$13 million and has only US$50,000 in assets. He is currently serving a three-year sentence for grand theft auto and filing a false financial statement. In August 2011, he was charged with indecent exposure for allegedly exposing himself to women whom he met through Craigslist.

Dykstra faces up to 51 months in jail for the money laundering, bankruptcy fraud and concealment convictions.