Ontario court reserves judgement on extradition of suspected terrorist and money launderer

By Christine Duhaime | September 22nd, 2010

Suresh Sriskandarajah, also know as “Waterloo Suresh,” a Sri Lankan refugee to Canada being sought by the U.S. on terrorism and money laundering charges, is free on bail while the Ontario Court of Appeal decides whether to allow his appeal of a decision by the Ontario Superior Court of Justice granting an order committing him into the custody of U.S. officials for extradition under the Extradition Act. The Court of Appeal reserved judgement today.

Sriskandarajah was arrested in 2006 as a result of a joint FBI – RCMP investigation and charged in the U.S. with conspiracy to provide material support and resources to the Liberation Tigers of Tamil Eelan (LTTE), and wilfully dealing in LTTE property. The LTTE is a designated terrorist organization in Canada and in the U.S.

According to a criminal complaint filed in the U.S. District Court for the Eastern District of New York, Sriskandarajah allegedly wrote several explicit e-mails instructing student couriers on how to smuggle equipment illegally into Sri Lanka for the LTTE, and how to bribe and lie to customs officials and the Sri Lankan Army to get past military check-points. In one e-mail quoted in the complaint, he is alleged to have told students to make up “BS” to get into LTTE-controlled territory and once there, to inform LTTE officials that they were sent by “Waterloo Suresh.”

With other co-defendants, Sriskandarajah is alleged to have helped LTTE officials buy communications towers, purchased submarine and warship equipment, smuggled computer, GPS equipment and other items to LTTE-controlled areas in Sri Lanka, and conspired to buy almost $1 million worth of missiles and assault rifles in New York. He is also alleged to have used U.S. banks to launder money for LTTE terrorist activities.

You can read the criminal complaint here (Download USA v. Fnu Lnu).

Vatican Bank being investigated for money laundering

By Christine Duhaime | September 21st, 2010

Italian authorities announced today that they have impounded US$30 million from the Institute for the Works of Religion, or as many call it, the “Vatican Bank”, and placed its top two officers, president Ettore Gotti Tedeschi and director general Paolo Cipriani, under investigation in connection with a money laundering inquiry.

The 2005 Directive 2005/60/EC of the European Parliament and of the Council requires that financial institutions in the member states of the EU record and report on certain money transfers to state financial intelligence units to prevent and detect money laundering and terrorist financing activities.

The Vatican Bank investigation stems from two apparently suspicious transfers in September from an account held by the Vatican Bank – one for US$26 million and the other for US$4 million – that were reported by the Bank of Italy to Italy’s financial intelligence unit. The Vatican Bank is a privately held institute located inside the Vatican. Its president reports to a committee of cardinals, and ultimately to the Pope. In the 1980s, the Vatican Bank was involved in a major political and financial scandal in connection with the US$3.5 billion collapse of Italy’s Banco Ambrosiano.

New York resident indicted for hawala activities in attempted Times Square bombing

By Christine Duhaime | September 15th, 2010

The US Attorney for the Southern District of New York today announced the filing of an indictment (Download Younis Indictment) charging Mohammad Younis with operating an unlicensed money transfer business that allegedly facilitated the attempted car bombing in New York City’s Time Square on May 1, 2010.

According to the indictment, Younis provided money transmitting services as a hawala.

A hawala is an informal system of money transfer whereby funds are transferred by customers to a hawala operator, called a hawaladar, in one country and disbursed to recipients in another country by other hawaladar associates.

Younis is alleged to have made two hawala transactions in Long Island on instructions from a hawaladar in Pakistan, without being licensed to operate a money transmitting business.

One of the individuals to whom Younis provided funds was Faisal Shahzad who pleaded guilty earlier this year to attempting to blow up a car bomb in Times Square.

According to Shahzad, the hawala funds originated from the Pakistani-based group Tehrik-e Taliban, a militant extremist group.

The Tehrik-e Taliban was listed on September 1, 2010 as a terrorist organization in the United States. Thus far, the group is not a listed entity in Canada.

The US Attorney has said that Younis was unaware that the funds provided through the hawala system to Shahzad were intended to fund terrorism. If convicted, Younis faces a ten-year term of imprisonment.

Florida businessman pleads guilty in US$800 million Ponzi scheme

By Christine Duhaime | September 15th, 2010

Florida businessman Nevin Shapiro pleaded guilty to running a US$880 million Ponzi scheme. Shapiro was the founder and president of Capitol Investments USA, Inc. (Capitol), a grocery distribution business. He surrendered to the FBI and was arraigned in federal court in New Jersey in April of this year.

He was charged with securities fraud and money laundering. Shapiro used Capitol to solicit millions from investors when it had virtually no income-generating business. New investor funds were used to make principal and interest payments to existing investors and fund Shapiro’s lavish lifestyle.

According to the indictment, Shapiro paid himself US$23 million in salaries and another US$15 million in loans, and charged more than US$600,000 of personal expenses to Capitol’s American Express card, including US$116,000 of charges for a girlfriend. About US$5 million of the funds misappropriated went to pay for illegal sports gambling debts. Shapiro faces a 20 year term of imprisonment for securities fraud and a US$5 million fine. The money laundering charge carries a sentence of up to 10 years in prison. Shapiro will be sentenced in January 2011.

Paralegal sentenced for money laundering and immigration fraud in U.S.

By Christine Duhaime | September 2nd, 2010

Dalia Preldakaj, a paralegal in the New York law firm of Salvador Collazo, was sentenced today in Manhattan to 78 months in prison for money laundering, witness tampering, immigration application fraud and conspiracy to operate an immigration fraud mill.

Collazo is a former Acting Justice of the New York State Supreme Court who was removed from the bench in 1998 for inappropriate conduct after he passed a note to a court lawyer about the physical attributes of a law intern and then instructed the intern to take off her jacket in court, even though she had nothing on underneath.

Preldakaj and Collazo prepared and submitted hundreds of fraudulent immigration applications on behalf of foreign nationals in New York. Preldakaj charged the foreign nationals thousands of dollars for what she told them were fees charged by the U.S. Department of Citizenship and Immigration Services, which in fact were far in excess of the application fees. While out on bail following her arrest, Preldakaj contacted a witness and attempted to persuade the witness to file a false statement that the money paid to Preldakaj for immigration-related work was a personal loan.

U.S. Attorney for the Southern District of New York, Preet Bharara said: “Dalia Preldakaj preyed upon the hopes and dreams of immigrants who trusted her with their applications for status in this country. To line her own pockets, she took their hard-earned money in exchange for what turned out to be empty promises of assistance.”

Former Justice Collazo was found guilty of one count each of conspiracy to commit immigration application fraud, immigration fraud, and making false statements. He will be sentenced in October.

Terrorist financing charge laid in alleged terrorism plot in Canada

By Christine Duhaime | August 27th, 2010

Three Canadian citizens, Hiva Mohammad Alizadeh, 30 and Misbahuddin Ahmed, 26, both of Ottawa and Khurram Syed Sher, 28, of London, Ont., have been charged in an alleged terrorism plot in Canada.

Alizadeh, the alleged ring-leader of the group, is also charged with terrorist financing for allegedly making property or financial services available to a terrorist group. It is an offence under Section 83.03 of the Criminal Code of Canada to provide financing that will be used by or benefit a terrorist group. Police said searches of the property of the accused turned up a vast quantity of terrorist literature, videos and more than 50 electronic circuit boards designed specifically for remotely detonating explosive devices. The group is alleged to have planned to bomb Ottawa.

Lawyer pleads guilty to laundering funds for client

By Christine Duhaime | August 24th, 2010

South Carolina tax lawyer, John O’Connor, pleaded guilty today to a charge of money laundering in connection with his involvement in a conspiracy to liquidate and conceal money stolen by a former client. The former client, William Trier, embezzled approximately US$5 million over a ten year period from his employer by creating phoney invoices from two fictitious transportation companies and submitting them for payment. He used his position to approve the payment of the fraudulent invoices. When Trier learned he was under investigation, he contacted O’Connor to help him.

In 2008, Trier pleaded guilty to money laundering and mail fraud and was sentenced to 63 months in prison and ordered to pay restitution of US$5.2 million.

Royal Bank of Scotland fined over anti-money laundering gaps

By Christine Duhaime | August 5th, 2010

The Royal Bank of Scotland has been fined £5.6 million by the UK regulatory agency for failing to implement key anti-money laundering requirements. The fine is the largest ever levied by the Financial Services Regulator.

The Bank failed to adequately screen its customers and their transactions to ensure there were no ties to listed persons. Since 9/11, banks in the UK (and in many other countries) are required to confirm they do not transact with persons or entities who are listed as associated with terrorism.

In Canada, the Minister of Public Safety maintains a list of sanctioned terrorist organizations.

The United Nations maintains a similar list of sanctioned persons and organizations.

EU approves SWIFT data sharing agreement with U.S.

By Christine Duhaime | July 8th, 2010

The European Parliament approved a five-year agreement with the U.S. for the transfer of financial and other information collected by the Society for Worldwide Interbank Financial Telecommunication (SWIFT) to the U.S.

SWIFT is a Belgium-based financial messaging company that operates a financial transfer network used by 8,000 financial institutions in over 200 countries. The network collects, stores and shares personal and financial information used to transfer funds electronically, including the names of account holders, bank account numbers of the transferee and transferor, destination of funds transferred, amount transferred, and the identity of the recipient of the funds. SWIFT controls 80% of the electronic funds transfers worldwide.

Following 9/11, the U.S. Treasury Department issued subpoenas to SWIFT seeking information on suspected international terrorists under its Terrorism Finance Tracking Program. In 2009, SWIFT stopped storing certain data on its U.S. servers and began hosting that data in the European Union. The U.S., SWIFT and the EU Parliament began negotiating for U.S. access to SWIFT data.

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FinCEN proposing adding prepaid cards to anti-money laundering reporting system

By Christine Duhaime | June 22nd, 2010

The U.S. federal regulatory agency, Financial Crimes Enforcement Network (FinCEN), is proposing amendments to the Bank Secrecy Act regulations that would regulate prepaid cards and similar devices in the U.S. The proposal covers plastic cards, mobile phones, electronic serial numbers, key fobs and mechanisms that provide a portal to funds that have been paid for in advance and are retrievable and transferable. There are four main changes contemplated by the proposed regulations as follows:

  1. Prepaid or stored value card programs would be defined as “prepaid access” and the definition of money services businesses would be amended to include prepaid access businesses;
  2. The terms “issuer” and “redeemer” of stored value would be replaced with the terms “provider” and “seller”. A provider is any person with principal oversight and control over one or more prepaid programs. A seller is any person that receives funds or the value of funds in exchanging for providing prepaid access as part of a prepaid program directly to the person that provided the funds or value, or to a third party as directed by that person;
  3. Non-bank providers of prepaid access would be subject to comprehensive Bank Secrecy Act regulations similar to depository institutions. Providers would be required to register with FinCEN and establish an AML program, file suspicious activity reports, establish customer identification procedures, and comply with record retention requirements. Sellers would be required to establish an AML program, file suspicious activity reports, and implement customer identification procedures. They do not have to register with FinCEN or provide transaction reports to FinCEN; and
  4. Certain types of prepaid access products and services that pose a lower money laundering or terrorist financing risk would be exempt. They include cards purchased for employment benefits, government benefits or health care benefits, are of limited value (US$1,000 or less), or are limited to a closed-loop prepaid access, and do not allow value to be transmitted internationally or transfers between users.

The proposed rule is open to comments until August 27, 2010.