Archive for September, 2006

A Billings insurance agent admits money laundering

Wednesday, September 27th, 2006

On September 20, 2006, a Billings insurance agent, Michael Don Hutton, 59, admitted defrauding companies and laundering money.

Being the principal of M.D. Hutton Insurance, from May 1999 till May 2004 Hutton issued 38 performance and payment bonds on behalf of St. Paul Fire and Marine Co. and St. Paul Mercury Insurance Co. to S.E. Inc. in Deaver, Wyoming. USD 160 152 was paid for the bonds by S.E. Inc. The St. Paul insurance companies were not notified about the issuance of the bonds, so, Hutton kept the insurance premiums collected from SEI.

Michael Don Hutton admitted issuing the unreported bonds and retaining the premiums and claimed doing this because of being broke and having business losses .

As to the mail fraud scheme, carried from September 2002 to May 2004, the agent submitted 28 premium financing agreements to Provident Financial Inc. on behalf of 12 customers in order to get loans, possibly, to pay the customers’ insurance premiums. However, he did not have the customers’ consent to get premium loans on their behalf. Hutton forged the names of customers on the premium finance agreements and sent them to Provident to get loan proceeds. Hutton kept the loan proceeds from the Provident and premiums. Also, he kept the premium paid to him by the customer. Then he used some of these loan proceeds and premiums to make payments on the loans to Provident.

The investigation was conducted by the FBI Agents, the Criminal Investigation Division of the IRS as well as the Montana State Auditor’s Office. The sentencing has been set for December 20.

A Billings insurance agent, Michael Don Hutton faces a maximum of 20 years in prison and a USD 500 000 fine. Currently, Hutton is released.

The Joint Money Laundering Steering Group (JMLSG)

Friday, September 22nd, 2006

The Joint Money Laundering Steering Group (JMLSG) is made up of the leading UK Trade Associations in the Financial Services Industry. The members of the JMLSG are Association of British Insurers (ABI), Association of Foreign Banks (AFB), Association of Independent Financial Advisers (AIFA), Association of Private Client Investment Managers and Stockbrokers (APCIMS),British Bankers’ Association (BBA), Council of Mortgage Lenders (CML), Electronic Money Association (EMA), Finance and Leasing Association (FLA), Investment Management Association (IMA), Wholesale Market Brokers’ Association (WMBA) and other organizations.

The JMLSG aims at promulgating good practice in countering money laundering and to giving practical assistance in interpreting the UK Money Laundering Regulations.

This is achieved by publishing Money Laundering Guidance Notes for the financial sector that are produced since 1990. The Guidance Notes get regularly updated to reveal changing circumstances and developing good practice.

The Guidance Notes outline the requirements of money laundering legislation of the UK, provide the interpretation of the Regulations and develop a base for management to work out tailored policies and procedures appropriate to their business. They are not mandatory, however, they indicate what is expected from financial sector firms and point to a safe way in respect of the Regulations.

The Guidance Notes are applicable to all banks, building societies and credit institutions, all individuals and firms dealing with investment business, all insurance companies covered by the European life Directives and other physical and legal persons. Most of the content can be applicable to other companies and businesses carrying out relevant financial activities as well.

Money laundering allegations – who stands behind West Ham

Monday, September 18th, 2006

Two gifted footlballers, Argentinian World Cup stars, Carlos Tévez and Javier Mascherano, became the victims of the deal between Media Sport Investment (MSI) and Corinthians which purpotedly was used to launder money.  The officials of Brazil’s organised crime taskforce and the Brazilian intelligence agency investigated a subsidiary of MSI after it took over Brazil’s leading club, Corinthians. The suspicions are stated in an official report compiled in Brazil, the two footballers played for Corinthians before their move to West Ham. Investigators claim that they have enough evidence to consider that a secretive offshore investment company that owned Tévez and Mascherano was involved in money laundering. The transfer of the footballers was an unusual deal as the club pays some of the players’ wages but does not make transfer fee to Corinthians. 

The report alleges that the money was laundered on behalf of Boris Berezovsky, a Russian oligarch, mathematician-turned-entrepreneur, who was the wealthiest and most powerful player until Russia’s President Vladimir Putin turned upon him. Berezovsky has been living in exile in the UK, until he was given a UK passport under the name Platon Elenin. However, he faces arrest if comes back to Russia. 

One more man related to this deal is Mr Berezovsky’s old friend, a former Communist Party official from Georgia and the owner of Dinamo Tbilisi football club, Badri Patarkatsishvili. He will also be arrested if comes to Russia. 

Pini Zahavi seems to be another influential figure in the West Ham story. This Israeli sports journalist-turned-agent has stood behind some of the biggest transfers in English football. 

The former president of MSI Kia Joorabchian, denies the involvement in money laundering and refuses to disclose the identities of those who stand behind. Kia Joorabchian, 35, is an Iranian-born businessmen whose family after the 1979 Islamic revolution fled to Kent. In 1999, through his British Virgin Islands-registered company Mr Joorabchian bought 85% of the one of the most influential newspapers of the post-Soviet era, Kommersant. 

As well as Mr Joorabchian, Mr Berezovsky the allegations of money laundering. He denies backing MSI and claims he has no interest in West Ham.

Geographic Money Laundering

Wednesday, September 13th, 2006

When talking about money laundering around the globe, it goes without saying that geography plays its part. There are countries notorious for money laundering. There are countries famous for anti-money laundering.

Banks should be cautious when working with clients from some countries without adequate anti-money laundering strategies. This often are countries with politically unstable regimes, high level of corruption and countries famous for drug producing or drug transit, as well as countries with vague anti-money laundering strategies.

The blacklists of money laundering countries published by different institutions and organizations can be used to see which geographic locations can be dangerous regarding this problem. The lists that can be used are as follows:

  • FATF (Financial Action Task Force) blacklist of high-risk for money laundering countries , FATF mutual evaluation reports;
  • OECD (Organisation for Economic Co-operation and Development) blacklist of countries for adverse tax practices;
  • World Bank & IMF (International Monetary Fund) reviews;
  • USA Patriot Act Section 311 “Special measures for jurisdictions, financial institutions, or international transactions of primary money laundering concern”;
  • US lists of terrorist sponsors, drug dealing countries

and some other lists.

Sometimes it is also good to be cautious when dealing with country that has been removed from a blacklist just recently.

So, geographic approach to countries can be useful, however money laundering itself is not a geographic phenomenon scattered about some locations – it can be existent absolutely anywhere in the world.

Cyberlaundering. How Anonymous E-money Originates

Friday, September 8th, 2006

As it has been already discussed, cyberspace gives many opportunities to money launderers because of anonymity available on the net. Ecash, unlike real cash is very hard to trace.

So – anonymity. This is why money launderers are particularly interested in dealing with electronic funds.

Mark Bortner (Anonymous Digital Cash and Money Laundering, 1996) provides a typical common scheme of how it happens usually:

Doug Drug Dealer is the CEO of an ongoing narcotics corporation. Doug has rooms filled with hard currency which is the profits from his illegal enterprise. This currency needs to enter into the legitimate, mainstream economy so that Doug can either purchase needed supplies and employees, purchase real or personal property or even draw interest on these ill-gotten gains. Of course, this could be accomplished without a bank account, but efficiency demands legality. Anyhow, Doug employs Linda Launderer to wash this dirty money. Linda hires couriers (“smurfs”) to deposit funds under different names in amounts between $7500 and $8500 at branches of every bank in certain cities. This operation is repeated twice a week for as long as is required. In the meantime, Linda Launderer has been transferring these same funds from each branch, making withdrawals only once a week, and depositing the money with Internet banks that accept ecash. To be safe, Linda has these transfers limited to a maximum of $8200 each. Once the hard currency has been converted into digital ecash, the illegally earned money has become virtually untraceable; anonymous. Doug Drug Dealer now has access to legitimate electronic cash.

Whether just as simple as that? What is quoted above is why the law enforcement in many countries has been strict to operations related to e-money and, in reality (whether virtual reality or “real” reality), it is not as easy as it seems anymore. Let’s hope, money launderers will have no chance at all very soon.

Money Laundered Offshore. Ideal Financial Haven

Monday, September 4th, 2006

When laundering “dirty” money, criminals often look for a haven – either offshore or “onshore”, wither online or “offline”. It has been already discussed that offshore tax jurisdiction does not necessarily go hand-in-hand with money laundering, however, money launderers often choose offshore jurisdiction to launder money.

So, what are the criteria to choose a financial haven criminals take into account?

The United Nations Office on Drugs and Crime has pointed out the following features of an ideal financial haven:

  • no deals for sharing tax information with other countries,
  • availability of instant corporations,
  • corporate secrecy laws,
  • excellent electronic communications,
  • tight bank secrecy laws,
  • a large tourist trade that can help explain major inflows of cash,
  • use of major world currency, preferably the United States dollar, as the local money,
  • a Government that is relatively invulnerable to outside pressure,
  • a high degree of economic dependence on the financial services sector,
  • a geographic location that facilitates business travel to and from rich neighbours.

    Also, features like time zone location, a free-trade zone and availability of a flag-of-convenience shipping registry can influence money launderers’ choice.

    The above-mentioned list does not indicate the places not to deal with, it just indicates the places that are vulnerable to money laundering and the United Nations help many countries to develop anti-money laundering appropriate policies to avoid illegal proceeds.