I)  The US-based  International Consortium of Investigative Journalists, (“ICIJ”), analyzed more than 2.5 million documents in its Secrecy for Sale Project.  The Project began after the ICIJ received a computer hard drive in the mail, which contained the so-called leaked documents.  The Project’s goal was to uncover money launderers, tax cheats, kleptocrats and anyone else with assets hidden offshore.

The Project detected secret foreign bank accounts or other assets allegedly maintained by individuals ranging from American doctors and dentists to Bayartsogt Sangajav, the deputy speaker of Mongolia’s Parliament.  Among other things, the Project investigated a nominee incorporation service known as the Portcullis TrustNet Group.  According to the Project’s webpages, the overall investigation was carried out through link charts generated by NUIX computer software, data mining and “old fashioned shoe leather reporting“.

II)  Hiding Assets Through Gatekeepers With Accounts Across The Globe highlighted the problem of lawyers, accountants, etc., who orchestrated asset concealment schemes.  One such case may involve New York attorney Edgar Paltzer and Swiss banker Stefan Buck.  A press release asserts that the two supposedly employed Swiss bank accounts as part of a conspiracy to hide millions from the IRS.  They were indicted on April 16th in U.S.A. v. Paltzer, et  al., U.S. District Court, S.D.N.Y., Index No. 13-cr-00282.

Copyright 2013 Fred L. Abrams

In its 2007 National Money Laundering Strategy report, the U.S. government estimated that as much as $36 billion annually from just the former Soviet Union, was being secretly transferred through U.S. bank accounts and U.S. shell companies.  Besides using U.S. bank accounts and shell companies, kleptocrats, Ponzi schemers, divorcing spouses, etc., can of course conceal assets by parking them in Swiss or other foreign bank accounts.

This program analyzes how bank secrecy laws, multiple jurisdictions and smuggling are utilized in schemes to conceal vast sums of money. The program discusses mutual legal assistance treaty relief and using letters rogatory as asset recovery tools.  It mentions ways whistleblowers or other tipsters may help sniff out these monies and the difficulty lawyers face in dealing with whistleblowers either as clients or as tipsters.

One of the program’s speakers Jack Blum, Esq., will examine the IRS Whistleblower Program and the ethical concerns gatekeepers such as lawyers and accountants have in reporting illegal behavior in both the civil and criminal contexts.  Mr. Blum served as associate counsel, or assistant counsel, or special counsel to three U.S. Senate committees or subcommittees; and has been quoted by or mentioned in thousands of newspaper and magazine articles around the world.  He was also an expert witness for the U.S. Department of Justice and the Internal Revenue Service.

Mr. Blum’s select clients include Heinrich Kieber, who blew the whistle on customers with offshore accounts at Liechtenstein’s private bank, the LGT Group.  Mr. Kieber sold his whistleblowing tips to the German government, which used them to track suspected tax cheats.  Mr. Blum too represented former Julius Baer Swiss banker Rudolf Elmer, who supplied tips about suspected tax evaders to both WikiLeaks and the IRS.

Another one of the program’s speakers is Robert Fiechter, who is a partner at the Des Gouttes & Partners law firm of Geneva Switzerland, founded in 1834.  Advocate Fiechter also serves as a Deputy Judge at the Court of Justice of Geneva, an appellate court.  He too served as a substitute criminal judge and is the Deputy Secretary of the Supervisory Board of the Swiss Bank’s Code of Conduct.  During the program, Advocate Fiechter will describe the ins and outs of Swiss bank secrecy laws.  He will additionally review the legal remedies available for recovering assets hidden in Switzerland and elsewhere across the globe.

Fred Abrams, Esq. the program’s chair, located tens of millions of dollars hidden in offshore tax havens and filed legal proceedings in Zurich, Geneva, Tel Aviv, Amsterdam and San Juan, Puerto Rico, to seek discovery from foreign bank witnesses.  A member of the New York bar since 1990, he handled a wide variety of legal matters in which assets were hidden, such as RICO, money laundering, identity theft and tax fraud.

Practicing in the asset recovery areas of financial intelligence, financial fraud investigations and forced collection proceedings, Fred Abrams has been cited by Forbes Magazine, The New York Times, MoneyLaundering.com, Reuters and FoxBusiness News. He also publishes “The Asset Search Blog” (www.assetsearchblog.com), where he writes about interdicting assets which have been fraudulently concealed by politically exposed persons; securities fraudsters; post-judgment debtors; divorcing spouses and others.

Program Chair
Fred L. Abrams, Esq., New York City

Faculty:

Jack Blum, Esq.

Robert Fiechter Partner, Des Gouttes & Partners Law Firm, Geneva Swtizerland

Agenda

6:00-6:10 PM         Introduction & Opening Remarks
                                    Fred L. Abrams

6:10-7:00 PM         The Ubiquitous Problem Of  Hidden Assets
                                    Fred L. Abrams

• How Ponzi schemers, tax cheats, divorcing spouses, etc., may hide assets from domestic authorities and everyone else
• Following A Money Trail
  • U.S. Bank Secrecy Laws
  • Contaminated or Spurious Tips

• Recovering assets by using whistleblowers / tipsters in your client’s court case

7:00-7:05 PM         Break

7:05-7:55 PM         Tipping The IRS Via Its Whistleblower Program
                                    Jack Blum

• Swiss Bank Julius Baer whistleblower, Rudolf Elmer
• LGT Group’s former Liechtenstein computer technician, Heinrich Kieber

7:55-8:00 PM           Break

8:00 -8:50 PM          Interdicting Assets Hidden Across U.S.
                                       Robert Fiechter

• Bringing Forced Collection Proceedings In Switzerland & Other Countries
  • Swiss Professional Secrecy Laws
• Recovering Assets By Using Criminal & Civil Law Tools
  • Seeking Mutual Legal Assistance Treaty & Related Relief

8:50-9:00 PM         Q & A

Copyright 2013 Fred Abrams

The receiver trying to recover assets lost to Trevor Cook’s Ponzi scheme has now filed a complaint against Associated Bank over this same Crown Forex, LLC account.  The complaint available below alleges “Associated Bank knowingly aided and abetted one of the largest Ponzi schemes in Minnesota’s history.”  Complaint, p. 8¶ 13.  The complaint seeks damages for causes of action sounding in fraud, breach of fiduciary duty, conversion and false representations.

It claims at p. 9 ¶13 & p. 24 ¶48, that Associated Bank ignored “red flags” related to the Crown Forex, LLC account.  The complaint’s exhibits also include the January 15, 2010 affidavit of Lien Edward Sarles, a former Associated Bank employee.  The affidavit basically alleges that Associated Bank failed to follow the required customer verification procedures, at the time the Crown Forex account was opened.

As mentioned at “Using Red Flags To Recover Ponzi Proceeds“, suing financial institutions in the aftermath of a Ponzi scheme is nothing new.  These lawsuits sometimes assert that a financial institution negligently or recklessly permitted Ponzi schemers to launder illicit proceeds through a financial account.

  (Click On The Image To View The Receiver’s Redacted Complaint) 

Copyright 2013 Fred L. Abrams

Meanwhile, the court-appointed receiver tasked with recovering Trevor Cook’s Ponzi scheme proceeds, published statistics about the scheme’s 724 damaged investors.   The statistics are accompanied by a graph, adding insight into the demographics of the damaged investors:

Chart Courtesy of: The Cook, Kiley & Beckman Receiverships

Copyright 2013 Fred L. Abrams

• At “Human Intelligence & The SEC’s Whistleblower Program”, Labaton & Sucharow partner Jordan A. Thomas examines the critical role whistleblower tips will have in the SEC’s detection of fraudsters / recovery of assets.  One example of the foregoing might be the whistleblower tip of former Deutsche Bank risk analyst, Dr. Eric Ben-Artzi.  Mr. Thomas represents Ben-Artzi and a press release reveals that Ben-Artzi claims there were multi-billion dollar securities law violations at Deutsche Bank.  The article “Did Deutsche Bank Fraudulently Hide Huge Losses?“, also reports on Ben-Artzi’s SEC whistleblower tip.
• The U.S. Treasury Department announced its largest collective settlement ever, $875 million dollars to be paid by HSBC, which has approximately $194 billion in assets and 300 branches.   This settlement resolves charges that HSBC had lapses in its anti-money laundering program and failed to place controls on foreign correspondent accounts.  An assessment of civil damages outlines the charges that were leveled against HSBC:

(Click On The Image To Read The Entire Assessment of Damages)

Copyright 2012 Fred L. Abrams

FATF’s Focus on Asset Forfeitures Could Challenge Some Nations¹

October 31, 2012, By Brian Monroe

An intergovernmental group’s revised expectations of how countries should seize looted assets may prove difficult to meet, and could lower the mutual evaluation scores nations receive for their anti-money laundering controls.

Earlier this month, the Paris-based Financial Action Task Force (FATF) outlined in guidance how jurisdictions should best assist one another with asset forfeitures, calling for the implementation of formal and informal mutual legal assistance arrangements and the creation of specialized units to expedite responses to intergovernmental inquiries.

How willingly nations cooperate with one another will be an important factor in how FATF evaluates their anti-money laundering (AML) and counterterrorism financing regimes going forward, according to an individual familiar with high-level discussions within the intergovernmental group.

“Asset confiscation and recovery is a very important objective and an indicator of the success of the overall regime,” said the person, who asked not to be named. The issue is linked to FATF’s increased focus on fighting corruption, the individual said.

In February, individuals involved in FATF talks told ACAMS MoneyLaundering.com that the group was revising how it scored regimes to emphasize efficacy, and would consider forfeiture sizes, conviction rates and other factors. The shift follows FATF’s decision to streamline its AML and counterterrorism financing standards earlier this year.

As part of that effort, the group plans to grade countries on both technical compliance and how effectively they implement financial crime controls, including asset forfeitures, sources said this month. The two separate grades will be combined in an overall score included as part of each mutual evaluation.

But meeting FATF’s asset forfeiture standard, as outlined in its Oct. 19 best practices, will be challenging for nations of all stripes, according to Tom Lasich, a former head of training at the Switzerland-based International Centre for Asset Recovery and a former Internal Revenue Service criminal investigator.

Most developing countries lack laws for tracing and freezing assets, and those that do generally don’t understand or use them, said Lasich. Developing countries also don’t know how to effectively make requests of large financial center countries, like the United States or United Kingdom, or follow a money trail overseas, he said.

Developed nations, where looted assets may be banked, tend to have stringent prerequisites for asset freeze requests, often asking to review evidence for the seizure before obliging, Lasich said. The countries want to avoid asking financial institutions to expend resources on complex and expensive investigations that can take over five years to complete, he said.

The reticence on the part of financial centers to move quickly on such requests is likely to hurt them in FATF mutual evaluations, Lasich said.

Many jurisdictions may grapple with how to share sensitive bank information with their foreign counterparts, particularly when few nations have the legal structure for doing so, said Lasich. FATF’s call for specialized asset forfeiture teams is another challenge, particularly for developing nations that don’t have the in-country expertise to form effective groups, he said.

In its best practices, FATF said the teams should be “adequately resourced and trained” to work on asset forfeiture investigations. The guidance also asked that governments create a central register of bank accounts to facilitate asset freezes.

FATF examiners may also expect jurisdictions to track the bribes paid by local companies to foreign governments, as part of their effort to crack down on corruption, according to Fred Abrams, a New York-based attorney specializing in asset recovery.

The Organisation for Economic Co-operation and Development (OECD) last week asked France to more aggressively try to repatriate bribes paid by French firms, noting that the country has only secured five related convictions in the 12 years since the intergovernmental group introduced its anti-bribery convention.

“The fundamental issues are not being addressed,” said Abrams, who describes FATF’s standards going forward as “a lot higher than before.”

FATF’s expected focus on asset recovery follows efforts by other nations to better repatriate lost money.

In July 2010, the U.S. Justice Department formed the Kleptocracy Asset Recovery Initiative to investigate high-ranking foreign officials accused of looting money. The group’s formation roughly coincided with a change in Swiss law allowing countries to request that suspect assets be frozen for up to five years even when no mutual legal assistance treaty exists between the nations.

In the case of international blacklists, some jurisdictions “don’t have the mechanism on the ground for blocking or complying with the sanctions they signed on to and agreed to enforce,” said William Hoffman, a former chief counsel at the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).

The international patchwork of laws has resulted in “very uneven and mixed enforcement of sanctions” and related asset freezes, even among European Union members, said Cari Stinebower, a former attorney-advisor for the general counsel’s office assigned to OFAC.

The United States has been “very frustrated” with how some nations have complied with United Nations or U.S. measures, she said, adding that American officials have significant sway at FATF meetings.

Calls to spokespersons of FATF and the U.S. Treasury Department were not immediately returned.

¹“FATF’s Focus on Asset Forfeitures Could Challenge Some Nations”, Copyright 2012 Alert Global Media, reprinted with permission.

The October 25, 2012 indictment of Michael Mastro and his wife Linda, alleges violations of money laundering and bankruptcy fraud laws.  Among other things, the indictment accuses the Mastros of fraudulently hiding portable valuable commodities, such as a platinum ring with a 27.80 carat pear shape diamond and one 14 karat white gold ring with a 15.93 carat round diamond.

These rings might have been parked offshore, as suggested by “Mastros’ $1.4M diamonds now reportedly in France.”  According to page 15, ¶44 of the October 25th indictment, Linda Mastro falsely testified during her March 24, 2010 deposition, about the whereabouts of the rings.  At the deposition, Linda Mastro stated she brought the rings to Italy on or about November 2009.  As page 33, lines 15-25 of the deposition transcript show, Linda Mastro too asserted she could not recall if she left the rings in Italy:

(Click Above To Read The Entire Deposition Transcript)

Copyright 2012 Fred L. Abrams

In some cases, these concealment methods are jointly employed to launder the title of looted artwork, similar to the way that illicit funds may be laundered.  Furthermore, because more than 20% of Europe’s art is believed to have been looted by the Nazis during WWII, countless cases exist which can be studied.

There are of course a wide variety of other situations in which assets are secretly transferred by way of concealment methods like multiple jurisdictions, nominees, etc.  The 2007 National Money Laundering Strategy published by U.S. authorities, describes businesses known as “nominee incorporation services”.  Page 64 of the 2007 Money Laundering Strategy, indicates that nominee incorporation services can help their clients open U.S. bank accounts and form U.S. shell companies with anonymity.

By forming these shell companies and opening bank accounts, the nominee incorporation services are thought to have helped launder or secretly transfer as much as $36 billion annually, just from the former Soviet Union alone.

Copyright 2012 Fred L. Abrams

1. At a news release, the Organisation for Economic Co-operation and Development notes that in twelve years, French authorities had just five convictions in cases arising out of the bribery of foreign officials.  The news release claims that French authorities have a “lacklustre response” to cases involving actual or alleged foreign bribery.
2. The Role of Financial Intelligence Units in Fighting Corruption and Recovering Stolen Assets is a white paper provided by The Egmont Group of financial intelligence units.  It mentions how government authorities may detect corruption proceeds because  of tips / suspicious activity reports, supplied by financial institutions.  Page 13 of the paper reveals how illicit assets from a politician’s extortion scheme were uncovered as a result of suspicious activity reports, (i.e “SARs”), generated by three  banks:

Copyright 2012 Fred L. Abrams

LGT Group whistleblower Heinrich Kieber, for example, is in a witness protection program courtesy of German authorities.  Time.com’s August 2011 article, reports that “some say he has a $10,000 million bounty of his head.”  Then there is the pending matter of former HSBC employee Herve Falciani.  An August 31^st Businessweek article indicates that the suspected theft of HSBC bank account records by Mr. Falciani, is one reason profits may have declined at HSBC’s Swiss Private Bank.

The article quotes HSBC’s chief executive as saying “[t]he Swiss unit has suffered ‘reputational and financial damage’ since Herve Falciani, a former software technician in Geneva, stole details on 24,000 accounts.”  The July 8, 2010 Wall Street Journal article “Mass Leak of Client Data Rattles Swiss Banking” meanwhile, suggests that Mr. Falciani considered himself to be a whistleblower.  According to the article, Mr. Falciani claimed he ‘acted liked a citizen’ and that he acquired the HSBC records “to expose secrecy in banking practices.”

These HSBC records ended up in the hands of tax authorities across the globe who are trying to detect any tax cheats with assets hidden in the HSBC Swiss accounts.  Mr. Falciani was reportedly arrested in Barcelona, Spain in July, at the request of Swiss authorities.  Reuters reported that Mr. Falciani faced extradition to Switzerland on charges that he violated Swiss bank secrecy law, because of his alleged theft of the HSBC records.  It additionally reported that a banker is thought to have recently been arrested for the separate suspected theft of Julius Baer Swiss bank account records.  The banker may have sold these confidential records to tax investigators from the German state of North-Rhine Westphalia.

Copyright 2012 Fred L. Abrams